The Connecticut Supreme Court recently reversed a judgment that had been in favor of an automobile insurer in a breach of contract action brought by glass repair companies who had been assigned the rights of the defendant’s insureds. Auto Glass Express, Inc. v. Hanover Ins. Co., SC 18118 (Conn., August 25, 2009). The Supreme Court held that (1) contracts had not been formed between the defendant insurer and the plaintiff glass repair companies regarding the price to be paid to the plaintiffs for glass repair services, and (2) the policy language regarding what constituted an “amount necessary” to perform glass repair was ambiguous.

The defendant’s automobile insurance policies provided coverage for reimbursement of the “amount necessary to repair or replace [broken] glass with other [glass] of like kind and quality.” The plaintiff automobile glass repair companies, who did business with the defendant insurer, received pricing letters from the defendant at various times informing them of the defendant’s pricing standards for glass repair services that reflected the defendant’s estimate of “fair and reasonable prices for the market.” According to the pricing letters, “[b]ills that are accurate and are not more than this pricing structure will be paid promptly as submitted.”

The plaintiffs repaired automobile glass for several of the defendant’s policyholders and, in exchange for the glass repair work, the policyholders assigned to the plaintiffs their rights of reimbursement from the defendant. The plaintiffs submitted invoices for the glass repair work to defendant’s third party administrator, who reimbursed the plaintiffs for the amounts set forth in the pricing letters, which were less than the amounts submitted in the plaintiffs’ invoices. The plaintiffs filed lawsuits alleging that the defendant insurer breached its insurance contracts by failing to pay the full amount of the invoices submitted by the plaintiffs.

The trial court found that the pricing letters from the defendant insurer to the plaintiffs constituted offers from the defendant to pay for glass repairs to automobiles insured by the defendant and the plaintiffs had accepted those offers each time they performed those glass repairs, thereby consummating a series of unilateral contracts between the parties. The trial court further found that the terms of the pricing letters had supplied the amounts that were “necessary” to repair glass under the insurance policies assigned to the plaintiffs by the defendant’s policyholders. The trial court therefore concluded that the insurer did not breach the insurance contracts and rendered judgment in favor of the defendant.

The Supreme Court reversed the judgment on both grounds. Although the Supreme Court agreed that the pricing letters constituted offers to the plaintiffs, the court disagreed that the performance of glass repairs, without more, constituted acceptance of the terms set forth in the pricing letters. The Supreme Court concluded that the defendant’s pricing letters did not evidence an intention not to pay a greater amount, but rather an intention not to pay a greater amount “promptly,” the letters did not restrict the plaintiffs from submitting invoices reflecting higher prices, and in order for unilateral contracts to have been formed, the plaintiffs would have been required to accept the prices by submitting invoices that conformed to those prices, which they did not do.

The Supreme Court also held that what constituted the “amount necessary” to repair or replace broken glass with like kind and quality was ambiguous. Because both the plaintiffs’ interpretation of the phrase (“an amount that is reasonable in the marketplace”) and the defendant’s interpretation of the phrase (“an amount absolutely required or essential to have the service performed”) were both reasonable, the court resolved the ambiguity in favor of the insured. However, because the trial court made no findings as to what amounts were reasonable in the marketplace, the cases were remanded to the trial court to decide whether the plaintiffs’ invoices were reasonable and whether the defendant breached the terms of the insurance policies by failing to pay the full amount of the invoices.

A copy of the decision is available here.