A Florida appellate court recently ruled that a shop could not pursue punitive action in a lawsuit against Progressive Insurance. The case closely examined Progressive’s pricing, appraisal and third-party administrator practices.
Lloyd’s of Shelton Auto Glass North Port, Florida, filed a bad faith lawsuit against the insurer in 2020 after it paid Lloyd’s less than what the shop had billed for a windshield replacement. The practice is known as “short-paying” in the auto glass industry.
Lloyd’s moved to amend its bad faith suit to also seek punitive damages from Progressive, which the insurer disputed. The Court ruled Lloyd’s of Shelton could not seek punitive damages. The shop initially appealed the decision but has recently dropped the appeal.
Though one of the three Florida Second District Court of Appeals judges presiding over the case dissented, the majority agreed with Progressive that Lloyd’s of Shelton could not pursue punitive action.
According to court documents, Bruce Farlow had his windshield replaced at the North Port, Florida-based business in February 2019 and signed his insurance benefits over to the shop. Lloyd’s of Shelton billed Progressive $1,420.97 for the service, the documents say, but Progressive would not pay that amount. It responded to the shop with a letter explaining that the price didn’t fit its policy.
“Progressive determined the reasonable amount necessary to replace Mr. Farlow’s windshield to be $486.82 and, in accordance with the letter, paid that amount to Lloyd’s of Shelton,” the legal opinion says.
Determining Pricing
In its opinion, the court reviewed Progressive’s method for determining pricing. It quotes Progressive’s windshield replacement policy, which says the insurer uses the following factors “in determining the amount necessary to repair damaged property to its pre-loss physical condition” and the amount it pays:
- The amount can’t be higher than the “prevailing competitive labor rates” in the local market plus the cost of parts and equipment, “as reasonably determined by [Progressive].”
- The amount is based on “the cost of repair or replacement parts and equipment which may be new, reconditioned, remanufactured or used, including, but not limited to” original equipment manufacturer and aftermarket parts.
According to court documents, Progressive corporate representative Mike Root testified in the lawsuit. Root said Progressive uses National Auto Glass Specifications (NAGS) data to help determine what it pays for glass claims. When Root testified in 2022, he said the insurer applies a 52% discount to the NAGS rate.
“The NAGS benchmark pricing is typically higher than the market rate will bear,” he said.
Appraisals
As part of Progressive’s policy for reimbursement disagreements, the insurer and Lloyd’s of Shelton both used appraisers to mediate the replacement value. Progressive regularly uses an appraiser to determine the value of a windshield replacement, according to evidence cited in the opinion. It requests that shops disputing the value do the same.
Progressive’s appraiser initially valued the job at $486.82, the court’s opinion says. The shop got its own appraiser, and together the two determined that $882.27 was appropriate. The court opinion says Progressive then paid Lloyd’s of Shelton the difference between the original compensation and the new appraisal.
According to testimony from Progressive’s appraiser cited in the court opinion, the company hired the appraiser to perform appraisals and the insurer maintains a relationship with the appraiser’s own auto glass business. The appraiser testified to no longer providing appraisals for Progressive after offering an “unfavorable” one in 2022.
Third-party Administrator
Lloyd’s of Shelton included a complaint against Progressive’s relationship with its third-party administrator (TPA), Safelite Solutions, in its accusations of bad faith. The court disagreed on whether or not the TPA’s tendency to direct consumers toward Safelite or Safelite-affiliated shops was “steering.”
The majority opinion cited a Florida law that allows an insurer to require a specific shop for repairs.
“An insurer that elects to repair a motor vehicle and specifically requires a particular repair shop for vehicle repairs shall cause the damaged vehicle to be restored to its physical condition as to performance and appearance immediately prior to the loss at no additional cost to the insured or third-party claimant other than as stated in the policy,” the law says.
While the majority of the Appeals Panel didn’t think Safelite Solutions’ actions were steering, it also determined that the issue wasn’t relevant to the court’s decision against punitive measures.
The dissenting judge said that Lloyd’s of Shelton’s complaints about Progressive and Safelite Solutions were justified because, based on the evidence in front of her, the TPA was steering. She said that even Progressive’s appraiser referred to the TPA’s actions as steering.
“Safelite [Solutions] uses a lot of tactics to try and scare the insured into choosing Safelite,” the appraiser said. “And therefore, we call that steering because Safelite [Solutions] is constantly steering people to Safelite.”
The Court’s Conclusion
Judges J. Andrew Atkinson, Patricia Kelly and Nelly Khouzam handled the appeal case. Atkinson and Kelly agreed that Progressive’s pricing, appraisal plan and TPA relationship did not meet the requirements to allow punitive action. Khouzam dissented, saying the content of the evidence didn’t matter as much as the number of allegations that Lloyd’s of Shelton had made.
Since the majority opinion decides the case, Lloyd’s of Shelton won’t be allowed to pursue punitive action. Though the shop initially appealed the decision, court documents say it recently moved to withdraw the appeal.
