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Illinois Farmers Insurance Co. v. Glass Service Company

September 30, 2003


Ramsey County District Court File No. C1-02-5860

Considered and decided by Randall, Presiding Judge; Kalitowski, Judge; and Hudson, Judge.


I. An assignee of an insured whose claim is covered by no-fault insurance is subject to the mandatory arbitration provisions of the No-Fault Act, Minn. Stat. §á65B.525 (2002).

II. Under the No-Fault Act, separate claims assigned to the same assignee may not be consolidated so as to exceed the maximum limit for mandatory arbitration.

III. There is no authority to order one panel of arbitrators to consider all of the arbitrations that arise when the insureds assign their claims to the same assignee.

The opinion of the court was delivered by: Hudson, Judge

Affirmed in part, reversed in part


This is an appeal from summary judgment in a dispute as to the amount that insurers must pay for automobile glass repair and replacement services performed on behalf of the insureds. The companies that performed these repairs challenge the district court determination that they were required to arbitrate the claims and that each claim must be separately arbitrated.

The insurers contend in a notice of review that the district court erred in requiring that these individual arbitrations take place before the same panel of three arbitrators. We affirm the decision that the auto glass companies are required to arbitrate these claims and must arbitrate each claim separately. We reverse the decision that the same panel of three arbitrators must adjudicate all of the claims.


The insurers, respondents Illinois Farmers Insurance Company and Mid-Century Insurance Company, issue automobile insurance policies in Minnesota. The auto glass companies, appellants Glass Service Company, Inc., and its wholly owned subsidiary Auto Glass Service Center, Inc., are engaged in the business of automobile glass repair and replacement. The insureds had policies with the insurers under which the latter covered repair or replacement of damaged automobile glass. All of the policies also contained a mandatory arbitration clause.

The auto glass companies performed automobile glass repair and replacement services for many of the insurers' policyholders. Rather than obtaining payment directly from their customers, who would then be required to submit the claims to their insurers, the auto glass companies submitted their customers' bills directly to their insurers.*fn1

Pricing in the auto glass replacement business is based primarily on three components: glass, adhesives, and labor.*fn2 Both the insurers and the auto glass companies agree that pricing for these components is based on a national price-list publication known as the National Auto Glass Specifications (NAGS). NAGS provides a price by part number for each glass part; a price per tube of adhesive; and either a flat or an hourly rate for labor.

Although the auto glass companies and the insurers base their calculations on these undisputed figures, they use different formulas to arrive at the amount that they respectively bill and pay. The insurers' formula results in a lower amount than the auto glass companies' formula. Thus, the insurers routinely paid less than the full amount billed by the glass companies. The glass companies, however, rarely, if ever, disputed the individual payments because the discrepancy on any one claim seldom exceeded $500, and could sometimes be as little as $1. It appears from the record that this billing/payment practice between the parties continued for several years.

As a result of these "short" payments from the insurers (i.e., payments for less than the amount billed), the auto glass companies served a demand for arbitration of the claims, which now number more than 5,700 and amount collectively to more than $1ámillion. The insurers responded by bringing a declaratory judgment action, asserting that any claimed assignment did not include the right to arbitrate or, alternatively, that any right to arbitrate did not include the right to arbitrate the individual claims collectively. The auto glass companies then withdrew their demand for arbitration and asserted a counterclaim for money damages on a breach-of-contract claim. The insurers moved for summary judgment and a declaration that the auto glass companies were required to separately arbitrate each of the assigned claims and for dismissal of the counterclaim. The district court granted summary judgment requiring individual arbitration of the ...

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