This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).






Sandra Vee Andersen,





United Fire and Casualty Company,




Filed May 16, 2006

Reversed and remanded

Worke, Judge


Hennepin County District Court

File No. PI 03-006069


William O. Bongard, Sieben, Grose, Von Holtum & Carey, Ltd., 900 Midwest Plaza East, 800 Marquette Avenue, Minneapolis, MN 55402, and


Scott A. Wilson, 900 Second Avenue South, Suite 400, Minneapolis, MN 55402 (for respondent)


Frederick L. Grunke, Rajkowski Hansmeier Ltd., 11 Seventh Avenue North, P.O. Box 1433, St. Cloud, MN 56302 (for appellant)



            Considered and decided by Worke, Presiding Judge; Dietzen, Judge; and Collins, Judge.[*]

U N P U B L I S H E D   O P I N I O N

WORKE, Judge

            On appeal from a district court decision that respondent was entitled to underinsured motorist (UIM) benefits, appellant argues that the district court erred in (a) disregarding the parties’ agreement to engage in binding arbitration and in failing to accept the arbitrator’s findings; (b) ruling that appellant was not entitled to a collateral-source deduction; (c) ruling that appellant was not entitled to an offset under Minn. Stat. § 65B.51 (2004) for no-fault benefits paid up to the date of the award; and (d) ruling that respondent was entitled to UIM benefits.  We reverse and remand. 


Arbitrator’s Decision

            Appellant United Fire and Casualty Company argues that the district court erred in disregarding a decision from binding arbitration.  Respondent Sandra Vee Anderson argues that the district court did not err because the decision was merely advisory.  Arbitrators derive their authority to resolve disputes from the parties’ agreement to do so.  Johnson v. Piper Jaffray, Inc., 530 N.W.2d 790, 795-96 (Minn. 1995).  Parties are free to determine the scope and extent of their arbitration agreement, Lucas v. Am. Family Mut. Ins. Co.,403 N.W.2d 646, 648 (Minn. 1987), and may choose which controversies they agree to arbitrate.  Michael-Curry Cos., Inc. v. Knutson S’holders Liquidating Trust, 449 N.W.2d 139, 141 (Minn. 1989).  A written agreement to arbitrate is presumptively “valid, enforceable, and irrevocable.”  Minn. Stat. § 572.08 (2004).  

            Here, respondent was involved in a two-car collision while insured under an automobile policy issued by appellant.  After settling her claim against the at-fault driver for $90,000, respondent filed a complaint alleging that appellant refused to pay her UIM benefits.  The parties agreed to submit the claim to a three-member arbitration panel seeking a gross-damages award.  The parties did not submit the issue of collateral-source deductions, believing that they would reach an agreement; but the parties agreed to subsequently submit that issue for a determination in the event they could not agree.  The panel determined that respondent’s gross damages were $156,000—$96,000 in past medical expenses, $50,000 in past pain and suffering, and $10,000 in future pain and suffering.  Appellant informed the arbitration panel chairman that the parties had been unable to agree on the collateral-source issue and agreed to submit the matter to him for a decision.  Respondent confirmed the parties’ intent to seek assistance in making a decision related to the collateral-source issue and the parties’ agreement that applicable collateral-source offset determinations could be made post verdict.  Respondent’s submission stated that the parties had “rather different views of the collateral source statute, and the effect of a no-fault settlement early on in the case, and [sought] assistance in making a decision[.]”  Thus, the parties agreed to submit the issue for a binding decision. 

            We must next decide whether the district court erred by disregarding the arbitrator’s decision.  Minnesota policy strongly favors the finality of arbitration awards.  Erickson v. Great Am. Ins. Cos., 466 N.W.2d 430, 432 (Minn. App. 1991).  “In no-fault arbitration, the arbitrator’s findings of fact are conclusive . . . . [While] [q]uestions of law are subject to [de novo review].”  Barneson v. W. Nat’l Mut. Ins. Co., 486 N.W.2d 176, 177 (Minn. App. 1992).  Because we are not bound by and need not give deference to the district court’s decision on a question of law, Frost-Benco Elec. Ass’n v. Minn. Pub. Utils. Comm’n, 358 N.W.2d 639, 642 (Minn. 1984), we must accept the arbitrator’s findings of fact and review de novo the application of those facts to relevant statutes.  

            Here, after finding that respondent had not met the $100,000 threshold for recovery of UIM benefits,the arbitrator determined that respondent was not entitled to UIM benefits.  The arbitrator found that approximately $16,000 ($1,137.09 in medical benefits paid and a $15,000 settlement payment) respondent received in no-fault benefits should be offset.  The arbitrator also found that respondent’s medical insurer had paid the balance of respondent’s medical expenses and that respondent could not be liable to anyone for the $96,000 in past medical expenses awarded by the arbitration panel.  The arbitrator concluded that respondent was only entitled to $80,361.10 ($29,290.11 recovery of medical expenses, plus $60,000 recovery of non-economic expenses, less 10%—respondent’s agreed-on comparative fault, equals $80,361.10).  Appellant moved the district court to confirm this decision, and respondent moved the district court to confirm the gross-damages award.  The district court confirmed the award as follows: “[respondent’s] $96,000 medical expense recovery is to be reduced according to the offset provisions of the No-Fault Act by no more than $1,137.09, yielding $94,862.91, prior to application of the agreed 10% comparative fault reduction.  This amount, added to the unreduced $60,000 non-economic component, totals $154,862.91.”  The district court then reduced the award by the 10% comparative fault and deducted the $90,000 respondent recovered from the at-fault driver and concluded that respondent was entitled to $49,376.61 in UIM benefits ($154,862.91 less 10% equals $139,376.61, less $90,000 equals $49,376.61).  We need not defer to the district court’s decisions on questions of law; we must accept the arbitrator’s findings and apply them to the applicable statutes to determine whether respondent is entitled to UIM benefits. 

Collateral-Source Deduction  

            Collateral sources are “payments related to the injury or disability in question made to the plaintiff, or on the plaintiff’s behalf up to the date of the verdict[.]”  Minn. Stat. § 548.36, subd. 1 (2004).  The deduction of collateral-source payments includes “amounts of collateral sources that have been paid for the benefit of the plaintiff or are otherwise available to the plaintiff as a result of losses except those for which a subrogation right has been asserted.”  Id., subd. 2(1) (2004).  It is the arbitrators, not the district court, that must consider collateral-source offsets under Minn. Stat. § 548.36 (2004).  W. Nat’l Mut. Ins. Co. v. Casper, 549 N.W.2d 914, 917 (Minn. 1996).  “[I]t is the arbitrators who, in arriving at their award, must determine the amounts paid by collateral sources which have been included in the gross award and who must then calculate the net award accordingly.”  Id. 

In 2001 respondent had entered into an agreement with her medical insurer whereby the insurer accepted $20,500 from respondent “as full and final satisfaction of [its] subrogation interest for this loss [of $29,290.11].”  The arbitrator determined that the only subrogation right that had been asserted was for $29,290.11.  The district court rejected this determination and relied on Smith v. Am. States Ins. Co., 586 N.W.2d 784 (Minn. App. 1998), review denied (Minn. Feb. 18, 1999).  The district court ruled that respondent was not barred from recovering special damages even though the damages had been paid by another.  But the facts in Smith are unlike the circumstances here.  The court in Smith held that based on its particular fact situation, the collateral-source statute did not apply “[b]ecause the statute expressly does not apply to payments not yet received, whether due to an insurer’s denial of coverage or discontinuation of payment based on an insured’s failure to show continued entitlement to those benefits[.]”  Id. at 786.  Minn. Stat. § 548.36 is limited to payments made up to the date of the verdict.  Here, all of the payments claimed as collateral sources were made prior to the award and the statute should apply; thus, $29,290.11 is the only amount subject to the subrogation claim and it is not deductible as a collateral source. 

Respondent argues that the statute states “except those for which a subrogation right has been asserted” and this means all payments regardless of when paid.  Minn. Stat. § 548.36, subd. 2(1).  But as the settlement agreement regarding subrogation specifically states, the insurer “agreed to accept $20,500 as full and final satisfaction of [the insurer’s] subrogation interest for this loss [$29,290.11].”  (Emphasis added.)  The $20,500 was accepted for the particular loss of $29,290.11 and not for any other amount paid after the date of the agreement.  Thus, the arbitrator was correct in determining that $29,290.11 was the only amount subject to the subrogation claim.   


            Minn. Stat. § 65B.51, subd. 1 (2004), provides for the deduction “from any recovery the value of basic or optional economic loss benefits paid or payable[.]”  The offset provision operates to preclude duplicate recovery or “over-compensation.”  Pfeffer v. State Auto. & Cas. Underwriters Ins. Co., 292 N.W.2d 743, 747-48 (Minn. 1980).   But the offset provision “should not operate until [the] plaintiff has been fully compensated[,]” and should not be applied “so as to invade items of damage for which [the] plaintiff has not yet been compensated.”  Tuenge v. Konetski, 320 N.W.2d 420, 422 (Minn. 1982). 

In July 2001, respondent accepted $15,000 from appellant as settlement of all no-fault-benefit claims of whatever nature resulting from the accident.  Respondent agreed that by receiving the $15,000 it was her “specific intent to release [appellant] . . . from any and all claims that [she] may have for past, present or future claims for no-fault benefits.” The arbitrator determined that respondent had received more than $16,000 in no-fault benefits consisting of $1,137.09 in medical benefits and the $15,000 settlement.  The district court reduced respondent’s recovery by $1,137.09, and did not provide any reason for not deducting the $15,000. 

Respondent argues that the district court did not deduct the $15,000 because it cannot be traced to medical expenses.  Respondent argues that Fahy v. Templin, 361 N.W.2d 158 (Minn. App. 1985), review denied (Minn. Apr. 18, 1985), is controlling.  Fahy’s insurer paid him no-fault benefits of $40,000 for medical expenses and $20,000 for lost wages.  Fahy, 361 N.W.2d at 158.  A jury found that Fahy incurred $18,000 in medical expenses and that $78,000 would compensate him for medical expenses and loss of earnings.  Id. at 159.  The tortfeasor requested that the court deduct from the $78,000 the $60,000 in no-fault benefits Fahy received.  Id.  The district court offset the verdict by $20,000 for lost-income benefits and $18,000 for medical-expense benefits.  Id. The court in Fahy held that only the amount found for medical expenses should be deducted because otherwise “there would be an invasion of Fahy’s recovery for other uncompensated items of damage.”   Id.   This case is different because respondent entered into an agreement accepting $15,000 and releasing appellant from all claims for no-fault benefits of whatever nature and kind.  The agreement should be given the effect the parties intended, and the $15,000 should be included in the offset amount.  Further, respondent does not show how the deduction would invade damages for which she has not yet been compensated and concedes that she is not responsible for any medical expenses incurred after she purchased her medical insurer’s subrogation interest. 

Underinsured Motorist Benefits

            Minn. Stat. § 65B.43, subd. 17 (2004), provides that an individual is entitled to UIM benefits only if the at-fault driver’s policy limit for bodily injury liability is less than the amount needed to compensate the insured for actual damages.  Here, the at-fault driver’s policy limit was $100,000.  As the arbitrator concluded, respondent is entitled to $80,361.10 which falls short of the $100,000 threshold of the at-fault driver’s policy limit; therefore, respondent is not entitled to UIM benefits.  The arbitrator’s analysis was correct, and the district court erred in not adopting the arbitrator’s findings and decision that respondent was not entitled to UIM benefits.  We reverse and remand to the district court to adopt the arbitrator’s findings and decision.

            Reversed and remanded.

[*] Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.