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In re Claims for No-Fault Benefits against Progressive Insurance Co.

September 12, 2006

IN RE THE CLAIMS FOR NO-FAULT BENEFITS AGAINST PROGRESSIVE INSURANCE COMPANY.


Hennepin County District Court. File Nos. MC 05-4246, MC 05-12122.

SYLLABUS BY THE COURT

Under the Minnesota No-Fault Automobile Insurance Act, an arbitrator's subject-matter jurisdiction derives from the amount in controversy, not from an insurer's denial of a claim for benefits.

The opinion of the court was delivered by: Wright, Judge

Affirmed in part and reversed in part; motion denied.

Considered and decided by Ross, Presiding Judge; Shumaker, Judge; and Wright, Judge.

OPINION

Appellant-insurer challenges district court orders confirming ten no-fault automobile-insurance arbitration awards. Appellant argues that the district court erred by (1) denying its motion to vacate because the arbitrators lacked subject-matter jurisdiction and the awards were procured by fraud, and (2) refusing to stay proceedings in district court pending resolution of a related federal lawsuit. Appellant also challenges the district court's imposition of sanctions under Minn. R. Civ. P. 11 and respondents' motion for sanctions on appeal. We affirm in part, reverse in part, and deny the motion for sanctions on appeal.

FACTS

These consolidated appeals arise from ten separate arbitration awards granting medical-expense benefits under the Minnesota No-Fault Automobile Insurance Act (No-Fault Act). The claimants were insured by appellant Progressive Insurance Company (Progressive) and sought treatment at Alivio Chiropractic Clinic (Alivio) for injuries received in their automobile accidents. The first arbitration award was issued on November 20, 2003, and the last award was issued on July 13, 2005.

Progressive moved to vacate the arbitration awards based on fraud or, in the alternative, requested that the district court stay the awards pending the outcome of related federal proceedings.*fn1 Progressive also argued in nine cases that the arbitrators lacked subject-matter jurisdiction because Progressive had not denied those insureds' claims. Those nine cases were consolidated in Hennepin County District Court by order of the Minnesota Supreme Court. In the tenth case, that of Edgar Villafana Pallares, Progressive denied benefits. The Pallares case was litigated separately in Hennepin County District Court before a different judge. In each of the ten cases, the insured moved to confirm the arbitration award and for sanctions under Minn. R. Civ. P. 11 and Minn. Stat. § 549.211 (2004).

In an order dated August 8, 2005, the district court in the Pallares case confirmed the arbitration award and found no legal basis to stay the arbitration award pending the outcome of the federal lawsuit. In a subsequent order dated November 28, 2005, the district court imposed $1,500 in sanctions against Progressive. In the nine consolidated cases, in an order dated November 18, 2005, the district court denied Progressive's motion for a stay, confirmed the nine arbitration awards, and imposed sanctions on Progressive in the amount of $1,500 for each insured. Progressive appealed each decision, and we consolidated the cases for appellate review.

ISSUES

I. Did the district court err in denying Progressive's motion to vacate the arbitration awards based on the claim that the arbitrators exceeded their authority when they considered claims for medical-expense benefits that had not been denied but were under investigation?

II. Did the district court err in denying Progressive's motions to vacate the arbitration awards based on fraud by medical-service providers?

III. Did the district court violate Progressive's procedural-due-process rights when it declined to hold evidentiary hearings relating to the alleged fraud?

IV. Did the district court abuse its discretion when it declined to stay the arbitration awards until the ...


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