Minn. Court of Appeals Rules that Non-Assignment Clause Protects Insurers from Dealing Directly with Glass Shops

The State of Minnesota's Court of Appeals recently ruled that a "non-assignment" clause in an insurance policy protects insurers from having to deal directly with auto glass shops, in a case filed by Auto Owners Insurance Co. against Star Windshield Repair Inc.

The case originated when Star Windshield billed Auto Owners for repair work done for its insureds, and Auto Owners sent a payment to Star for less than the amount billed. Star Windshield attempted to initiate arbitration with the Lansing, Mich.-based insurer, and in response, Auto Owners filed a declaratory-judgment action "seeking a declaration that the non-assignment clause in its insurance contract prevented the customers from assigning the payment to Star Windshield," according to court documents. The decision to rule in favor of Auto Owners was made on January 8.

However, Chuck Lloyd of Livgard and Rabuse, who represented Star Windshield in the case, says the case is far from over.

"We're going to ask the Minnesota Supreme Court to review the case," Lloyd says, noting that the most recent decision conflicts with a prior decision by the Minnesota Supreme Court and another decision by the Minnesota Court of Appeals.

Likewise, Lloyd notes that the anti-assignment clause is designed to protect the insurer from insuring someone it has chosen not to insure—-not to prevent it from handling post-loss payments directly with the provider of service.

"That's the thing the Minnesota Court of Appeals completely missed in all of this," he says.

He adds, "This whole notion that the anti-assignment clause is designed to protect the insurers from doing business with those that they don't want to do business with—that's true in the underwriting area, but not in the negotiation of claims."

Lloyd cites Gopher Oil Company v. American Hardware Mutual Insurance Company (1999), a previous Minnesota Court of Appeals Case, along with Windey v. N. Star Farmers Mutual Insurance Co. (1950), an earlier Minnesota Supreme Court ruling, as evidence for the case—and what the non-assignment clause means.

"[The court] claims that Auto Owners didn't want to do business with us [Star Windshield Repair], but they clearly did," he says.

Lloyd currently is involved in a similar case right now in the Federal Court of Appeals, Farmers Insurance vs. Alpine Glass, and in this case, he says Farmer's glass claims administrator, Safelite, has contacted Alpine directly.

"That's a far cry from, 'we don't want to do business with the glass companies," Lloyd says.

He also mentions that the Minnesota Court of Appeals will soon hear a similar case, in which he also is involved, on the same question.

"This is a hopping issue right now," Lloyd says.

Lloyd says his request for the Supreme Court to hear this case will be filed within 30 days of the Appeals Court's decision, which was made on January 8, and the Minnesota Supreme Court likely will decide whether to accept it within six to eight weeks.

William Moeller of Blethen, Gage & Krause PLLP, who represented Auto Owners, says he believes he also has a strong case.

"I think at this point it's a very strong opinion of the court of appeals in support of the enforcement of the non-assignment clauses," Moeller says.

CLICK HERE for the full text of the Minnesota Court of Appeals' decision.

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