This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2006).
IN COURT OF APPEALS
Glass Service Co., Inc.,
as Assignee of Brad Benson, et al., claimants,
Illinois Farmers Insurance Company,
Ramsey County District Court
File No. C1-02-005860
Charles J. Lloyd,
Livgard & Rabuse, P.L.L.P.,
Eric J. Magnuson, Diane B. Bratvold, Briggs & Morgan, 2200 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402; and
Steven R. Kluz, Jr., Gregory Erickson, Mohrman & Kaardal, P.A., 33 South Sixth Street, Suite 4100, Minneapolis, MN 55402 (for appellant)
Considered and decided by Randall, Presiding Judge; Klaphake, Judge; and Willis, Judge.
U N P U B L I S H E D O P I N I O N
On appeal from the district court order confirming the arbitrators’ awards of damages in multiple, individual, consolidated claims under the no-fault law, in which respondent sought additional payments for automobile windshield glass repair and replacement work it had performed for appellant’s insureds, appellant argues that the arbitrators exceeded their authority (a) in awarding aggregate damages in multiple individual consolidated claims; (b) in failing to hold respondent to its burden of proof as an assignee and under the arbitration rules; and (c) in awarding damages in contravention of the policy language and governing statute. Appellant also argues the district court erred in modifying the arbitrators’ awards to add pre-award interest. We affirm.
Appellant Illinois Farmers Insurance Company
provides automobile insurance to thousands of
appellant and respondent concerning the amount that appellant must pay respondent for services performed on behalf of approximately 5,700 of appellant’s insureds.
Pricing in the auto glass industry is primarily based on
three components: glass, adhesives, and
labor. The pricing on these components
is based on a national price-list publication known as the National Auto Glass
Specifications (NAGS). The NAGS
benchmark pricing is updated and published quarterly to remain current with new
part introductions and revisions to existing parts information, and reflect
adjustments for inflation. Like most
insurers and glass providers in
Using its percentage of the NAGS list prices, appellant routinely paid respondent less than the amount billed. However, because the discrepancies between the amounts billed and the amounts reimbursed were relatively small, usually under $500, respondent rarely disputed the individual claims. In fact, if respondent had disputed any of the individual claims, the dispute would have been bound by a mandatory arbitration clause in appellant’s insurance policy. The clause requires arbitration of “all cases where a claim made by an insured person is $5000 or less.”
In addition to the arbitration clause contained in
appellant’s insurance policy, the No-Fault Act provides 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 . . . for
no-fault benefits or comprehensive or collision damage coverage.”
As a result of appellant paying what it considered to be the prevailing competitive rate for respondent’s work rather than paying the full amount of the invoices, the 5,700 alleged underpayments amounted collectively to more than $1 million. Consequently, in 2002, respondent served a demand for arbitration of its claims against appellant. In response, appellant sought a declaratory judgment in district court prohibiting arbitration. Respondent subsequently withdrew its demand for arbitration and filed a counterclaim seeking damages for breach of contract. Appellant then moved for summary judgment on the breach of contract and sought a declaration that respondent was required to arbitrate each claim individually. The district court granted summary judgment requiring individual arbitration of the claims, but authorizing the same panel to determine all of the individual claims.
Respondent appealed and this court affirmed the district
court’s summary judgment ruling, but held that the district court erred when it
required that all the claims be arbitrated before the same panel. Ill.
Farmers Ins. Co. v. Glass Service Co., 669 N.W.2d 420, 428 (
On remand, the district court ordered eight consolidated arbitrations, the first three of which are at issue here. The consolidated arbitrations were organized according to the glass price used in the different formulas respondent utilized during successive intervals to determine the cost of its work. The first arbitration category was classified as “List – 14%,” meaning respondent charged 14 percent less than the price published in the NAGS calculator. The second arbitration category, classified as “List,” meant that respondent charged the full list price of the published NAGS list price for glass. Finally, the third category, classified as “List + 35%,” meant that respondent allegedly charged appellant 35% over the list price for auto glass, based on the industry-accepted NAGS.
Respondent first submitted a petition for arbitration of the “List – 14%” invoices on January 20, 2005. The arbitration petition claimed “an amount in excess of $180,618.87 to be determined.” Shortly thereafter, the American Arbitration Association (AAA) issued a letter questioning whether it had jurisdiction over the claim because the claimed amount listed on the petition exceeded the maximum jurisdictional limit of $10,000. The AAA indicated that to initiate the case, it needed an agreement from the parties to waive the jurisdictional limit. Appellant refused to waive the jurisdictional limit. Respondent subsequently filed a motion seeking emergency relief, requesting that the district court require appellant to arbitrate the dispute. On February 7, 2005, the district court ordered that the claim stated in the petition should proceed.
After AAA accepted respondent’s two other petitions setting forth claims for $331,394.12 and $463,487.99 respectively, each category was separately arbitrated with a no-fault arbitrator, and each received a separate arbitrator’s decision. On August 22-23, 2005, the parties arbitrated the “List – 14%” claims and the arbitrator awarded $158,109.82 to respondent. On November 15-16, 2005, the parties arbitrated the “List” claims, and respondent was awarded $324,152.91. Finally, the “List + 35%” claims were arbitrated in December 2005, and respondent was awarded $434,035.93. None of the awards included pre-award interest.
Appellant filed separate motions in district court to vacate the three arbitration awards. Respondent subsequently filed a single response to appellant’s motions to vacate and sought confirmation and modification of the award to include pre-award interest. In a single order dated April 27, 2006, the district court denied the separate applications to vacate. The district court also modified the three awards by granting pre-award interest to respondent.
Respondent moved to amend the April 27 order to include specific amounts of pre-award interest. Appellant then filed an appeal, which was subsequently dismissed by this court because of the pendency of the motion to amend. The district court filed an amended order on May 11, 2006, directing entry of a single money judgment in the amount of $1,023,487.25, representing the amount of the three arbitration awards plus $107,188.59 in pre-award interest not included in the arbitrator’s awards. Judgment was entered in that amount, plus an additional $12,783 in interest calculated from the date of each arbitration award to the time of judgment. This appeal followed.
D E C I S I O N
Therefore, a judicial
appeal from an arbitration award is subject to a particularly narrow standard
of review. State, Office of State Auditor
of arbitration awards is “limited to those matters where jurisdiction is
statutorily granted.” Abd Alla v.
Mourssi, 680 N.W.2d 569,
Appellant argues that the district court erred in failing to vacate the arbitrators’ awards for three reasons: (1) the arbitrators exceeded their authority under the No-Fault Act by allowing respondent to aggregate its many individual assigned claims and present summary evidence, and by awarding damages in an aggregated sum that was far in excess of the jurisdictional limit imposed by the No-Fault Act; (2) the arbitrators exceeded their authority in failing to hold respondent to its burden of proof as an assignee and under the No-fault Arbitration Rules; and (3) the arbitrators exceeded their authority in awarding damages to respondent under a standard that contradicts the policy and statutory language that binds respondent as an assignee.
A. Damages in excess of the limit imposed by the No-Fault Act
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, subd. 1 (2006). Here, because each award was more than $10,000, appellant argues that the arbitrators exceeded their authority by issuing awards for damages in excess of the jurisdictional limit established by the No-Fault Act.
In Ill. Farmers I, the supreme court specifically stated that:
The form, volume, and amount of the assignments does not, however, transform [respondent’s] status as an assignee of 5,700 plus individual claims into a claimant with a single claim of over $1 million. We therefore conclude that [respondent] is an assignee of 5,700 plus individual claims, each of which is subject to mandatory arbitration under the No-Fault Act.
Ill. Farmers Ins.
Co. v. Glass Service Co., 683 N.W.2d 792, 804 (
B. Burden of proof
Appellant asserts that because respondent was an assignee of appellant’s policy holders, respondent was required to meet the same burden of proof as each of the individual insureds. Appellant claims that this burden of proof mandated that for each individual claim, respondent must prove (1) there was coverage, (2) a loss that fell within the scope of coverage, (3) a failure on the part of appellant to pay the amount due under the policy, and (4) that respondent possessed a valid assignment from the insured. Appellant contends that by resolving the disputes in the aggregate, and not on a claim-by-claim basis, as ordered by the supreme court in Ill. Farmers I. the arbitrators exceeded their authority by failing to hold respondent to the appropriate burden of proof.
In Ill. Farmers I, the supreme court specifically held that respondent
“is an assignee of 5,700 plus individual claims, each of which is
subject to mandatory arbitration under the No-Fault Act.” Ill. Farmers, 683 N.W.2d at 804
(emphasis added). Although the court
recognized the hardship of arbitrating each of the 5,700 plus claims, the court
concluded that it must follow the mandate of the No-Fault Act.
When deciding whether to order consolidation, courts should consider the efficiencies of consolidation, the danger of inconsistent judgments if disputes are arbitrated separately, and the prejudice that parties may suffer as a result of consolidation. Efficiencies may result from a commonality of witnesses or evidence in multiple proceedings, similarity of claims between the parties, or the dependence of multiple claims on a common set of facts. . . . [But] a court may find that the differences between claims, such as differences in governing law or factual differences between individual claims, make consolidation undesirable.
On remand, the district court found that:
1. There exist common issues of law and fact with respect to the disputed invoices;
2. Efficiencies with respect to resolving the disputes over these invoices greatly weighs in favor of a consolidated arbitration, particularly given the formulaic manner in which both the [appellant] and [respondent] handle glass claims.
3. Absent consolidation, there is significant danger that separate arbitrations will result in inconsistent results. The only way to avoid inconsistent results is to consolidate the invoices for consideration in one proceeding.
(Emphasis added.) The district court then consolidated the matter “based on the Formulae [respondent] used to compute charges at various times.”
The manner in which the district court consolidated the claims is consistent with the supreme court’s holding in Ill. Farmers I. See 683 N.W.2d at 806 (stating that consolidation may be an appropriate way of promoting arbitration as a cost-effective, simplified, and informal alternative to litigation). The fact that the district court consolidated the claims into various groups based on the formulaic method used does not destroy the separateness of each individual claim. See Peterson v. Minneapolis Star & Tribune, 282 Minn. 264, 273, 164 N.W.2d 621, 627 (1969) (where cases are consolidated for trial, each claim retains its separate identity); Simon v. Carroll, 241 Minn. 211, 218, 62 N.W.2d 822, 827 (1954) (upon consolidation under Minn. R. Civ. P. 42.01, no merger of the action results, each action retains a separate identity, and there is no change in the rights or status of the litigants). As the district court recognized, the heart of this dispute concerns the “formulaic” method of reimbursement for glass work. Each of the 5,700 plus claims was calculated pursuant to one of eight different formulas. By placing each individual claim into a category based on the formulaic method used to calculate the amount due on the invoice, the reasonableness of that particular formulaic method was determined once, rather than each time a like claim was presented. Consolidation in such a manner established consistency as to whether each formula was reasonable. In other words, to require the arbitrators to make findings with respect to each of the individual consolidated claims would undermine the purpose of the order, leading to inefficient proceedings and potentially inconsistent judgments. Despite appellant’s assertion to the contrary, the presentation of generalized evidence regarding the reasonableness of each formula was appropriate.
Appellant argues that the arbitrators exceeded their authority by failing to hold respondent to its burden of proof as an assignee because respondent submitted generalized evidence of their claims rather than specific evidence for each individual claim. To support its claim, appellant asserts that the arbitrators allowed respondent to recover on hundreds of claims where respondent presented no evidence that the insured had signed respondent’s invoice, much less intended to assign the claim to respondent.
An arbitrator has authority to find facts and determine
the sufficiency of proof in a no-fault claim.
Here, the issue of whether respondent met its burden of proof is a fact issue determined by the arbitrator and not reviewable by this court. See id. Even if we were to review the arbitrators’ awards, the record reflects that respondent met its burden of proof. Respondent submitted as evidence signed assignments demonstrating that the policy holders paid respondent for its work by assigning the proceeds due under their insurance policies issued by appellant. The arbitrators’ findings and awards reflect that individual claims were considered. For example, for the “List + 35%” claims, respondent sought an award of $19,126.12 for appellant’s alleged non-payment of the invoices. The arbitrator denied the request concluding that “[respondent] has failed to produce any compelling or convincing evidence that the [appellant] in fact insured those persons making up the ‘non-pay or no pay invoices’ as set forth in [respondent’s] Arbitration Exhibit No. 27.” We conclude the district court did not err in rejecting appellant’s claim that the arbitrators failed to hold respondent to the appropriate burden of proof.
C. Damages in connection with the policy language and governing statute
Appellant argues that the arbitrators exceeded their authority by awarding damages in contravention of the applicable policy language and governing statute. According to appellant, the policy language and governing statute defined appellant’s payment obligation in terms of a “prevailing competitive rate” for the work performed. Appellant contends that in awarding damages, the arbitrators accepted respondent’s claim that appellant was obligated to pay the amount “necessary” to replace the damaged glass, so long as the amount charged by respondent was reasonable. Appellant argues that because respondent charged considerably more than the “prevailing competitive rate,” the arbitrators exceed their authority in awarding damages and, therefore, the awards must be vacated.
The record reflects that the claims
at issue arose during a five-year time period from August 1997 to April
2002. During this time period, the
regulatory structure of the auto glass industry changed significantly. In 1996, the applicable statute required
insurers to “assume all reasonable costs sufficient to pay the insured’s chosen
[glass] vendor.” Minn. Stat. § 72A.201,
subd. 6(14) (1996). The legislature
amended the statute in 2000 to require payment “based on a competitive price,”
and directed the Commissioner of Commerce to conduct a market survey to
determine “a fair and reasonable market price for similar services.” Minn. Stat. § 72A201, subd. 6(14)
(2000). Under this legislation, the
market survey was to be used to establish prices for glass work when an insurer
disputed an amount charged by a glass company.
Prior to 2000, appellant’s insurance
policy provided that “[o]
For glass losses, the maximum amount that we will pay for repair or replacement is the prevailing competitive price. Prevailing competitive price means prices charged by the majority of glass repairers in the local area as determined by a survey conducted by us. The competitive price includes the cost of repair or replacement including labor rates, parts and material. Upon your request, we will identify the facilities that will perform the repairs for the prevailing competitive price.
The language contained in the MN008 endorsement was consistent with the 2000 legislative changes made to Minn. Stat. § 72A.201, subd. 6(14).
In addition to their standard policy, appellant offered its insured an optional deductible waiver endorsement, E1400, entitled “Safety Glass – Waiver of Deductible Coverage F.” This endorsement provided in pertinent part: “For an additional premium, it is agreed that any deductible applying to coverage F – Comprehensive does not apply to safety glass. Our limit of liability for loss is the amount necessary to repair or replace safety glass.”
Appellant argues that under the MN008 policy language, as amended in 2000, it was only obligated to pay the prevailing competitive price for auto glass repair or replacement. Conversely, respondent argues that because the majority of the insureds were covered by the E1400 endorsement, and the language in the E1400 endorsement controls, appellant was obligated to pay the “amount necessary to repair or replace safety glass.” Appellant interprets the “amount necessary to repair” as a price that is reasonable in the marketplace.
In issuing the awards, the arbitrators did not make findings or conclusions with respect to which endorsement controls. The arbitrators also did not make any findings or conclusions with respect to the prevailing competitive price or the reasonableness of price respondent charged for its services. Instead, the arbitrators simply awarded respondent the amount due for most of the “short paid invoices.” The arbitrators also awarded respondent the amount due for some of the unpaid invoices. For the remaining unpaid invoices, the arbitrators concluded that respondent failed to produce any compelling evidence that appellant, in fact, insured the persons making up the “non-pay or no pay invoices,” and, therefore, rejected respondent’s request for these unpaid invoices.
The district court denied appellant’s
motion to vacate the arbitrator’s awards for damages. Although not specifically addressed in the
district court’s memorandum, the court could have confirmed the arbitrators’
awards at least two different ways.
First, as respondent points out, the district court could have concluded
that the arbitrators declined to decide which endorsement controls. Instead, after receiving evidence on the
issue, the arbitrators could have found the evidence provided by appellant
regarding the “prevailing competitive price” insufficient. Consequently, the arbitrators may have
concluded that, regardless of which endorsement controls, the price charged by
respondent for its services was within the “prevailing competitive price” range. Such a determination was within the
arbitrators’ authority, and because it is a factual determination, the awards
are unreviewable by this court. See
The district court could also have determined that the arbitrators based their awards on a conclusion that the E1400 endorsement controlled and awarded damages on the basis that the price charged by respondent was the “amount necessary to repair.” The arbitrators were presented with appellant’s insurance policy and the applicable endorsements, and were empowered with the authority to determine how much appellant owed respondent under the issued policy. This determination included a consideration of the applicable policy provisions. The nature of the dispute fell within the arbitrators’ authority to resolve. The fact that the arbitrators did not explain their reasoning in their findings of fact is consistent with the nature of arbitration proceedings because an arbitrator’s findings of fact are final. See Barneson, 486 N.W.2d at 177. Appellant has already gone to the supreme court and gotten relief. We understand appellant’s position and agree that the issues are close, but inherent in arbitration is a two-party mutual agreement to get the issue permanently resolved outside of the formal perimeter of a full-scale trial. We conclude the district court did not err in denying appellant’s motion to vacate the awards.
Appellant argues that the district court erred in
modifying the arbitrators’ awards to add pre-award interest. Generally, this court will not
disturb a damage award unless “failure to do so would be shocking or would
result in plain injustice.” Hughes v.
Sinclair Mktg., Inc., 389
N.W.2d 194, 199 (
Here, respondent made claims for pre-award interest in its petitions for arbitration. The damages issued by the arbitrators did not include interest. Respondent subsequently moved the district court for pre-award interest. By denying appellant’s motion to vacate the arbitration awards, and modifying the award to include prejudgment interest, the district court granted respondent’s motion.
In National Indemnity Co. v. Farm Bureau Mut.
Ins. Co., the supreme court interpreted the arbitration statute, Minn.
Stat. § 572.21, to preclude an award of prejudgment interest when the
application for arbitration included interest as an item of damages and the
arbitrators did not award any. 348
N.W.2d at 748, 752 (
We disagree. National
Indemnity Co. has been superseded by statute. Minn. Stat. § 572.15(a) (2006), now requires
most types of awards to include interest.
This statute provides: “The
award must include interest, except this does not apply to arbitrations between
employers and employees . . . .”
(a) When a judgment or award is for the recovery of money . . ., interest from the time of the verdict, award, or report until judgment is finally entered shall be computed by the court administrator or arbitrator as provided in paragraph (c) and added to the judgment or award.
(b) Except as otherwise provided by contract or allowed by law, preverdict, preaward, or prereport interest on pecuniary damages shall be computed as provided in paragraph (c) from the time of the commencement of the action or a demand for arbitration, or the time of a written notice of claim, whichever occurs first, except as provided herein. . . . [I]nterest on the judgment or award shall be calculated by the judge or arbitrator in the following manner. The prevailing party shall receive interest on any judgment award from the time of commencement of the action or a demand for arbitration . . . until the time of the verdict, award, or report . . . .
(Emphasis added.) The statute further provides instances when pre-award interest shall not be awarded, none of which are applicable here. See id. This is consistent with the cannon of construction expressio unius est exclusio alterius. See Blacks Law Dictionary 602 (7th ed. 1999) (defining expressio unius est exclusio alterius as “[a] cannon of construction holding that to express or include one thing implies the exclusion of the other, or of the alternative”). Based on the statutory language, the district court was within its discretion by awarding respondent pre-award interest.