The outcomes of 18 lawsuits — and potentially many more — rest on State Farm Mutual Automobile Insurance Co.’s appeal of a court order to reveal how it decides on a fair price to replace a shattered auto windscreen.
State Farm v. Shazam Auto Glass may be the first test of whether the insurer’s “system pricing” mechanism qualifies as a protected trade secret.
At least, it’s the first that plaintiff’s attorney Rob Haynes, of Christopher Ligori & Associates in Tampa, knows of.
But, in a state where auto glass claims have risen markedly during the past decade, the dispute could prove an important test case.
“We have close to 900 total auto glass cases, and similar firms are doing the same volume,” Haynes said in a telephone interview. “Not all of those are State Farm. But, absolutely, it’s going to come up in the future. That’s why we’re pushing so hard to try to get a positive result in this one. Because if we can get it here, we’ll be able to use it in all the others.”
Hillsborough County Judge Herbert Berkowitz, after reviewing State Farm’s information, ordered it turned over. State Farm appealed. Those 18 cases are set for trial in July, Haynes said — presuming the appeal is resolved by then.
Shazam, armed with an assignment of benefits agreement, is standing in for a State Farm customer in the litigation.
Under the pricing mechanism, the insurer solicits competitive bids, but only from shops within its preferred vendor network, which tend to offer “extremely low” bids, Haynes said.
“But they’ll never pay lower than their system price,” he said. “They won’t let us know how they came up with that pricing — was it generated through software? Was it a separate bid?”
If State Farm wants to argue its system pricing is fair, the company needs to explain the system, Haynes argued. State Farm, by contrast, argues the information is a protected trade secret — and that disclosure would “cause irreparable harm by effectively compelling production of ‘cat out of the bag’ materials.”
Shazam bases its prices on the National Auto Glass Specification standards. Other insurers apply separate industry or internal standards. “They each tend to have their own ways of dealing with glass claims,” Haynes said.
He wasn’t aware of any other insurance companies confronting similar challenges.
“Normally, these cases were resolved via settlements — we were able to work them out,” he said. “Since State Farm insisted on going to trial, we had to take the next step and do our best to protect our clients.”
Not to say that State Farm is more aggressive than its competitors in litigation, he added — just that any trade secrets they asserted were not dispositive.