United States District Court, D. Minnesota
[Copyrighted Material Omitted]
Brian F. Murn, Charles J. Lloyd, and Rachael J. Abrahamson, LIVGARD & LLOYD PLLP, Minneapolis, MN, for plaintiff.
Leatha G. Wolter, Tamara L. Rollins, and Kathleen M. Ghreichi, MEAGHER & GEER, PLLP, Minneapolis, MN, for defendants.
MEMORANDUM OPINION AND ORDER
JOHN R. TUNHEIM, United States District Judge.
Plaintiff Alpine Glass, Inc. (" Alpine Glass" ), an auto glass repairer, brought this declaratory judgment action against Defendants, State Farm Fire & Casualty Company and State Farm Mutual Automobile Insurance Company (collectively, " State Farm" ), seeking to consolidate 140 shortpay claims for arbitration under the Minnesota No-Fault Automobile Insurance Act, Minn. Stat. § § 65B.41-.71. Alpine Glass alleges that State Farm underpaid Alpine Glass for auto glass repairs and replacements covered by insurance policies that State Farm issued to Alpine Glass customers.
Alpine Glass moves to consolidate the 140 claims into a single arbitration proceeding. State Farm brought an initial motion for summary judgment, arguing that this case presents purely legal issues for the Court to resolve in its favor and no factual issues for an arbitrator to decide. Several months after filing its first motion for summary judgment, State Farm now brings a second motion for summary judgment, arguing that a lawsuit limitation clause in one of the underlying insurance policies bars Alpine Glass' action to consolidate claims arising out of that policy. The Court will deny State Farm's first motion for summary judgment because the issues presented by the shortpay claims are factual issues of the type to be resolved in arbitration. The Court will also deny State Farm's second motion for summary judgment because it concludes that the lawsuit limitation clause does not apply to arbitration proceedings or proceedings to consolidate arbitration. Finally, the Court will grant Alpine Glass' motion for consolidation, as consolidation of the 140 claims will promote efficiency and decrease the risk of inconsistent judgments.
I. ALPINE GLASS' BILLING PRACTICES
Alpine Glass is engaged in the business of automobile glass repair and replacement. (Decl. of Michael Reid ¶ 3, Sept. 3, 2012, Docket No. 27.) A large percentage of the work that Alpine Glass performs is paid for by its customers' auto insurance companies. ( Id. ¶ 4.) It is the usual practice for Alpine Glass' customers to assign their individual insurance claims to Alpine Glass. ( Id. ) By assigning their claims, customers " authorize and direct [their] insurance company to pay th[e] invoice directly to Alpine Glass, Inc." and " assign any and all claims in connection with th[e] automobile glass installation or repair against [their] insurance company and all policy
proceeds due for this installation or repair to Alpine Glass, Inc." (First Aff. of Melissa Kern, Ex. 5 at 2, Sept. 24, 2013, Docket No. 33.) Alpine Glass then bills the insurance company for the work performed and receives payment directly from the insurance company. (Reid Decl. ¶ 4.)
In preparing invoices to submit to an insurance company for reimbursement, Alpine Glass relies upon a price list known as National Auto Glass Specifications (" NAGS" ) that is widely used in the auto glass industry. ( Id. ¶ 6.) NAGS provides a benchmark price for more than 10,000 auto glass parts in addition to the standard number of labor hours required for the installation of each part. ( See, e.g., id., Ex. A.) Alpine Glass uses the NAGS benchmark as a starting point for its pricing, but multiplies the NAGS benchmark by a set factor before submitting the invoices for reimbursement. ( Id. ¶ 7.) Alpine Glass' ultimate invoice thus might reflect a price that is greater or less than the NAGS price by a specific percentage. ( Id. ) For example, Alpine Glass' might charge the list price minus 14% or the list price plus 50%. Whichever factor Alpine Glass arrives at, it applies that same factor to all of its invoices regardless of the parts involved. ( Id. ) Alpine Glass periodically adjusts the factor and uniformly adjusts its billing to reflect the new factor. ( Id. ) Alpine Glass bills for labor either as a flat installation rate or on an hourly basis using the benchmark installation times included in the NAGS, subject to the same type of factoring described above. ( Id. ¶ ¶ 9, 11.) An Alpine Glass invoice also typically includes a flat rate for a glass adhesive kit. ( Id. ¶ 12.)
II. STATE FARM INSURANCE COVERAGE
A. Auto Glass Damage
State Farm provides automobile insurance to the Alpine Glass customers involved in this matter. ( See First Kern Aff. ¶ 6; Reid Decl., Ex. E.) State Farm had two policies in effect in Minnesota during the relevant time period that provided coverage for auto glass damage. (First Kern Aff., Exs. 1-2.) The policies provide that State Farm will pay the cost of repair or replacement based upon one of the following:
1. the cost of repair or replacement agreed upon by [the insured] and [State Farm];
2. a competitive bid approved by [State Farm]; or
3. an estimate written based upon the prevailing competitive price. The prevailing competitive price means prices charged by a majority of the repair market in the area where the car is to be repaired as determined by a survey made by [State Farm]. If [the insured] ask[s], [State Farm] will identify some facilities that will perform the repairs at the prevailing competitive price. [State Farm] will include in the estimate parts sufficient to restore the vehicle to its preloss condition.
( Id., Ex. 1 at 3 (emphases omitted).)
During the relevant time period, State Farm was also bound by a Consent Order entered into by State Farm and the Minnesota Commissioner of Commerce in 2002. ( Id. ¶ 4, Ex. 3.) The Consent Order arose out of allegations by the Commissioner that State Farm had " engaged in
various unfair trade and claim settlement practices in its handling of auto glass claims in Minnesota." ( Id., Ex. 3 at 9.) The Consent Order resolves these allegations and requires State Farm to implement certain processes for handling auto glass claims. ( Id., Ex. 3 at 9-10.)
With respect to glass claims for which State Farm lacked notice of the loss prior to repairs being performed  the Consent Order provides three acceptable procedures that State Farm can follow in paying auto glass claims. The first procedure that State Farm can use requires it to pay " the lower amount of three competitive bids." ( Id., Ex. 3 at 12.) The first bid is the invoice from the auto-glass repairer seeking reimbursement, in this case, Alpine Glass. ( Id. ) The second bid is to be from a non-O& A  glass provider and the third is to be from a glass provider within State Farm's O& A program. ( Id. ) State Farm can use 86% of the NAGS price plus a cost kit of $20 and labor in the amount of $40 in lieu of a bid from a non-O& A glass shop. ( Id., Ex. 3 at 13.) Instead of this competitive bid procedure, the Consent Order also authorizes State Farm to " pay the full invoice received" or pay " 86% of the NAGs, plus the cost kit ($20) and labor ($40)." ( Id. )
State Farm contends that with respect to the 140 Alpine Glass claims at issue, it utilized the first procedure -- paying Alpine Glass the lowest of three competitive bids. ( Id. ¶ 6.) State Farm alleges that for each of the claims it paid either the lowest of the three competitive bids or the amount that State Farm would pay an O& A glass shop, where that amount exceeded the lowest of the three bids. ( Id. ¶ 8.) State Farm has submitted documentation of the competitive bids that State Farm obtained for each ...