Safelite Files U.S. District Court Complaint Over Minnesota’s Settlement with Auto Club Group

Safelite Group is asking the U.S. District Court, District of Minnesota, to enjoin and declare invalid enforcement of a Minnesota statute which excludes “Safelite from doing business in Minnesota without the opportunity for a hearing.”

Safelite is referring to a settlement agreement between the Minnesota Department of Commerce, Insurance Division, and Auto Club Group that provides for the Auto Club Group to pay a civil penalty of $150,000 and “cease and desist from using Safelite Solutions, or any other subsidiary of Safelite Group Inc. as its administrator of automobile glass claims in Minnesota,” according to the settlement agreement.

After the order was signed, Safelite Group and Safelite Solutions, as related parties to the consent order, filed a petition for writ of certiorari with the Appellate Court of Minnesota.

“Because the January 8, 2015 consent order does not meet any of the three indicia of quasi-judicial act under MCEA, certiorari review is not available. … The writ of certiorari is discharged and this appeal is dismissed,” according to the Minnesota Appellate Court.

Safelite asked the Minnesota Supreme Court to review the Appellate Court’s decision.

“Here, in issuing the cease and desist order, the commissioner necessarily concluded that the statute authorizes him to order licensed insurance companies in Minnesota to terminate valid, enforceable and entirely legal contracts with third-party administrators who are not required to be licensed by the department. In issuing the order, the commissioner necessarily concluded that the statute authorizes him to blacklist third-party administrators, despite the fact that they are not required to be licensed, and authorizes the commissioner to, essentially, de-bar certain legitimate companies from ever doing business in Minnesota,” write Safelite’s attorneys in their petition to the Minnesota Supreme Court.

The State Supreme Court has not yet issued a decision.

“Safelite has been afforded no opportunity to become a party to any proceedings involving the consent orders,” Safelite’s attorneys write in their complaint to the U.S. District Court. “Safelite petitioned the Minnesota Court of Appeals for a writ of certiorari to review the consent order, but the court determined the order was unreviewable because it does not qualify as a ‘quasi-judicial decision’ and because Safelite was not a party to the order. A petition to the Minnesota Supreme Court is pending, but Safelite remains a non-party with no right to review.”

During a January 14, 2015 meeting with the Department of Commerce (where Safelite learned of the settlement agreement between the department and Auto Club Group, Safelite contends, “The Department of Commerce indicated that it was planning to enter into similar consent orders with other insurance-company clients of Safelite Solutions and that these consent orders could be finalized and issued in the near future.”

In addition to asking for the U.S. District Court to enjoin and declare invalid enforcement of the Minnesota statute, Safelite has filed the complaint against Lori Swanson, in her official capacity as Attorney General of the State of Minnesota, and Michael Rothman, in his official capacity as the Commissioner of the Minnesota Department of Commerce “based on personal knowledge as to all Safelite facts and on information and belief as to all other matters.”

Safelite contends the complaint is to “protect and preserve Safelite’s rights to freedom of speech under the First Amendment, due process under the Fourteenth Amendment, and to protection from discrimination against interstate commerce under Article 1, Section 8, Clause 3 of the U.S. Constitution.”

When Safelite Solutions receives an automotive glass claim, attorneys say a pre-recorded announcement discloses to the policyholder the relationship between Safelite Solutions and Safelite AutoGlass.

“After the announcement, Safelite customer service representatives, using the insurance provider’s scripting, advise policyholders about the glass repairs necessary given the nature of the damage, about the insurance coverage in place, about the features and benefits available to them under their policies, and about their right to choose any repair shop to perform the service,” according to the court documents. “When the policyholder is from Minnesota, Safelite’s scripts include the advisory required by a Minnesota statute that ‘Minnesota law gives you the right to go to any glass vendor you choose, and prohibits me from pressuring you to choose a particular vendor.’”

“[A]s an additional service to its insurance clients and their policyholders, Safelite Solutions maintains a network of preferred repair shops that enter into a network participation agreement. Shops that participate in the network—including Safelite AutoGlass shops—contractually agree, among other things, to maintain adequate liability insurance, to warranty their work, and to adopt the pricing terms of each individual insurance company. … Vehicle glass repair shops that do not participate in the Safelite Solutions network are not bound to provide the consumer with the same protections as network shops have agreed to provide, meaning that a policyholder who uses a non-network repair shop may not receive the same benefits as a policyholder who uses a network repair shop,” according to Safelite’s attorneys.

“For example, many insurance companies provide a guarantee of the work performed by Safelite AutoGlass and other glass repair shops that are a part of the network. This guarantee is in addition to any warranty that a glass repair shop provides. But most insurance companies do not provide any guarantee if the repair work is done by a non-network glass repair shop,” according to Safelite’s attorneys.

While network repair shops have agreed to pricing terms with insurance companies, Safelite’s attorneys say the non-network shops do not have this agreement.

“As a result, non-network repair shops may charge policyholders more than the insurance company will reimburse as fair and reasonable. In that case, the non-network shops have the right to seek reimbursement directly from the policyholder. Indeed, glass repair shop invoices routinely provide that the policyholder is responsible for any charges not paid by the insurer,” Safelite’s attorneys write in court documents.

Attorneys included a footnote in the court document that says, “Often, where a non-network repair shop disputes the insurance company’s reimbursement, the repair shop will obtain an assignment of the policyholder’s rights against the insurer and then negotiate or litigate with the insurer. … Assignments typically do not contain waivers or releases in favor of the policyholder if the shop does not prevail on the assignment claim.”

Though the Commerce Department indicated future settlement agreements, similar to the one with Auto Club Group, could be signed, it did not offer Safelite any details.

“Although the department refused to disclose any details, it indicated that future orders would also include a cease-and-desist component that would bar each insurance company client in Minnesota from conducting any business of any sort with Safelite Solutions,” Safelite attorneys write.

Safelite is asking the court for a declaratory judgment that the Minnesota Commissioner of Commerce’s enforcement actions violate the United State Constitution and for a permanent injunction prohibiting state officials from enforcing the statute to restrict Safelite’s ability to conduct business in the state without “affording Safelite notice and an opportunity to be heard.” The company is also asking for the Commissioner of Commerce to dissolve, or agree never to enforce, the settlement agreement with Auto Club Group.

The State Commissioner of Commerce’s office has not yet responded to a request for comment at press time about the U.S. District Court lawsuit.

The Commerce Department’s attorneys contend that the only provision of the settlement with The Auto Club Group that Safelite’s objects to is the company’s agreement not to use the company as its administrator of automobile glass claims in the state of Minnesota, according the attorneys statement to the Minnesota Supreme Court.

“[T]he Court of Appeals properly concluded that none of the three indicia of quasi-judicial actions are present in this case. First, there is no disputed claim or weighing of evidentiary facts because the consent order represents a voluntary settlement of the issue,” write the attorneys for the state Department of Commerce. “Rather, there was an administrative investigation, followed by an informal resolution. Indeed, the consent order specifically provides that it is an informal resolution without a hearing. … To the contrary, the regulated party entered into an agreement with a regulatory agency to avoid quasi-judicial factual findings or legal conclusions.”

To view Safelite’s complaint to the U.S. District Court, click here.