Farmers Insurance Ordered to Pay Minnesota Auto Glass Company more than $1.2 Million for Short Pays

The following press release was issued today by Livgard & Rabuse, P.L.L.P.

In a case that has generated considerable interest in the automobile glass and insurance industries, Farmers Insurance has been ordered to pay Minnesota based Glass Service Company more than $1.2 million for previously short paid glass claims. In a dispute that first reached the courts in 2002, Farmers has lost four successive arbitrations resulting in awards totaling $1,239,258.88, representing more than 90% of what Glass Service sought in the arbitrations.

Farmers originally contended that Glass Service should be forced to arbitrate each of the more than 5700 disputed invoices individually. The Minnesota Court of Appeals ruled that Glass Service could not consolidate the invoices for purposes of mandatory arbitration under Minnesota's No-Fault Act, acknowledging that the procedure resulting from its decision was neither efficient nor cost effective. The Minnesota Supreme Court, however, granted review of the case and ultimately concluded that the disputed invoices could be grouped for arbitration if the trial court found certain criteria were met. The court then sent the case back to the trial court to determine how many arbitration hearings should be conducted.

The Ramsey County District Court settled on eight arbitrations, based upon the eight different glass prices Glass Service charged to Farmers during the time Farmers was short paying Glass Service's invoices.

The first arbitration covered invoices where glass was billed at NAGS list minus 14%. In that proceeding, Farmers was ordered to pay Glass Service $158,109.82. The second arbitration was for invoices where glass was billed at full NAGS list price. There, Farmers was ordered to pay Glass Service $324,152.91. The third arbitration covered invoices billed at NAGS list plus 35%. In that proceeding, the arbitrator awarded Glass Service $434,035.93.

Farmers sought to have the district court set aside the first three arbitration awards. After extensive briefing and oral argument from the parties' attorneys, the Ramsey County District Court rejected Farmers' application and directed that judgment be entered against Farmers in favor of Glass Service. In addition, the court awarded interest on the amounts of the arbitration awards dating back to April of 2002 when Glass Service first demanded arbitration. Farmers is appealing that decision to the Minnesota Court of Appeals.

Most recently, a fourth arbitration has been concluded on those invoices where glass was billed at list plus 43%. In that instance, the arbitrator has awarded Glass Service $322,960.22. Interest dating back to 2002 has also been awarded.

With interest, the amounts awarded to Glass Service now exceed $1.4 million and are growing daily as interest accumulates.
Chuck Lloyd of the Minneapolis law firm of Livgard & Rabuse, Glass Service's attorney throughout this process, said "These awards and the subsequent court order make it clear that insurance companies don't get to unilaterally set reimbursement rates.

As Farmers is learning, the amount owed is the amount dictated by the insurance policy, not some arbitrary lesser amount the insurer simply wants to pay."

Chul Kwak, former General Counsel of Glass Service, said, "It's gratifying that the arbitrators are seeing these disputes as we see them, particularly given the fact that we offered to settle these claims for far less than what the arbitrators awarded. For whatever reason, Farmers never responded to our offers."

With respect to Farmers' appeal, Lloyd stated: "We fully expect the trial court's decision confirming the awards to be affirmed on appeal and that we will collect the amounts the arbitrators and the courts have said my client is owed along with the interest that continues to accumulate."

Glass Service is also seeking to collect its receivables from other insurers and fully expects to continue having success in its efforts.

Stay tuned to glassBYTEs.com for more information on the decision and a link to the ruling when it becomes available on the court website.