This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2002).






Angela Marie Carolla,


American Family Mutual Insurance Company,


Filed September 9, 2003

Affirmed in part, reversed in part, and remanded

Minge, Judge


Dakota County District Court

File No. C4-00-8633


Sharon L. Van Dyck, Schwebel, Goetz & Sieben, P.A., 5120 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402-2246 (for respondent)


Corey J. Ayling, Kathleen M. Brennan, McGrann, Shea, Anderson, Carnival, Straughn & Lamb, Chtd., 2600 U.S. Bancorp Center, 800 Nicollet Mall, Minneapolis, MN 55402-7035 (for appellant)


            Considered and decided by Minge, Presiding Judge, Harten, Judge, and Stoneburner, Judge.

U N P U B L I S H E D  O P I N I O N


MINGE, Judge


            Appellant insurer brings an interlocutory challenge to the district court determination that (1) it had subject-matter jurisdiction over an action by respondent policyholder for coverage and other relief for diminished-value loss to her vehicle; and (2) mandatory injunctive relief should be granted.  Respondent filed a notice of review challenging the court’s imposition of a bond.  The controversy involves disputes over losses subject to the no-fault arbitration process of Minn. Stat. § 65B.525 (2002).  Because the policy coverage for diminished value is a legal issue subject to judicial determination, and because appellant, in earlier stages of this litigation, has denied coverage, the district court’s exercise of subject-matter jurisdiction is affirmed.  Because the mandatory relief determinations of the district court have been modified and are inconsistent, because the nature and extent of mandatory relief are dependent upon interpretation of the insurance policy, which is not ripe for appeal, and because no reasons are provided for the bond requirement, the mandatory injunction is reversed, and the case is remanded.


In 1998, a car leased by respondent Angela Carolla and insured by appellant American Family Mutual Insurance Company (American Family) was damaged in an accident.  American Family paid for repairs to Carolla’s vehicle.  Carolla later filed a class-action breach-of-contract suit, asserting that the value of her car was diminished as a result of being in an accident and that American Family’s Minnesota Family Car Policy covered that diminished-value loss.[1]     

In December 2000, Carolla moved for partial summary judgment on her breach-of-contract claim, seeking a judgment that “diminished value is a covered loss under the insurance policy . . . issued to [Carolla] and class members in Minnesota.”  On June 29,  2001, the district court granted partial summary judgment, finding that the policy covered the diminished-value loss as a matter of law.  At that time, the district court did not make any determination as to class certification, nor did it actually order American Family to take any action. 

In April 2002, Carolla sought to amend her complaint to include as a class other persons insured by American Family whose cars had been damaged in accidents.  Carolla sought immediate injunctive relief as part of the class-action claim.  On June 19, 2002, the district court granted Carolla’s motion to amend her complaint to add an injunctive class and a prayer for injunctive relief.  The district court held a four-day hearing on class certification and subject-matter jurisdiction.   

On September 25, 2002, the district court granted Carolla’s motion for injunctive relief and effectively ordered American Family to either change the language of its Minnesota Family Car Policy to specifically exclude diminished-value loss or notify a class of policyholders that they were entitled to diminished-value loss.  The district court made extended findings of American Family’s “pattern of utter noncompliance” and “complete disregard” of the court’s earlier orders finding coverage for diminished-value loss and, in part, based its injunctive relief on this recalcitrance.  After initially declining to change its policy, American Family ultimately changed the policy to specifically exclude diminished-value loss; then it moved the district court to decertify the injunctive class. 

On January 7, 2003, the district court denied American Family’s motion to decertify the injunctive class.  The district court also concluded that Carolla had not made a satisfactory showing of a specific diminished-value formula for use in a class action, denied a motion by Carolla to certify a money-damages class, and instead ordered that all money-damages claims were subject to mandatory arbitration pursuant to the Rules of Procedure for No-Fault Arbitration under Minn. Stat. § 65B.525 (2002).  The district court also ordered Carolla to post a $750,000 bond.  The district court noted that it had already found that there was coverage for diminished-value claims and that American Family’s policyholders were “entitled to notice that there is coverage and the right to make and pursue a claim.” 

American Family appeals from the September 2002 and January 2003 orders.  Carolla challenges the $750,000 bond requirement by notice of review.



            American Family first argues that the district court did not have subject-matter jurisdiction to “issue an injunction telling American Family how to investigate and pay” the diminished-value claims.  American Family argues that the No-Fault Act, Minn. Stat. § 65B.525 (2002), requires mandatory arbitration of diminished-value claims and thereby deprives the district court of subject-matter jurisdiction.  Note that in this interlocutory appeal, the dispute is over injunctive relief incident to a class-action claim.  The underlying diminution-value claims are not at issue.

The existence of subject-matter jurisdiction is a question of law and is reviewed de novo.  Olson v. Am. Family Ins. Co., 636 N.W.2d 598, 601 (Minn. App. 2001).  In this case, as in Olson, whether or not the district court may properly exercise subject-matter jurisdiction depends on the construction of the Minnesota No-Fault Act.  See id.  Statutory construction is also a question of law and is reviewed de novo.  Id.   

The No-Fault Act provides:

Except as otherwise provided in section 72A.327, the supreme court and the several courts of general trial jurisdiction of this state shall by rules of court or other constitutionally allowable device, provide for the mandatory submission to binding arbitration of all cases at issue where the claim at the commencement of arbitration is in an amount of $10,000 or less against any insured’s reparation obligor for no-fault benefits or comprehensive or collision damage coverage.


Minn. Stat. § 65B.525.  The Minnesota Supreme Court has adopted Rules of Procedure for No-Fault Arbitration.  However, arbitrators decide only issues of fact; interpretation of law is left to courts.  Kerber v. Allied Group Ins., 516 N.W.2d 568, 569 (Minn. App. 1994).  Consistent with that general principle, interpretation of the No-Fault Act and of the insurance contract is a question for courts, not for arbitrators.  AMCO Ins. Co. v. Ashwood-Ames, 534 N.W.2d 740, 741 (Minn. App. 1995), review denied (Minn. Sept. 28, 1995). 

            American Family asserts that the district court orders issued on September 25, 2002 and January 7, 2003 require that once a policyholder submits a diminished-value claim, American Family must pay the claim and does not have the option of denying the claim if it believes that a particular policyholder did not actually incur a diminished-value loss.  American Family argues that the district court orders circumvent the arbitration requirement and are therefore an improper exercise of subject-matter jurisdiction. 

            The September 25, 2002 order required American Family to either change its policy language to specifically exclude diminished-value claims or to create a procedure whereby diminished-value claims could be arbitrated and paid.  Ordinarily, when a claim is submitted to an insurance company, the company investigates the claim and decides whether to pay the claim or deny the claim.  If the company denies the claim, the policyholder, under the No-Fault Act, can demand that the matter be arbitrated.  See Minn. Stat. § 65B.525.  We agree with American Family that the September 25, 2002 order is an improper exercise of the district court’s subject-matter jurisdiction because it does not permit American Family to deny diminished-value claims if it believes that a given policyholder did not actually incur a diminished-value loss.  That order deprives American Family of its right to arbitrate the claims.

But, by its own terms, American Family complied with the September 25, 2002 order when it amended its policy and the alternative mandate no longer applied.  The January 7, 2003 order contains a new mandate, which only requires that American Family notify certain policyholders that their policies prior to amendment included coverage for diminished-value losses.  The January 7, 2003 order acknowledges that each individual diminished-value loss claim is subject to mandatory arbitration to determine the actual amount, if any, of that loss.  The requirements of the January 7, 2003 order prevail.  Under the two district court orders, once an insured submits a diminished-value claim to American Family, American Family can either pay the claim or deny the claim.  If American Family denies the claim, the policyholder can demand arbitration. 

We are then left with the question of whether the district court’s continued retention of subject-matter jurisdiction pending arbitration of diminished-value claims was proper.  American Family does not contest and apparently concedes that the court had subject-matter jurisdiction to determine whether the policy covered such claims.  As we have already noted, interpretation of an insurance contract is a question of law, and the No-Fault Act does not apply arbitration to questions of law.   Meister v. W. Nat’l Mut. Ins. Co., 479 N.W.2d 372, 376 (Minn. 1992); AMCO, 534 N.W.2d at 741.  Based on the district court’s findings of American Family’s adamant resistance to evaluating diminished-value claims, we conclude that the retention of jurisdiction was proper. 

Carolla argues that reversing the district court’s exercise of subject-matter jurisdiction would be an unconstitutional violation of her right to a jury trial and of her right to an effective remedy.  We do not agree with this claim.  The constitutionality of the No-Fault Act has been upheld.  See Neal v. State Farm Ins. Co., 509 N.W.2d 173, 178-79 (Minn. App. 1994) (finding that the mandatory arbitration requirement does not violate a party’s right to a jury trial), reversed on other grounds by Neal v. State Farm Mutual Ins. Co., 529 N.W.2d 330 (Minn. 1995).  In any event, because American Family is not challenging the court’s jurisdiction to determine coverage and because we are not reversing the district court’s exercise of continuing subject-matter jurisdiction, other aspects of Carolla’s constitutional arguments are either moot or can be raised later and are not further considered in this appeal.     


The second issue is whether injunctive relief is appropriate in this case.  As a threshold consideration, we must determine whether the injunction is temporary or permanent.       

A temporary injunction is issued prior to a complete trial on the merits and “a showing of irreparable harm is required to prevent undue hardship to the party against whom the injunction is issued, whose liability has not yet been determined.”  Cherne Indus., Inc. v. Grounds & Assocs., Inc., 278 N.W.2d 81, 92 (Minn. 1979).  The Minnesota Rules of Civil Procedure require the posting of a bond for a temporary injunction.  See Minn. R. Civ. P. 65.03(a) (stating that no “temporary injunction shall be granted except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained.”).  Thus, a temporary injunction is issued to preserve the status quo until there is a determination on the merits.  A permanent injunction, on the other hand, is granted after a determination of the case on the merits.  See Theros v. Phillips, 256 N.W.2d 852, 859 (Minn. 1977) (noting that a court has no discretion to deny a permanent injunction “where the facts proved at trial require such relief”) (citation omitted); Bio-Line, Inc. v. Burman, 404 N.W.2d 318, 320 (Minn. App. 1987) (noting that a permanent injunction will issue “only after a right to such relief has been established at a trial”) (quotation omitted).     

            Carolla argues that the injunction is permanent while American Family argues that the injunction is temporary.  Carolla moved for a permanent injunction and the district court memorandum indicates that the district court intended to issue a permanent injunction.  The memorandum repeatedly references mandatory injunctions and notes that “in a case such as this, there is no legal remedy short of permanent injunction that is adequate to prevent continuing injury.”  The injunction followed the district court’s summary judgment determination that the policy included diminished-value coverage.  Yet the district court’s requirement that Carolla post a $750,000 bond is a feature of a temporary injunction.   

            Because the injunction in this case followed a determination on the merits, we conclude that the injunction is a permanent injunction.  As to the bond requirement, we note that the Minnesota Rules of Civil Procedure require the posting of a bond only for temporary injunctions.  Minn. R. Civ. P. 65.03.  In this case, because there has already been a determination of the coverage issue on the merits, there is no danger, as with a temporary injunction, that the district court will later decide that the injunction should not have been issued.  Accordingly, we reverse that portion of the injunction that requires Carolla to post a $750,000 bond. 

            We must now decide whether the permanent injunction was properly issued.                      The granting of an injunction generally rests within the sound discretion of the trial court, and its action will not be disturbed on appeal unless, based upon the whole record, it appears that there has been an abuse of such discretion.  Cherne, 278 N.W.2d 81, 91.  The party seeking the injunction must establish that his legal remedy is not adequate and that the injunction is necessary to prevent great and irreparable injury.  Id. at 92. 

The injunction in this case requires American Family to send notice to certain of its policyholders informing those policyholders that they may have diminished-value claims.  The requirement that American Family send notice to policyholders assumes that American Family was breaching the policy by not evaluating damaged vehicles for diminished value, even in the absence of a specific diminished-value claim.  The notice requirement assumes that when a policyholder makes a general claim of loss, the American Family adjuster is required to assess diminished-value loss, even if the policyholder has not claimed a diminished-value loss.  Whether that is a valid assumption depends on the interpretation of the insurance policy; it is a matter of contract between the parties.  Although interpretation of contracts is a question of law which we review de novo, this specific issue was not addressed by the district court and is not before us on appeal.  Accordingly, we reverse the issuance of the injunction and remand for determination as to whether the American Family policy requires assessment of diminished value in the absence of a specific claim by the policyholder. 

We note that if the district court had determined that American Family by its insurance contract assumed the duty to evaluate all general-loss claims for diminution in value, a permanent injunction requiring American Family to perform that duty would not be an abuse of discretion.  But the district court cannot require American Family to pay all diminished-value claims submitted to it.  The district court does not have jurisdiction to determine which claims should be paid.  Arbitration is the statutorily mandated forum for disputed claims.

The posture in which this court received this case—an interlocutory appeal—limits our consideration.  However, we recognize that there are several critical issues that are not before us on this appeal.  The first is whether under the policy there is any coverage for diminished value.[2]  Second is whether the class in this case is appropriate for certification.  Third is whether under the policy and Minnesota law American Family has any affirmative duty to notify policy holders of diminished-value coverage. 
Fourth is whether after arbitration of individual claims the class will have such diverse interests that it cannot be maintained as a class.  Finally, is whether under the circumstances of the disposal by Carolla of her vehicle she has a legitimate claim of loss that enables her to represent the class. 

Based on the issues before us, we reverse the bond requirement, and we reverse the issuance of the injunction.

Affirmed in part, reversed in part, and remanded.     

[1] At the time of the accident, Carolla was leasing a 1995 Jeep Cherokee with an agreed upon value of $17,569.20.  In May 1999, Carolla traded in the Jeep for a Chevrolet Malibu.  At that time, Carolla received a trade-in value of $13,000.  Carolla alleged that the value of her car was diminished by about $4,000 as a result of the accident.  Her allegation was based on her belief that had her car not been in an accident, she could have sold it to a private party for at least $18,000.  There is a factual dispute over the existence and extent of any diminished-value loss to this vehicle.  That dispute is not part of this appeal.

[2] Diminished-value claims have spawned a large amount of litigation in recent years.  See, e.g., State Farm Mut. Auto. Ins. Co. v. Mabry, 556 S.E.2d 114, 129 (Ga. 2001) (finding that insurance policy covers diminished-value claims); Pritchett v. State Farm Mut. Auto. Ins. Co., 834 So.2d 785, 794-95 (Ala. Civ. App. 2002) (declining to follow State Farm v. Mabry and finding that insurance policy does not cover diminished-value claims).