William M. Hart, Meagher & Geer, P.L.L.P., 4200 Multifoods Tower, 33 South Sixth Street, Minneapolis, MN 55402 (for respondent)

Considered and decided by Amundson, Presiding Judge, Crippen, Judge, and Anderson, Judge.

Amundson, Judge

On appeal from an order vacating an arbitrator's award on the ground that the arbitrator exceeded his authority by deciding a question of law, Dana Weaver asserts that the district court erred, because the reasonableness of her refusal to attend the independent medical examination (IME) is a factual question within the arbitrator's authority to decide. She also claims that, pursuant to Minn. Stat. § 65B.54, subd. 2 (1998), interest continues to accrue on the overdue payments. We reverse and remand for confirmation of the arbitrator's award and inclusion of accrued interest.

In 1997, Dana Weaver ("Weaver") was involved in an automobile accident. State Farm Mutual Automobile Insurance Company ("State Farm") initially paid her medical bills and wage loss. State Farm wrote to Weaver's chiropractor, requesting a reason for the double treatment that Weaver received on three occasions. Weaver's chiropractor responded that, on those days, Weaver had suffered an exacerbation that required more frequent treatment to reduce the pain. State Farm replied that it was still investigating the reasonableness and necessity of those treatments. On the same day, the insurer notified Weaver's counsel that it had scheduled an IME for Weaver.

Weaver's counsel told State Farm that his client would attend the IME if State Farm paid the $228.48 in outstanding chiropractic expenses. State Farm refused to pay these expenses unless the IME doctor believed that the treatment was reasonable and necessary. The insurer then suspended Weaver's no-fault benefits for alleged noncompliance with the "policy provision and the No-Fault Statute requiring cooperation of insureds in attending [IMEs]."

In September, Weaver petitioned for arbitration, which was scheduled for March 1998. Two months before the hearing, State Farm offered to schedule another IME for Weaver. She agreed to attend, if State Farm paid the medical bills and wage loss that now totaled $3,859.71. State Farm did not pay her claim, and Weaver did not attend an IME.

The parties proceeded to arbitration. The arbitrator, without findings, awarded Weaver $7,404.66. This award represented her requested medical expenses, mileage, and part of her costs, but not wage loss. State Farm moved to vacate the arbitrator's award, claiming that (1) the arbitrator exceeded his authority by deciding an issue of law and (2) the arbitrator was biased. The district court vacated the award but concluded that the claim of bias was untimely. This appeal followed.

In vacating the award, the district court, in pertinent part, stated:

The arbitrator exceeded his authority by deciding questions of law. [Weaver's] excuse for refusing to attend an IME was legal, not factual, in nature. In making his award, the arbitrator necessarily decided a question of law, i.e., whether [Weaver] was legally justified in refusing to attend an IME because State Farm had not pre-paid her claim.

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A no-fault claimant may not refuse to attend an [IME] on the ground that her claim was not pre-paid. [Weaver's] refusal to attend the IME was unreasonable as a matter of law. The No-Fault Act mandates that a claimant 'shall * * * submit to a physical examination * * *.' The Act places no conditions on an insurer's right to require an IME.

Weaver asserts that that the insurance company does not have an absolute right to an IME. The reasonableness of her refusal to attend the IME was a factual question that was within the arbitrator's authority.

State Farm contends that the arbitrator necessarily interpreted the No-Fault Act and Neal v. State Farm Mut. Ins. Co., 529 N.W.2d 330 (Minn. 1995), as establishing that (1) the Act requires claim payment within the first 30 days and (2) failure to do so legally excuses the claimant from attending an IME. According to State Farm, as a matter of law, a claimant may not refuse to attend an IME on the ground that the claim is not paid within 30 days; therefore, the arbitrator exceeded his authority by ordering an award after State Farm had validly suspended benefits. State Farm also contends that Minn. Stat. § 65B.56, subd. 1 (1998)[1] (governing insured's cooperation in investigative efforts) and Minn. Stat. § 65B.54, subd. 1 (1998)[2] (governing insured's prompt payment of benefits) are not connected to one another.

The supreme court has, however, indicated that these provisions are interrelated. Neal, 529 N.W.2d at 333. In Neal, the court stated that an arbitrator's finding that a claimant's unexplained failure to attend an IME is unreasonable is "clearly within the scope of [an arbitrator's] factfinding authority." Id. at 331-32. The court then, in addressing the consequence of the failure to attend an IME, discussed both Sections 65B. 54 and 65B.56, subd. 1:

To achieve [the No-Fault Act's] designated goals, the legislature has imposed certain obligations on both the benefit claimant and the insurer. For example, the insurer is mandated to pay designated benefits to the insured promptly, Minn. Stat. § 65B.54. However, so that the insurer may be assisted in its gathering of information to determine the nature and extent of the injury and loss, the insured is required to cooperate in transmitting medical information and in submitting to an IME. Minn. Stat. § 65B.56, subd. 1. The quid pro quo implied in the Act is the protection of each of the parties - the insured by the prompt payment and the reasonableness and location of any scheduled IME and the insurer by the cooperation of the claimant in its investigative efforts.

We, therefore, conclude the statute contemplates a balancing of the entitlements of each party in the sense that the continued receipt of benefits is conditioned on the reasonable submission to an independent medical examination. * * * It is, therefore, our further conclusion that admissibility of a claimant's noncooperation is not the exclusive sanction. That the insurer suspends, rather than terminates, payment until the claimant has, upon request, submitted to a physical examination scheduled in accordance with the statutory guidelines seems eminently reasonable. Thereafter, during the arbitration process, the parties may produce evidence of either the reasonableness of the refusal to attend the IME so as to warrant the reinstatement of benefits, in the case of the claimant, or the appropriateness of the suspension of benefits for the claimant's lack of cooperation within the terms of the insurance contract or Minn. Stat. § 65B.56, subd.1 and the prejudice suffered by the insurer in its efforts to gather information with regard to the claim, in the case of the insurer.

Id. at 333-34 (emphasis added).

Although the supreme court refers to the insurer's decision to suspend payment until the claimant has submitted to an IME as "eminently reasonable," the court does not state that an insured must unconditionally attend an IME. Id. at 333. The supreme court simply states that the insurer may suspend benefits if the insured does not attend an IME. Id. By permitting the parties to present to the arbitrator evidence of either the reasonableness of the refusal to attend the IME or the appropriateness of the suspension of benefits, the supreme court leaves these matters as factual issues within the arbitrator's province. See id. (allowing arbitrator to receive evidence to determine whether to suspend or reinstate benefits).

This case is unlike Hovland, because of its facts. In the instant case, State Farm availed itself of the sanction available in Neal by suspending benefits after Weaver refused to attend the IME. The arbitrator did not award Weaver all of her claimed expenses and costs, because he did not award wage loss or all of her requested costs. He implicitly found, however, that (1) her refusal to attend was reasonable; (2) her medical expenses were reasonable and necessary; and (3) her mileage and some of her costs were reasonable. Because the arbitrator did not exceed his power, the district court erred by vacating the award.

Weaver claims that, under Minn. Stat. § 65B.54, subd. 2 (1998), State Farm must pay a 15 percent interest penalty on the overdue benefits from the date of suspension to the date of payment. State Farm acknowledges that overdue payments invoke a 15 percent interest penalty.

A no-fault insurer becomes obligated to pay its insured for economic losses when it receives "reasonable proof of the fact and amount of loss realized." Minn. Stat. § 65B.54, subd. 1. "Overdue payments shall bear simple interest at the rate of 15 percent per annum." Id., subd. 2. Interest accrues on the overdue payments from the time of demand until payment. See Streich v. American Family Mut. Ins. Co., 358 N.W.2d 396, 399-400 (Minn. 1984) (stating that when overdue no-fault benefits are paid, they are to include 15 percent interest).

The arbitrator awarded 15 percent interest on the benefit payments that he implicitly found were overdue. Interest accrued from July 11, 1998 (the date the chiropractor responded to State Farm's letter requesting clarification) to the date of the award on March 13, 1998. Interest continues to accrue until State Farm pays the claim. We recommend that the district court review the confirmation of the award and the inclusion of the accrued interest.

Reversed and remanded.

ANDERSON, Judge (dissenting)

I respectfully dissent.

On the basis of the logic and reasoning of Hovland v. State Farm Ins. Cos., ___ N.W.2d ___ (Minn. App. May 11, 1999), which stands for the proposition that an insured may not refuse to attend an independent medical examination reasonable as to time, place, and circumstances simply because of unpaid medical bills, I would reverse and remand for further proceedings.

[1] Minn. Stat. § 65B.54, subd. 1 provides in part:

Basic economic loss benefits are payable monthly as loss accrues. Loss accrues not when injury occurs, but as income loss * * * or medical * * * expense is incurred. Benefits are overdue if not paid within 30 days after the reparation obligor receives reasonable proof of the fact and amount of loss realized * * *.

[2] Minn. Stat. § 65B.56, subd. 1 provides in part:

Any person with respect to whose injury benefits are claimed under a plan of reparation security shall, upon request of the reparation obligor from whom recovery is sought, submit to a physical examination by a physician or physicians selected by the obligor as may reasonably be required.

* * * *

An injured person shall also do all things reasonably necessary to enable the obligor to obtain medical reports and other needed information to assist in determining the nature and extent of the injured person's injuries and loss, and the medical treatment received. If the claimant refuses to cooperate in responding to requests for examination and information as authorized by this section, evidence of such noncooperation shall be admissible in any suit or arbitration filed for damages for such personal injuries or for the benefits provided by sections 65B.41 to 65B.71.