Also See Diamond-Triumph News Release Statement April 17, 2002

APRIL 4--Usually it’s the small independents that have problems with the steering of customers to auto glass shops with whom the insurance industry has preferred provider agreements. Rather than David vs. Goliath, this time it’s Goliath vs. Goliath.

    Diamond-Triumph of Pennsylvania has filed a lawsuit against Safelite Auto Glass Corporation alleging that Safelite, has illegally steered customers to Safelite shops through its network referral operations.

    “Diamond-Triumph has 50-70 instances where this has occurred,” said plaintiff’s attorney Chuck Lloyd, who announced the lawsuit at the Independent Glass Association (IGA) convention in Orlando, this morning. The suit was filed in Pennsylvania on March 31.

    “Diamond-Triumph is a large company, and it is also on Safelite’s network as many of you are,” said Lloyd. “And it has the same problems in this area as independent companies do. We expect this to be a landmark case in the area.” Safelite is the country’s largest auto glass replacement company with more than 500 locations nationwide. The Columbus-base company recently emerged from a bankruptcy reorganization under Chapter 11 of the U.S. Bankruptcy Codes. Diamond-Triumph is based in Harrisburg, Pennsylvania and has more than 200 locations nationwide. The announcement was greeted with a round of applause by the 700 independent auto glass retailers in attendance.

Updated April 12th

Kingston, Pa.-based Diamond-Triumph has filed a lawsuit against Columbus, Ohio-based Safelite Auto Glass Corp. alleging that Safelite is “failing to refer work to Diamond Triumph and is in fact actively steering work away from Diamond Triumph when Diamond Triumph is the vendor of choice by the insured/consumer.” In its official complaint filed in U.S. District Court in Scranton, Pa., Diamond-Triumph claims that Safelite’s conduct has violated the Lanham Act, 15 U.S.C. 1125(a)(1). In addition, it brings forth five other claims against the company, from breach-of-contract to disparagement.

Diamond Triumph says it has received a number of complaints, many of which are cited in the case, from consumers about problems they’ve had with Safelite’s call centers and shops. A steady flow of these complaints stirred the company to bring forth the suit.

“Diamond Triumph has learned that Safelite, utilizing its national call center and retail installation staff, has engaged in an ongoing series of practices designed to divert customers away from Diamond Triumph to Safelite-owned shops and/or Safelite-employed mobile installers,” writes Diamond Triumph in the court document. “Diamond Triumph has also learned that Safelite has used its considerable resources to pirate jobs away from Diamond Triumph that would have been performed by Diamond Triumph but for the improper conduct of Safelite.”

The plaintiff’s first claim in the suit is that Safelite has breached its contract of the network by steering customers to Safelite shops—despite the network agreement that the network would provide Diamond Triumph with referrals. Diamond Triumph’s network participation agreement will expire on March 31, 2002. This agreement provides that Safelite “operates a network of independent automotive glass replacement and/or repair shops to which Safelite, from time to time, may refer work.”

With many of the insurance companies with which Diamond Triumph works, including Nationwide, participation on the Safelite network is required in order to be part of the company’s glass program, according to the court document filed by Diamond Triumph.

Likewise, Diamond Triumph has filed a second claim that Safelite has committed a breach of duty of good faith and fair dealing by “making representations and disparaging remarks to customers about Diamond Triumph’s installers, [its] warranties, [its] pricing and [its] ability to perform the glass repair or replacement services” and “by deliberately delaying the confirmation of insurance coverage and the providing of required reference numbers to Diamond Triumph.”

In its third claim, the plaintiff alleges that Safelite has committed deceptive trade practices by “intentionally disparag[ing] the services of Diamond Triumph by making false or misleading representations of fact about Diamond Triumph and otherwise engaging in conduct which creates a likelihood of confusion or misunderstanding on the part of Diamond Triumph’s customers …”

The company cites a number of states that have laws prohibiting such deceptive trade practices. Among these are Ohio, Connecticut, Maryland, North Carolina, South Carolina and Virginia. Diamond Triumph cites examples of alleged wrongdoings in each of these states.

Diamond Triumph presents a fourth claim of “Tortious Interference” on the part of the defendant. The company says that Safelite and its employees have “designed to have Safelite perform work that customers wished to have performed by Diamond Triumph and that would in fact have been done by Diamond Triumph but for the conduct of Safelite … without justification.”

The Pennsylvania company asserts that even when Safelite has allowed a customer to schedule work at one of its shops, Safelite has then pirated the work, scheduling Safelite installers to perform the work prior to the time Diamond Triumph is scheduled to do the work.

Diamond Triumph also presents claims of disparagement on the part of Safelite by making false or misleading representations of the company, and a sixth claim alleging that the national glass chain has violated the aforementioned Lanham Act. The Lanham Act is a federal statute signed into law by Harry S Truman in 1946, also known as the Trademark Law of 1946. The law was designed to encourage competition, provide trademark protection to businesses and to protect consumers from deceit and confusion.

“If the insured states a preference for a shop other than a Safelite shop, such as Diamond Triumph, the Safelite employee will often tell the insured, among other things, that the selected shop is not ‘approved’ or ‘recommended’ by the glass program, that the insured may have to pay an amount out of pocket over and above the deductible if he or she uses a shop other than Safelite, that there may not be a guarantee for the work if the job is performed by someone other than Safelite, that the installation technicians employed by shops other than Safelite are not qualified or certified and that there is a Safelite shop available to perform the work … ” reads the statement. “These statements, and other similar statements that are commonly made by Safelite, are false and highly misleading in that they suggest to the insured, among other things, that the insured has no real choice in the matter if he or she wishes to have the claim covered by insurance.”

According to the complaint, the statement that Safelite cannot guarantee other shops on the network is also misleading, “given the fact that the parties’ network participation agreement includes specific warranty provisions requiring Diamond Triumph to offer a lifetime warranty and provides for coverage in the event Diamond Triumph fails to abide by its warranty obligations.”

The plaintiff also recalls a previous unnamed case against Safelite, in which the glass company/network/glass claims administrator admitted that “its call center operation was successful in convincing eight out of ten consumers to switch to Safelite after the consumers had expressed a preference for other vendors.”

Diamond Triumph cites several instances in which customers have called Safelite (which provides glass claims services to several large automotive insurance companies, including Fredericksburg, Va.-based GEICO Insurance and Cleveland-based Progressive Insurance) and have witnessed one of the above claims.

One case brought forth as an example in the suit is that of Timothy Monn, a Nationwide insured who needed to have the glass replaced in his vehicle. He reported the claim to his insurer and scheduled Diamond Triumph to do the work.

“He received a follow up call from ‘Blue Ribbon’ (actually Safelite) misrepresenting to Mr. Monn that Diamond Triumph was not a Blue Ribbon preferred shop. He was told that the job would be rescheduled with a Safelite shop in Bedford, Pa. Mr. Monn explained that he had already scheduled the job with Diamond and that he wanted to use Diamond because he had used them in the past and had received excellent service from them,” writes the plaintiff. Diamond Triumph learned of the problem when Monn called to complain, explaining what had happened.

Another example cited is that of the Parkersburg, W.Va.-based McCullough/Jackson Insurance Agency, which called Diamond Triumph to inform it of a recent encounter with Safelite on behalf of one of its customers who is insured by Nationwide.

“The agency called Safelite to report the claim on behalf of its client and obtain a referral number. At that time, Safelite was told that Triumph had been selected to perform the work. The insurer later called the agency to report that Safelite had called and inquired whether Triumph was the vendor selected for the work,” the complaint continues. “When the insured informed the caller that Triumph had been selected, the Safelite representative informed the insured that Safelite had its own network of shops and that someone would be calling her back to reschedule the job.”

When the agency called Safelite to complain about what had happened to its customer, a Safelite representative said that she had been trained to reschedule the work “in every instance where the customer is not at the glass shop or having the work done at that time,” according to court documents. Other examples cited involve Progressive. According to Diamond Triumph, John Barney, a Progressive policyholder in North Carolina, called Safelite to report his claim—at the direction of his insurance company.

“When he requested Triumph as the shop to perform the work, he was told that there was a bad connection and that the Safelite representative could not hear him and would have to call back,” writes Diamond Triumph. “When the person called Mr. Barney back, the Safelite representative tried very hard to get Mr. Barney to use Safelite rather than Triumph, notwithstanding the fact that Triumph is a member of Safelite’s network of affiliated shops.”

While insurance companies have the ability to monitor their calls from policyholders—and those transferred to claims administrators such as Safelite—-they do not have the ability to monitor Safelite’s outgoing calls as a claims administrator. Diamond Triumph also makes note of this in the suit.

“As a consequence, steering activity that may be contrary to Safelite’s first notice of loss agreement can be done without detection after feigning a bad connection or, as is shown in other examples, by follow-up calls to customers who have expressed a preference for a shop other than Safelite,” reads the document.

Bryon Rye’s case follows. The complaint alleges that Rye, a resident of South Carolina, called Diamond Triumph to schedule his windshield replacement, Diamond Triumph informed him that he needed to call Safelite to get a claim number, as provided by the terms of his Progressive insurance policy.

“When Mr. Rye called Safelite as instructed, he had to repeatedly tell the Safelite representative that Triumph had been selected for the work,” reads the suit. “Undeterred by the number of times Mr. Rye expressed his preference, the Safelite representative continued to push Safelite for the work. Mr. Rye finally had to state bluntly that only Triumph would be doing his work.”

The case continues, “When Triumph did not receive the customary confirming paperwork from Safelite, Triumph called Safelite to make an inquiry. Triumph was told by Chris Dietz, a Safelite representative, that a shop had not yet been assigned to this work, even though Mr. Rye had been explicit in his selection of a shop.”

These are just a few of the 20 such examples to which Diamond Triumph refers in the suit. In retribution for these offenses, Diamond Triumph has requested that the court order Safelite: to pay it for actual damages incurred (an amount to be determined during the trial); discontinue the conduct described in the complaint; and award Diamond Triumph for its costs and disbursements, including the cost of the investigation and attorney fees.

The complaint, filed on March 29, 2002, requested a jury trial. However, no dates for such a trial had been set in the Middle District of Pennsylvania, where the suit was filed. Richard Bishop of Scranton, Pa., and Chuck Lloyd, an AGRR columnist and an attorney in the Minneapolis firm of Livgard & Rabuse, P.L.L.P., are representing the plaintiff.

“We expect this to be a landmark case in the area,” Lloyd said, speaking to a crowd of 300 at the Independent Glass Association’s National Glass Show and Convention in Orlando, Fla., on April 5.

Safelite, the defendant, was unavailable for comment. The Columbus-based company recently emerged from a bankruptcy reorganization under Chapter 11 of the U.S. Bankruptcy Codes.

Diamond-Triumph is based in Kingston, Pa., and has more than 200 locations nationwide. Associates from Diamond-Triumph were not available for comment either, despite several attempts to reach them by phone.