An interesting lawsuit has come to our attention. The dispute does not involve New Jersey directly, but it does involve a business that many of us are familiar with: auto glass repair. It also involves a very unusual request: The company wants the court to issue an injunction that will stop the state from enforcing the law. One unusual part of the case: The law will not take effect until Jan. 1, 2014.

The purpose of the law is to make insurance transactions more transparent and to increase competition among auto glass companies in the state. The company claims that certain provisions of the law violate the company's constitutional right to free speech.

The plaintiff is one of the largest auto glass repair and replacement companies in the U.S., with locations every state. Its business operations are not limited to auto glass, though: The company is also a third-party administrator for 18 property and casualty insurance companies.

The law specifically addresses lawmakers' and consumer advocates' concerns about self-referrals from the insurance division to the auto glass division. As of Jan. 1, 2014, claims administrators will no longer be able to tell policyholders that the insurer may not guarantee an out-of-network repair shop's work. Nor will the claims administrator be able to refer or to direct a customer to a shop or service the administrator owns without also providing the name of at least one other auto glass repair service in the area.

In its complaint, the plaintiff says such restrictions impinge on the company's "constitutional right to engage in truthful, non-misleading speech." The complaint goes on to accuse the state of enacting the measures in order to steer business to smaller, local glass companies.

As court documents explain, the plaintiff requires its claims handlers to inform policyholders of the relationship between the claims administrator and the auto glass company. The plaintiff asserts as well that claims handlers put no pressure on policyholders to choose its glass services over competitors'; policyholders are always free to choose any repair shop. Claims personnel make recommendations tailored to the policyholder's coverage and location, not the company's own bottom line, the plaintiff says.

The plaintiff has also filed lawsuits against state's attorney general and insurance commissioner.

Source: 

Hartford Business Journal, "Autoglass company challenges new CT law," Aug. 14, 2013