LYNX Services tried to delay State Farm Insurance’s move to Safelite Solutions less than two business days before the transition was set to take place. But why? According to recently unsealed testimony given by Lisa Langford, it was out of concern for auto glass shops.
“I feel a certain fiduciary duty to the kinds of information that retailers have given [LYNX],” said Langford, senior director of client experience, during a June 30 hearing. “I am aware of retailers that participate in programs that LYNX runs that might not participate in the same [programs] with Safelite.”
Recapping the Lawsuit
On Friday, June 27, LYNX filed suit against State Farm and Safelite/Safelite Solutions for alleged misappropriation of trade secrets and also requested a temporary restraining order (TRO) and a preliminary injunction. The U.S. District Court for the Central District of Illinois, Peoria Division, held an emergency hearing on June 30 to evaluate the TRO and injunction requests. Judge Jonathan Hawley denied both.
The transcript of that June 30 hearing was sealed until Oct. 21, when a redacted version was filed alongside many other redacted lawsuit documents.
The hearing began with remarks from State Farm and Safelite’s legal counsel, stating that the documents they’d “scrambled” to file over the weekend provided enough information for the judge to deny the TRO and preliminary injunction requests. If the judge was inclined to grant the TRO and preliminary injunction, both counsel from both parties requested additional time to produce arguments. The judge said he wanted to hear Langford’s testimony before making a decision.
Langford began her testimony by describing LYNX’s function in the auto glass industry, explaining that the third-party glass claims administrator used to have “50 or 60” insurance and fleet customers. As of June 30, Langford said that it had approximately 30.
Testimony about TPAs
Langford described the relationship between TPAs, insurers and auto glass service providers, “the people that actually fix the glass,” to the court. Langford said LYNX has dealt with 20,000 to 30,000 auto glass shops or auto body shops that have provided glass services, “that at one time have done the transaction” with LYNX. Langford added that consumers are LYNX’s “ultimate customer” and said the TPA ensures their choice of repair provider is honored.
“As far as I know, [LYNX] is the only third-party administrator that does not also provide glass services,” Langford said, explaining that other TPAs like Safelite Solutions, Gerber National Glass and Driven Claims are all divisions of companies that also repair and replace auto glass.
LYNX’s relationship with Safelite Auto Glass is different from its relationship with Safelite Solutions, according to Langford.
“Safelite is an awesome retailer,” she said. “They do incredible work. They do hundreds of thousands of jobs through LYNX and [Safelite is] a lot of policyholder[’s] choice, driven by their advertising as well as their acquisition of glass companies over the last several years.”
When LYNX’s counsel asked Langford to explain the “concern in the industry about Safelite and the combination of its third-party administration business and … its auto glass repair business,” Safelite/Safelite solutions’ counsel objected, saying that the question called for speculation and was “beyond the scope of the TRO.” The judge sustained the objection, saying, “I really don’t know how that’s relevant.”
Alleged Trade Secrets
Langford detailed the process.
“Each retailer that signs up for METRYX signs in to give us their information for programs that we manage,” she said. “So that data is the same across the different carriers we work with.”
One piece of that information that is “specific to State Farm,” Langford said, is the contact information identifying who signed the agreement.
Service area information is among the trade secrets LYNX alleged that State Farm and Safelite/Safelite Solutions were misappropriating. Langford said that State Farm isn’t the only insurer that uses the information gathered in METRYX, and LYNX uses “certain logic behind the scenes” to create it. The nature of that logic and how it is used was redacted.
When retailers join the METRYX registry, they sign an agreement with METRYX that explains how the information they provide will be used, according to Langford.
“Once they’re active [in METRYX], they can then apply to programs [like State Farm’s],” Langford said.
In lawsuit documents filed later, State Farm and Safelite would claim that the information stored in METRYX is public knowledge that could be found by searching the internet. During the hearing, Langford said that isn’t the whole picture.
“You could go through one shop’s website at a time to try to identify where they serve, but when you do it for 10,000 [shops], I think that would be prohibitive,” she said.
Langford argued that the METRYX pricing strategy was also a trade secret that belonged to LYNX, not State Farm.
“Before METRYX, shops would set themselves up on the edge of an urban area because they could take advantage of the rural pricing, but they would have the volume [of jobs] available for the urban [area],” she said. “We believe it’s the best way to reimburse shops, especially when you’re a single shop in a very rural area. We’re able to provide them with a more market-based price.”
Explaining the Timing
Since State Farm’s counsel, Safelite’s counsel and the judge had all questioned why LYNX waited as long as it did to file suit and request a TRO, Langford explained that they hadn’t seen State Farm’s “new” offer and acceptance agreement until June 25, a day after it had been sent to shops.
“State Farm had been telling us that nothing would change,” Langford said. “They’d been telling the market that nothing would change. But we didn’t realize how much ‘nothing would change’ meant until we saw that the new agreement mirrors the old agreement [made through LYNX] exactly.”
That similarity piqued LYNX’s concern and helped prompt the lawsuit. The last-minute TRO was necessary, Langford said, because LYNX knew auto glass shops would have concerns about their data being shared with Safelite/Safelite Solutions.
“Even though Safelite sees [Safelite AutoGlass and Safelite Solutions] as two [different things], the market sees them as a competition,” Langford said.
The METRYX terms and conditions that shop owners and managers sign say that LYNX will “keep [the information they provide] confidential unless it’s need-to-know,” she added.
Langford finished her testimony by saying she’d just found out the morning of the hearing that Safelite had begun processing 10 to 12% of State Farm’s auto glass claims.
“I was shocked,” she said. “It’s in direct violation of our out-tasking agreement.”
glassBYTEs/AGRR will cover more of Lisa Langford’s testimony, including her responses to cross-examination by State Farm and Safelite/Safelite Solutions’ counsel, in coming newsletters.
