A CRITICAL VIEW OF MINNESOTA NO-FAULT
By T. Joseph Kane Crumley[1]
The No-Fault Act is the principal legal authority facing those injured in auto accidents in Minnesota.
This article assembles legal issues related to the Act, strategies for claimants, and recommendations for legislative reform of Minnesota insurance law.
Table of Contents
Minn. Stat. § 65B.44, subd.1 states:
Basic economic loss benefits shall provide reimbursement for all loss suffered through injury arising out of the maintenance or use of a motor vehicle . . . consisting of:
$20,000 for medical expense loss arising out of injury to any one person; and
(b) a total of $20,000 for income loss, replacement services loss, funeral expense loss, survivor's economic loss, and survivor's replacement services loss arising out of the injury to any one person.
The Act requires that there be an actual expenditure for medical and most other benefits.[2]
No-fault benefits do not fall under the Municipal Tort Liability Caps.[3] Thus, each injured person is entitled to full no-fault benefits, separate and apart from liability damages paid under the municipal cap.
The Act details medical expense benefits:
Medical expense benefits shall reimburse all reasonable expenses of necessary medical, surgical, x-ray, optical, dental, chiropractic, and rehabilitative services . . . and all other reasonable transportation expenses incurred in traveling to receive covered medical benefits, hospital, extended care, and nursing services . . . .[4]
There is no formal managed care system in Minnesota No-Fault. Attempts to legislate managed care have failed repeatedly. For a time, insures attempted to bypass the Act by organizing or hiring various managed care entities to review their bills. In the fall of 2000, Blue Cross/Blue Shield of Minnesota began administering managed care services in certain Illinois Farmers no-fault auto claims. A fairly developed no-fault managed care system appeared to have sprung up overnight.
In 2002, the legislature amended 65b.44, adding:
(b) Notwithstanding any other law to the contrary, a person entitled to basic economic loss benefits under this chapter is entitled to the full medical expense benefits set forth in subdivision 2, and may not receive medical expense benefits that are in any way less than those provided for in subdivision 2, or that involve any preestablished limitations on the benefits. Medical expenses must be reasonable and must be for necessary medical care as provided in subdivision 2. This paragraph shall not be deemed to alter the obligations of an insured or the rights of a reparation obligor as set forth in section 65B.56.
(c) No reparation obligor or health plan company as defined in section 62Q.01, subdivision 4, may enter into or renew any contract that provides, or has the effect of providing, managed care services to no-fault claimants. For the purposes of this section, "managed care services" is defined as any program of medical services that uses health care providers managed, owned, employed by, or under contract with a health plan company.[5]
Any use of preexisting limitations, such as U&C databases, etc., or other attempts at managed care are now banned by the act.
Insurers often attack physical therapy and chiropractic treatments, asserting that they only treat symptoms, rather than cure. These arguments should fail. The standard is not whether a particular treatment is curative. There is no authority for denying payment of medical expenses solely on the basis that the treatment was intended to relieve pain rather than cure a condition. Surely, no insurer would argue that anesthesia during a surgery and pain pills following the surgery are not payable because they are palliative and not curative.
The Act explicitly requires payment of reasonable charges for necessary treatment. The Court of Appeals has twice held that if the injured person benefits in some way from the treatment, it meets the reasonable and necessary standard. In Ruppert v. Milwaukee Mut. Ins. Co.,[6] the Court of Appeals found that medical benefits were payable because the trial court did not make an explicit finding that Ruppert was cured requiring no further treatment.[7] In Wolf v. State Farm Ins. Co., the insured's testimony that “the chiropractic treatments made her feel better” was sufficient to meet the reasonable and necessary standard.[8]
An unpublished Minnesota Court of Appeals case approves massage therapy treatment as reasonable.[9]
Psychiatric treatment for panic attacks was held not compensable when unrelated to physical injury.[10] This decision of the Court of Appeals contradicts the No-Fault Act itself. “Basic economic loss benefits shall provide reimbursement for all loss…”[11] Loss is defined in part, “…economic detriment is loss although caused by pain and suffering or physical or mental impairment.”[12]
The act provides specifically for payment of prosthetic devices.[13] In the past, arbitrators have awarded mattresses, cervical pillows, and other devices and objects. However, the Court of Appeals, in a published case, has specifically held a mattress not to qualify because it is neither a prosthetic device nor a service.[14]
Mileage to and from treatments and parking costs must be reimbursed as “reasonable transportation costs.”[15] These are actual costs to the claimant, and should be paid in full, at the 48.5 cents per mile I.R.S. rate,[16] unless the claimant can document higher costs that are reasonable. Advocates should review the insurer's payment logs to make sure that mileage has been paid since initiation of the claim. Often, the insurer will stipulate to pay mileage corresponding to undisputed past treatments.
The No-Fault statute describes disability and income loss benefits:
Disability and income loss benefits shall provide compensation for 85% of the injured person's loss of present and future gross income from inability to work proximately caused by the nonfatal injury subject to a maximum of $250 per week.[17]
This subdivision uses the proximate cause standard explicitly. If the accident had a “substantial part in bringing about the injury,”[18] the carrier must pay wage loss benefits.
For the “typical worker”, wage loss benefits are straightforward. However, calculation of benefits for anyone but the totally disabled, forty-hour-per-week worker can be complicated. Consequently, no-fault insurers and even claimants' attorneys often fail to realize the full benefits available. This results in economic hardship to many injured people.
A person injured while unemployed usually qualifies for no-fault benefits. If the person is receiving (or is qualified to receive) unemployment benefits before the injury, the no-fault carrier must pay wage loss benefits.[19] Payment is made at 100% of the unemployment rate, presumably because the unemployment benefit rate is already discounted from gross wages.
Alternately, an unemployed person that would have gone to work but for the injury is entitled to full wage loss benefits. The injured person must simply show that he or she “had a definite offer of employment or had consistently been employed such that a specific future period of employment could reasonably be predicted.”[20]
Partially disabled people who are unable to work full-time or return to the same type of work are eligible for income loss benefits.[21] They receive 85% of the difference between the pre-injury and post-injury wages.[22]
For a variety of reasons, some people use sick pay when they are injured in an accident rather than no-fault benefits. The Court of Appeals has held that people who deplete their sick pay because of their injuries clearly deserve reimbursement from their insurer.[23] This is true even if it produces a double recovery or windfall for the claimant.[24] The no-fault insurer should have paid for the loss of earnings in the first place and should not avoid payment simply because another source has made payment. Unlike other losses paid by third parties, there is no double recovery. The claimant suffers actual loss -- loss of their vacation or sick leave benefit.
Since Hoeschen, the Act has been amended to require insurers to repay vacation and sick time lost during treatment.[25] Wages lost during treatment are fully compensable, including sick and vacation benefits lost during treatment.[26]
Loss of earnings for self-employed persons is computed through one of the three prongs set forth in Rindahl v. National Farmers Union Ins. Co.:[27]
- Costs incurred for substitute employees;
- Loss of tangible things of economic value; or,
- Loss of “other earnings from work”.[28]
The No-Fault Act states:
Loss of income includes the costs incurred by a self-employed person to hire substitute employees to perform tasks which are necessary to maintain the income of the injured person, which are normally performed by the injured person, and which cannot be performed because of the injury.[29]
For example, the insurer must reimburse a self-employed farmer for the cost of hiring an additional farm hand while the farmer is injured.
Under the statute, income includes “tangible things of economic value produced through work.”[30] Thus, loss of tangible things of economic value equals loss of income. Tangible things of economic value include “insurance benefits, disability coverage and pensions,” as well as other items such as “vegetable garden produce, proceeds of a household business, such as crafts or daycare, and labor furnished to the farm business.”[31] Imaginative MAJ members have successfully argued that health insurance premiums are “tangible things of economic value.[32]
Self-employed individuals often find it difficult to prove their lost earnings. For example, in service industries, there is no “loss of tangible thing of economic value.” Hiring substitute employees may not be appropriate or practical. For example, the claimant may be the owner of a small business that has never produced a profit on paper, or paid the owner a wage. If there is a loss of the gross income of the business, that loss is compensable.[33]
Loss of a college athletic scholarship that paid for tuition, room, and board does not constitute loss of income under the Act.[34]
The Act reimburses
[A]ll expenses reasonably incurred . . . in obtaining usual and necessary substitute services . . . that . . . the injured person would have performed not for income but for direct personal benefit or for the benefit of the injured person's household ..[35]
“Reasonable expense incurred” generally requires an actual monetary expenditure.[36]
Injury to a homemaker, however, triggers replacement services even without actual economic loss and even if the homemaker is separately employed outside the home. The statute provides:
If the non-fatally injured person normally, as a full time responsibility, provides care and maintenance of a home with or without children, the benefit to be provided under this subdivision shall be the reasonable value of such care and maintenance or the reasonable expenses incurred in obtaining usual and necessary and substitute care and maintenance of the home, whichever is greater.[37]
“Full time responsibility” only means primary responsibility for management of the household. The injured person may be employed outside the home, even on a full-time basis. If he or she is the primary homemaker, the reasonable value of care and maintenance of the home, as well as loss of income benefits, must be paid by the insurer.[38]
Replacement services benefits are paid under income loss coverage and are subject to the same maximums.[39]
The Problem. Unfortunately, few people know that they have this benefit and few insurers ever tell. Despite fifteen years of practice representing auto accident victims, I have never seen a non-represented person bring this claim. Similarly, I have never seen an insurer properly notify their insured of this benefit.
In every case I have had involving a ‘Primary Homemaker’, I have been able to bring a claim for benefits. Most have succeeded. Depending on the severity of the injuries, the size of the household, and the availability of benefits[40], these claims have ranged from a few hundred dollars to the full $20,000 benefit.
Notice. An insurer commits an Unfair Claims Practice when they fail:
…to notify an insured who has made a notification of claim of all available benefits or coverages which the insured may be eligible to receive under the terms of a policy and of the documentation which the insured must supply in order to ascertain eligibility; [41]
The notices insurers provide describe other benefits, but ignore Primary Homemaker Replacement Services.[42]
After failing to provide notice of the benefit, most insurers attempt to retroactively set conditions of proof. But how can the insurer complain that the insured did not:
-
keep a diary,
-
keep lists of exactly who performed exactly what duty,
-
secure contemporaneous disability slips,
take photos of the messy home, etc.,
when the insurer has committed an Unfair Claims Practice by failing to notify them of this benefit! The insurer was in the best position to make sure that the claimant was aware of their benefits and any prove the insurer would require from the very beginning. The Fair Claims Practice violation amounts to a waiver of any but the most minimal prima facie proof requirements. Their retroactive defenses will fail because of their own inaction.
Some insurers complain that Claimants that are represented by counsel somehow lose their right to notification of the benefit. However, there is no authority that the insurer’s responsibility is somehow conditional or delegable. On the contrary, most insurers continue to send these letters directly to the insured even after being notified of the representation. In addition, many attorneys are initially retained regarding the third party claim, and are not yet representing the injured person until benefits are denied. [43]
Why do insurers fail to provide more meaningful notice? Obviously, limiting claims may be a major reason. It is also likely that the very nature of the benefit is difficult for them. This is the only PIP benefit that does not require an out of pocket expenditure or easily enumerated amount. They may also feel that “reasonable value” is not easily calculable and subject to some ambiguity. For whatever reason, insurers do a miserable job of notifying their insureds of the existence of Primary Homemaker Replacement Services.
Such excuses should fall on deaf ears. Arbitrator should take every opportunity to punish insurers who engage in such “accidental on purpose” cost-saving efforts. To be sure, for every late primary homemaker claim that is brought, many, many more will never see the light of day.
Thousands of Minnesotans are losing a valuable benefit.
Various “Rehabilitation benefits” are described in a variety of places in Minn. Stat §65B.44, and are further defined and regulated under §65b.45. There is some dispute as to the amount and limit of non-medical rehabilitation.
Unlimited Vocational Rehabilitation Benefits? There is an argument that there is NO maximum dollar limit on occupational rehabilitation benefits in the No-Fault Act. There is a very old Attorney General Opinion to the contrary, but such an opinion has no precedential effect, and precedes an important statutory amendment. In fact, various changes to the Act over the years have strengthened this interpretation of the Act.
One big argument against this interpretation has disappeared. The Act was amended in 1999 to change “maximum of $40,000” in benefits to “minimum of $40,000”
Medical rehabilitation and occupational (or vocational) rehabilitation are different things. Common sense tells us this. So does the Act. Minn. Stat § 65B.45 has not been substantially amended since enactment. Subd. 2 states:
An injured person who has undertaken a procedure or treatment for rehabilitation or a course of rehabilitative occupational training, other than medical rehabilitation procedure or treatment, shall give notice to the reparation obligor of having undertaken the procedure, treatment, or training within 60 days after a rehabilitation expense exceeding $1,000 has been incurred for the procedure, treatment, or training, unless the reparation obligor knows or has reason to know of the undertaking...[44]
Thus, medical rehabilitation procedures and treatment are differentiated from other types of rehabilitation, including rehabilitative occupational training.
Minn. Stat. §65B.44, Subdivision 1 provides:
Inclusions. (a) Basic economic loss benefits shall provide reimbursement for all loss suffered through injury arising out of the maintenance or use of a motor vehicle, subject to any applicable deductibles, exclusions, disqualifications, and other conditions, and shall provide a minimum of $40,000 for loss arising out of the injury of any one person, consisting of: (1) $20,000 for medical expense loss arising out of injury to any one person; and (2) a total of $20,000 for income loss, replacement services loss, funeral expense loss, survivor's economic loss, and survivor's replacement services loss arising out of the injury to any one person.
The statute originally provided for a maximum of $30,000 coverage; now it provides for a minimum of $40,000. This $40,000 is not intended to cover the entire benefit, but rather the minimum that must be provided, as explained in paragraphs (1) and (2). Neither of those paragraphs lists occupational or vocational rehabilitation as one of the benefits subject to the $40,000 limit.
Subdivision 2 provides more detail on the medical expenses:
Subd. 2. Medical expense benefits. (a) Medical expense benefits shall reimburse all reasonable expenses for necessary:
(1) medical, surgical, x-ray, optical, dental, chiropractic, and rehabilitative services, including prosthetic devices; (2) prescription drugs; (3) ambulance and all other transportation expenses incurred in traveling to receive other covered medical expense benefits; (4) sign interpreting and language translation services, other than such services provided by a family member of the patient, related to the receipt of medical, surgical, x-ray, optical, dental, chiropractic, hospital, extended care, nursing, and rehabilitative services; and (5) hospital, extended care, and nursing services. (b) Hospital room and board benefits may be limited, except for intensive care facilities, to the regular daily semiprivate room rates customarily charged by the institution in which the recipient of benefits is confined. (c) Such benefits shall also include necessary remedial treatment and services recognized and permitted under the laws of this state for an injured person who relies upon spiritual means through prayer alone for healing in accordance with that person's religious beliefs. (d) Medical expense loss includes medical expenses accrued prior to the death of a person notwithstanding the fact that benefits are paid or payable to the decedent's survivors. (e) Medical expense benefits for rehabilitative services shall be subject to the provisions of section 65B.45.
Paragraph (e) refers to medical expense benefits for rehabilitation (isn’t that what it says?) and subjects it to some of the same limitations as occupational or vocational rehabilitation listed in 65B.45 (but not the notice requirement, as discussed above).
It makes sense that vocational rehabilitation be open-ended. Vocational rehabilitation or retraining will vary from person to person, and can be expensive, but is limited to those severe cases where the added expense is reasonable.
Since occupational rehabilitation is apparently a potentially unlimited benefit, §65B.45 adds some additional requirements that are not necessary for medical rehabilitation. Notice is required to the insurer within 60 days of exceeding $1000. Either side may make a motion in an action or bring an action in district court to allow the court to assess reasonableness.
There has been almost no litigation on this portion of the no-fault act. If the right case comes along, the practitioner should consider this argument.
Death benefits are similar, but not identical, to injury benefits. Medical expenses accrued before death must be paid.[45] Funeral and burial expenses are a paltry $2,000,[46] including flowers and other expenses.[47] Survivors economic loss benefits provide up to $200 per week to dependents for loss of “contributions of money or tangible things of economic value, not including services.”[48] The Act establishes some presumptions about who is a dependent.[49] There is no loss when identical AFDC benefits were paid through a guardian sister after the mother’s death.[50]
Survivor's replacement services are paid only for actual expenses incurred.[51] The Act specifically provides no “primary homemaker” benefit in death cases.[52]
Before October 1, 1985, stacking of no-fault benefits was automatic in many circumstances.[53] Since that date, the insurer must “notify policyholders that they may elect to have two or more policies added together.”[54] Not only are the policy limits stacked, but the individual weekly benefit limits are stacked as well.[55]
There is authority that the owner’s purchase of no-fault stacking may not benefit mere passengers, but may be restricted to the named insured and resident relatives.[56]
In many circumstances, your clients may not even know that they explicitly elected stacking and paid an additional premium. No-fault carriers often fail in their obligation to inform claimants or their attorneys of the additional benefits available. It is important to demand a certified copy of your client's policy from the insurer. A declarations sheet is a poor substitute and should not be accepted.
If the insurer did not offer stacking, the courts should reform the policy to include stacking, as in pre-1985 underinsured motorist stacking cases.[57] Multiple mailed notices are sufficient as a matter of law, according to a recent Court of Appeals case.[58]
Whenever the policy limits are likely to be exceeded, the claimant's attorney should ask the no-fault insurer to document the offer of stacking. If the insurer cannot show that they notified their insured of the right to elect stacking, the claimant’s attorney should insist that the policy limits of all insured cars should be stacked.
The Act prescribes universal coverage for accidents occurring in Minnesota:
If the accident causing injury occurs in this state, every person suffering loss from injury arising out of maintenance or use of a motor vehicle or as a result of being struck as a pedestrian by a motorcycle has a right to basic economic loss benefits.[59]
For accidents out of state, (in the United States and Canada), insureds are covered, as well as:
(2) the driver and other occupants of a secured vehicle, other than (a) a vehicle which is regularly used in the course of the business of transporting persons or property and which is one of five or more vehicles under common ownership, or (b) a vehicle owned by a government other than this state, its political subdivisions, municipal corporations, or public agencies. The reparation obligor may, if the policy expressly states, extend the basic economic loss benefits to any stated area beyond the limits of the United States, United States possessions and Canada.
Thus, fleets of five or more vehicles, and those owned by other states and the federal government may exclude coverage for out of state accidents. Insurers may choose to extend coverage to countries other than the U.S. and Canada.
Causation. No-fault insurers use a variety of arguments to dispute that the accident caused the injuries. Claims adjusters, and even some defense attorneys, apparently feel that any possible alternate explanation for the injuries excuses the insurer from paying benefits. However, the No-Fault Act provides for payment of all economic loss “suffered through injury arising out of the maintenance or use of a motor vehicle.”[60]
While the Act does not define “from injury” the courts have addressed the causation standard. In Ruppert v. Milwaukee Mutual Ins. Co.,[61] the Court of Appeals stated:
The test, of course, is not whether the trauma . . . might, only in the realm of possibility, have been a factor in producing a certain result, but whether it was a factor or at least a probable factor in producing the claimed result.[62]
The “probable factor” test is usually very easy to satisfy. In most no-fault arbitrations, the accident will be at least a probable factor, and the arbitrator should award the benefits.
Marked police cars are not motor vehicles, and thus do not require no-fault coverage.[63] Strange as that may seem, it does follow the dictates of the statute. The No-Fault Act uses motor vehicle licensing as the trigger for coverage.[64] Since a marked police car does not need to be licensed, it is not considered a motor vehicle for purposes of the act.
The ramifications of are many, and not all negative.
1. First, we know a pedestrian struck by a marked police officer cannot receive no-fault benefits from the police car’s insurance. That’s the simplest holding of the case.
2. Probably, that pedestrian may be excluded from no-fault coverage from ANY policy. That’s because the holding is based on a marked police car being excluded from the definition of a motor vehicle. Under the No-Fault Act, a person has the right to claim basic economic loss benefits if he or she has been injured by the “maintenance or use of a motor vehicle.” If the policy was properly written, the private carrier could exclude coverage as well. Since many policies simply track the Act, most or all these policies may exclude the coverage. The court noted:
We recognize that the use of the plain meaning of “motor vehicle” will result in a of accident victims being uncompensated under the Act, including pedestrians or passengers who happen to be injured by any of the vehicles that are not required to be registered under Chapter 168.
3. There are no thresholdson liability actions that don’t arise out of the maintenance or use of a motor vehicle. Many minor injury third party claims will actually have much higher value.
4. Don’t assume the involvement of a police car always excludes coverage. Just as a farmer on a tractor or an Amish person in a horse-drawn cart (not motor vehicles) receives no fault when hit by a car (a motor vehicle), so does the person in the police car hit by another ‘real’ motor vehicle.
For the purposes of sections 65B.41 to 65B.71, injuries suffered by a person while on, mounting or alighting from a motorcycle do not arise out of the maintenance or use of a motor vehicle although a motor vehicle is involved in the accident causing the injury.[65]
Thus, motorcycle riders are excluded from the benefits of the Act.
Pedestrians struck by motorcycles are specifically included in the Act.[66]
There is no set-off or reduction of benefits for payments made by other insurers, except workers' compensation benefits actually paid. “Basic economic loss benefits shall be primary with respect to benefits, except for those paid or payable under a workers' compensation law.”[67]
No-fault carriers have no right to coordinate benefits with accident, disability or health carriers.[68] Coordination of benefits by these other insurers is allowed, but not required. The Supreme Court has recognized and accepted that some double recovery may occur in these circumstances.[69] Since no-fault is primary, benefits not paid by the no-fault insurer must be awarded regardless of whether other sources have paid, or may pay in the future.
The No Fault carrier must repay the full amount of the bill, not the discounted amount paid by Medical Assistance.[71] The case reiterates “if there is to be a windfall either to an insurer or to an insured, the windfall should go to the insured.”[72] This is even the case where the insured is not the premium payer.[73]
People hurt in motor vehicle accidents while working are eligible for both workers' compensation and no-fault benefits. Because workers' compensation benefits are primary,[74] and the benefits are often more extensive than no-fault benefits, the no-fault benefits are often forgotten. However, there are many circumstances where no-fault benefits will supplement, and even substitute for workers' compensation benefits.
Since there are no workers' compensation replacement services benefits, the no-fault carrier must pay.
The No-Fault Act details what wage loss benefits should be paid over and above workers' compensation payments.[75] Usually, the no-fault carrier pays the difference between the 85% no-fault rate[76] and the 66-2/3% workers' compensation rate.[77] Thus, in many cases the no-fault carrier is responsible for paying the added 18-1/3% of the wage loss. There is, however, a major restriction on this benefit. The no-fault carrier does not have to pay anything if the work comp payment exceeds the maximum weekly no-fault benefits[78] -- $250 in injury cases[79] or $200 in death cases.[80] Consequently, the no-fault carrier will usually only need to supplement wage loss benefits for workers grossing less than $375 per week.
Higher wage workers should receive the 18-1/3% benefit if their injury requires them to return to work at lower wages. Both no-fault[81] and workers' compensation[82] provide partial wage loss benefits at their respective 85% and 66-2/3% benefit levels. Thus, a worker grossing $1,000 per week before the accident who can only return to work part time, or at a lower paying job paying only $900 per week should receive $66.67 of temporary partial payments from the workers' compensation carrier and $18.33 from the no-fault carrier.
In the rare circumstances where the worker owns multiple vehicles and purchases stacking of no-fault benefits, the weekly maximums are also stacked. Thus, an injured worker with three stacked vehicles has maximum no-fault benefits of $750 per week, which exceeds the maximum workers' compensation rate.[83]
What if the workers' compensation carrier denies payment? The no-fault carrier must pay.
A claim for basic economic loss benefits shall be paid without deduction for the benefits which are to be subtracted pursuant to section 65B.61, if these benefits have not been paid to the claimant before the reparation benefits are overdue or the claim is paid. The obligor is entitled to reimbursement from the person obligated to make the payments or from the claimant who actually receives the payments.[84]
The language above is quite clear. When the benefits are due, the no-fault carrier must pay, and seek reimbursement from the workers' compensation carrier.
In Raymond v. Allied Property & Cas. Ins. Co.,[85] the workers' compensation carrier denied medical and wage payments, claiming the auto accident was not work related. The no-fault carrier refused payments, and the plaintiff was awarded over $10,000 in a no-fault arbitration. The Court of Appeals affirmed the arbitrator's award, holding that §65B.54 is clear and unambiguous, and that benefits denied by the workers' compensation carrier must be paid by the no-fault carrier. The court noted that the purpose of the No-Fault Act is to provide prompt payment of economic benefits.[86]
More recently, in Klinefelter v. Crum & Forster Ins. Co.,[87] the Court of Appeals extended that rationale. In Klinefelter, a worker litigated benefits within the work comp system. The claim was denied by the work comp judge, who was then affirmed by the Workers Compensation Court of Appeals. The worker then arbitrated and won over $8000 in benefits, and the no-fault carrier appealed. The court, Judge Gordon Schumaker writing, ruled that the workers compensation and no-fault laws were too dissimilar for the arbitration to be estopped, and the arbitrator was within his powers to award the benefits.
These cases make sense. The worker was injured in a car accident. Auto insurance premiums were paid. The injured worker should receive at least the minimum benefits paid for in those premiums.
The policy decisions that led to the many restrictions on workers compensation have no application here. The auto carrier must not receive a premium windfall based on political compromises related to the workers compensation statute.
Raymond and Klinefelter may provide an attractive alternative to workers' compensation litigation. Benefits denied by the workers' compensation carrier should be submitted immediately to the no-fault carrier, along with a copy of Raymond. The no-fault carrier must pay the benefit and then pursue the workers' compensation carrier. Even if the no-fault carrier denies payment, the worker may find the no-fault arbitration more attractive than litigating the workers' compensation denial. With the restrictions on Roraff and Heaton attorney fees, the 15% no-fault statutory penalty may provide a better remedy.[88]
What if the workers' compensation carrier denies benefits with a defense unique to the workers' compensation system? The no-fault carrier should pay. The defenses unique to workers' compensation have little or no application to no-fault.
For example, workers' compensation temporary total disability benefits are limited to 104 weeks,[89] temporary partial to 225 weeks.[90] There is no such limit to no-fault wage benefits. If the disability still exists, the no-fault carrier should pay the full benefit after the workers' compensation benefits expire.
What about the artificial 'twelve week rules”[91] limiting workers' compensation payments for chiropractic care and physical therapy? Should the bills be paid by no-fault after the denial?
What about workers' compensation managed care? Can the employee who wants to go outside the system simply opt for no-fault payments? These benefits should be available to workers, regardless of the restrictions of the workers compensation system.
Read the statute. The no-fault carrier must “provide reimbursement for all loss suffered through injury . . . arising out of the maintenance or use of a motor vehicle.[92] This includes “all reasonable expenses for necessary medical, surgical . . . chiropractic, and rehabilitative services,”[93] as well as “85% of the injured person's loss of present and future gross income.”[94] Finally, remember “basic economic loss benefits are primary except for those paid or payable under a workers' compensation law.”[95],[96]
See Section V.B.4 for a discussion of settlement.
Practice Tip. In all work injuries arising from maintenance or use of a motor vehicle, the attorney should consider potential no-fault claims. To make sure this remains available, the attorney should submit an application for benefits on a timely basis to avoid later claims of prejudice.[97]
For a short time, the Court of Appeals allowed an insurer to apportion benefits to an earlier accident to avoid payment.[98] The Supreme Court effectively eliminated insurer apportionment in Great West Casualty Co. v. Northland Ins. Co.,[99] and again in Scheibel v. Illinois Farmers Insurance[100]
In Scheibel, an arbitrator had found, (and the parties had agreed) that “Scheibel's injuries were 35 percent attributable to the first accident and 65 percent attributable to the second.”[101] The $20,000 limits from the second accident had been exhausted, and Scheibel wanted Farmers to pay from the first accident limits.
The court held that the “over-arching policy” of the Minnesota No-Fault Act “is to promote full but not over-compensation of injured persons.”[102] To fulfill that purpose, the court held that the second accident has no right to reduce benefits:
Consistent with our language in Great West, Illinois Farmers, as the insurer on the second accident, is obligated to pay the maximum policy limit of $20,000 for Scheibel's injuries regardless of the extent to which each accident contributed to the injuries.[103]
The Court then held that the first accident must step in and pay:
Because both accidents cumulatively caused Scheibel's injuries and because his medical expenses are not fully reimbursed under the policy limits attributable to the second accident, we hold that Scheibel is entitled to additional reimbursement under his policy with Illinois Farmers for losses attributable to the first accident…
Further, to the extent that, absent the second accident, Scheibel would still have a viable claim under his Illinois Farmers policy for injuries suffered in the first accident, he is entitled to payment for medical expenses attributable to the first accident that remain unreimbursed after the $20,000 policy limit for the second accident has been paid. However, Scheibel is entitled to recover only that unreimbursed portion of his total medical expenses attributable to the first accident, up to the $20,000 policy limit applicable to the first accident. Conversely, he cannot recover for any loss attributable to the second accident from coverage for the first accident.[104]
There are questions not clearly answered. For example, the court accepted the arbitrator’s and the parties’ apportionment without comment. What formula will be used to calculate the exposure of the first accident, once the limits of accident 2 are exhausted? Clearly, there will be no apportionment by the second accident insurer. Once those limits are exhausted, is the plaintiff limited to the percentage apportioned to the first accident? The Scheibel court states only that the recovery is limited to “only that unreimbursed portion of his total medical expenses attributable to the first accident, up to the $20,000 policy limit…”
On remand, the Scheibel[105] calculations were simple. The arbitrator’s 65% apportionment to the second accident almost equaled the $20,000 limits, and so enforcing the 35% apportioned to the first accident meant that 100% of the bills will be paid.
But what if the apportionments are not so neatly aligned with the policy limits? What if the percentage apportioned to the second accident exceeds those policy limits?
The competent defense attorney will certainly argue that the first accident need only pay up to the percentage of the apportionment, even if that leaves bills unreimbursed.
The claimant’s lawyer has the better argument. The Scheibel court made it clear that full compensation was the “over-arching” concern. As long as the uncompensated benefits are attributable to the first accident, that insurer should pay.
Under Scheibel, apportioning the higher amount to the first accident will tend to increase the recovery. This is because even if the second accident is only 10% responsible, the second policy must pay till exhausted. The Claimant could then argue for 90% of the bills under the first accident.
The best tactic for the claimant's lawyer may still be to avoid apportionment altogether. If the doctor indicates that each of the injuries is a substantial cause of the need for all treatment, then each of the insurers will probably remain responsible for the full amount.
What if the claimant has settled the later accident, and thus the limits are not exhausted? This was addressed in Khawaja v. State Farm Mut. Auto. Ins. Co.[106] Khawaja had settled the second accident for slightly less than the policy limits, and then proceeded to arbitrate subsequent bills against the insurer for the first accident. The Court of Appeals held that the claimant must “eat the gap” between:
…to the extent that the insured has medical expenses attributable to the first accident that remain unreimbursed after the second insurer has discharged its obligation, the first insurer’s liability under its policy with the insured is confined to those expenses that are above the insured’s policy limit for the second accident.
What if the prior accident did not involve an auto? The Supreme Court addressed this in Pususta v. State Farm,[107] where the Claimant had been previously injured in a fall from a horse.
The Court underscored that Scheibel was still good law in multiple auto accident cases:
Within the no-fault system, i.e., where there are multiple auto accidents involved, imposing liability solely on the insurer at the time of the most recent accident to the extent such coverage fully compensates the claimant serves the legislative goals of ensuring prompt payment of expenses and minimizing litigation.[108]
The court then notes a different standard when the prior accident was not automobile related:
Where, as here, one cause of injury arises within the no-fault system and one outside that system, our focus is on whether the loss arose out of the use of an automobile and whether reimbursement is for only those medical expenses resulting from injuries caused by the use or maintenance of an automobile.
The Pususta case should not be over read. The court only wishes that the auto carrier not be forced to pay for problems solely arising from non-auto cases. If the auto accident aggravates some prior condition, then the no-fault carrier is responsible for that aggravation.
However, there is no indication in the No-Fault Act that the legislature intended to modify the well-settled concept from tort law that damages are those attributable to a particular injury and the aggravation of a pre-existing physical condition. Requiring compensation for any aggravation of a pre-existing condition is what is meant by accepting the insured with any conditions she had at the time. Accepting the insured with the conditions she had does not mean that the insurer is liable for the expenses that the pre-existing condition, “running its normal course, would itself have caused if there had been no aggravation * * *.” The insurer is liable for the expenses related to injuries caused or aggravated by the automobile accident. [109]
The court concludes:
Thus, we reverse and remand and instruct the arbitrator to award those reasonable medical expenses for treatment of injuries caused by, or aggravated by, the automobile accident. The arbitrator must determine the extent to which the medical expense relates to an injury that was a natural and reasonable incident or consequence of the use of the vehicle. Medical expenses for injuries caused solely by the horse-riding accident shall be denied. [110]
So what is the current legal standard for medical causation? Ruppert’s “probable factor” sounds more expansive than “proximate cause”. Rodgers, ignoring Ruppert, rejected “proximate cause” out of hand, but Great Western and Scheibel have overruled the Rogers ruling. Pususta goes off on another tangent.[111]
The Act specifically uses proximate cause as the standard for wage loss benefits.[112] Why have a separate standard for medical expense benefits? It makes little sense to use one standard for wage loss and another for medical expenses.
By stating that the two accidents “cumulatively caused” the injuries the Scheibel court introduces a new term into the apportionment debate. But in using that term, it is clear that the court is near the proximate cause standard.
While Great West and Scheibel do not specifically use the term, it appears that proximate cause (or an even more expansive standard) may be the standard of causation for no-fault medical benefits.
The Act has no time limit for providing notice of claim to the insurer. However, a no-fault policy may require notice within six months.[113] Even where the policy does include a notice provision, the injured person is only ineligible to the extent the insurer shows actual prejudice.[114]
Even where the insurer's rights have been prejudiced, the insurer must have given notice of the potential prejudice or any attempt to deny benefits will be considered an unfair claim practice.[115] It is an unfair claim practice to fail to notify the insured in writing 60 days before the expiration of time for giving notice.[116]
The claimant's attorney should determine whether notice of the claim has been provided as soon as the file is opened. Some claimant's attorneys like to “lie low” and avoid sending a letter of representation to the no-fault insurer. They feel that the letter may trigger an early adverse exam. While this may be true, the lawyer who does not send a letter of representation must be doubly sure that the client notifies the proper no-fault carrier of the injury and that benefits are being paid.
There is no statute of limitations specific to the No-Fault Act. In a recent published case, the Court of Appeals held that the six-year contract statute[117] applies, and starts to run when benefits are terminated.[118] The six year underinsured motorists statute of limitation begins to run at judgment or settlement of the underlying claim.[119] However, the court has held that the uninsured motorist statute of limitations begins running on the date of accident.[120] Where possible, the prudent advocate will start any arbitration or lawsuit long before the sixth anniversary of the accident.
The No-Fault Act provides that
[a]ny 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.[121]
The statute clearly outlines exactly where the physical examination must be performed:
Such examinations shall be conducted within the city, town, or statutory city of residence of the injured person. If there is no qualified physician to conduct the examination within the city, town, or statutory city of residence of the injured person, then such examination shall be conducted at another place of the closest proximity to the injured person's residence.[122]
When the insurer violates this provision, the injured person should not be obligated to attend. Be careful, though. It is currently very questionable when it is valid to refuse to attend an exam.[123] The prudent advocate will inform the insurer of the objection, so perhaps the insurer will reset the exam, and not incur a cancellation fee.[124]
The Act only allows the adverse exam outside the injured person's city or town when “there is no qualified physician to conduct the examination” within the city or town. This rarely occurs. Whether in the metro area, or greater Minnesota, very few towns or cities have no qualified physicians practicing within their boundaries.
Who is a “qualified physician?” An orthopedic surgeon who treats problems of the musculoskeletal system is qualified to testify as to the reasonableness of chiropractic care, despite having no direct or practical experience with chiropractors or their field.[125] Would a chiropractor, trained in the nervous system and the musculoskeletal system, be similarly qualified to testify regarding the treatment of orthopedic surgeons, neurologists and physical therapists?
Many insurers argue that there is no qualified physician because commercial adverse exam scheduling services do not schedule exams in or near the client's hometown. Since the vast majority of the exams done by such services are on behalf of insurers and defense attorneys, such an argument tries to equate “qualified physician” with “insurance company doctor.”
To counter this, many claimants’ attorneys submit pages from the Yellow Pages to the arbitrator to prove that there are qualified physicians in the client's hometown. Better still, many doctors will sign affidavits that they are willing and able to do independent exams if requested. In addition, the Board of Chiropractic Examiners maintains a list of the names and addresses of all chiropractors in the state registered to perform “independent” exams. Claimant's attorneys should keep an up-to-date copy of that list and submit it to the arbitrator when helpful.
Even if the insurer is able to prove that there is no qualified physician available, they do not have carte blanche to schedule the examination anywhere. The exam must be conducted “at another place of the closest proximity to the injured person's residence.” The insurer again has the burden of showing that the location it has requested is the place of closest proximity. Failing that, the injured person arguably should have no obligation to attend such an examination.[126]
In the past, the courts held that there is no duty to attend an adverse examination after the insurer has breached its contract. Refusing or delaying benefits could be found to be breach of contract, relieving the insured from the duty to attend the adverse exam and preventing the insurer from using the failure to attend as a basis for terminating benefits.[127]
In Neal v. State Farm Mut. Ins. Co.,[128] however, the court held that the insurer could suspend benefits after a failure to attend an exam. The court implied the suspension was not forfeiture, and vested the arbitrator with considerable fact-finding power:
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 . . . .[129]
Of course, reasonableness is in the eye of the beholder. For the most part, the courts tended to support an arbitrator's decision on reasonableness of a refusal to attend.[130] To determine the proper course of action, the attorney needed only predict the future ruling of an unknown arbitrator!
Following Neal, State Farm appeared before the Court of Appeals on a number of refusal cases. The Court of Appeals decided three of these cases, Hovland v. State Farm[131], Weaver v. State Farm[132], and Chorske v. State Farm[133] within a one month and the Supreme Court consolidated the cases for review. In Weaver et. al. v. State Farm,[134] the Supreme Court decided this trio, providing further guidance.
The court held that:
[A]s a general proposition, the arbitrator has jurisdiction to award, suspend or deny benefits. To achieve the consistency desired in interpreting the no-fault act, this court and the district court review de novo the arbitrator’s legal determinations necessary to granting relief.
As to claimants:
We conclude that under the no-fault statute refusal presents an issue of reasonableness, which is a fact issue to be determined by the arbitrator.
Insurers also have to be reasonable:
It is for the arbitrator to determine the reasonableness of the request for the IME and the refusal, and to also order an appropriate remedy, which may include suspension of payment for disputed benefits until the claimant submits to an IME…
It appears the legislature intended to allow the insurer to withhold payment during a reasonable investigation period or pending arbitration over the disputed claim, subject to a 15 percent interest penalty after 30 days if the insured prevails.
Nonpayment of bills does not equal unreasonableness:
However, because nonpayment of some claims was contemplated by the legislature, it would appear the insured has no right based on the insurer’s nonpayment to refuse a reasonably requested IME.
The arbitrator’s authority is limited:
…An arbitrator is not authorized to award payment for medical treatment after finding the IME request with respect to that treatment was reasonable and necessary to the determination of benefits and its refusal unreasonable…
The court outlines the remedies available to an arbitrator:
If the IME request was reasonable and its refusal unreasonable, the arbitrator may award or ratify the insurer’s suspension of disputed payments until an IME is completed. If the arbitrator finds that the insurer is so prejudiced by the unreasonable failure to attend an IME that the insurer cannot defend against the claim, the arbitrator may proceed to deny benefits for which the IME is necessary.
Where the arbitrator has determined that a request for an IME was unreasonable and the refusal reasonable, the arbitrator may or may not proceed to award benefits. For example, where the arbitrator finds that an IME is unnecessary, the arbitrator may proceed to award or deny benefits based on the record presented.
The court concludes:
In sum, the refusal to attend an IME on the basis that the insurer has not paid outstanding claims may or may not prevent the arbitrator from ordering that benefits be paid. It is for the arbitrator to decide the reasonableness of the IME request and the reasonableness of the claimant’s response to the request. The arbitrator has authority on a case by case basis to award, suspend or deny benefits when the insured has refused to attend an independent medical examination because of nonpayment of a disputed claim. The relief awarded is subject to de novo review by the district court, however.
In most cases, practitioners should simply send their clients to all adverse exams, and save the complaints for the hearing. If the no-fault exam was obviously set just to harass the client, good arbitrators will consider that when assessing the award.
If the client has already failed to attend an adverse exam, and you feel the failure may be found unreasonable, ask the carrier to reschedule the exam. If the carrier refuses, your client's error will seem less prejudicial.
Another unpublished case provides further refinement of ‘reasonableness’ in scheduling of adverse exams. In Swan v. Milwaukee Ins. Co,[135] the district court held that a refusal to attend a last-minute adverse exam set the week before surgery was reasonable, and awarded benefits. Judge Amundson’s panel agreed, noting:
Swan offered to attend a post-surgery IME, but Milwaukee refused her offer… However, examinations after surgery are valid and often seen in insurance, workers’ compensation, and malpractice cases…
If Swan had waited until after the surgery to notify Milwaukee, Milwaukee would have been obligated to pay the bills for the surgery or could have required an IME at that time…
Because pre-surgery notice is not required, Milwaukee has not met its burden of demonstrating prejudice as a result of Swan’s refusal to attend a pre-surgery IME.[136]
Paper reviews have always been a fairly poor substitute for an actual exam. It is questionable whether an arbitrator could deny bills based on a mere review of records rather than the exam allowed by the Act.
Audits or bill reductions based on databases or schedules of “Usual and customary” charges have been barred by statute.[137]
There is no authority in the Act allowing termination of benefits simply because of a gap in treatment, however,
A plan of reparation security may provide that in any instance where a lapse occurs in the period of disability or in the medical treatment … and a person subsequently claims additional benefits based upon an alleged recurrence of the injury for which the original claim for benefits was made, the obligor may require reasonable medical proof of such alleged recurrence; … such coverages may contain a provision terminating eligibility for benefits after a prescribed period of lapse of disability and medical treatment, which period shall not be less than one year. [138]
Thus benefits may only be terminated when the insurer can show:
1. That the policy contains a lapse provision; and
2. There was a one-year lapse of treatment; and
There was a one-year lapse of disability.
A one-year lapse of treatment is usually straightforward; just look at the bills and records. A one year lapse in disability was a bit more difficult, especially given the lack of a general definition of “disability” in the Act. However, the Supreme Court has now affirmed a definition of “disability” as “anything affecting the normal, physical and mental abilities of a person.”[139] Thus, almost any residual disability, no matter how small, would prevent a lapse of disability. Apparently, a complete cure of all symptoms and injuries for one year is required before benefits lapse.
An unpublished case confirms this. In VanLangen v. Western National Ins. Group,[140] the plaintiff stopped seeing her neurologist, but continued to have symptoms. After a gap in treatment, she secured massage therapy for three years without a referral. When she found out the treatment might be compensable under the no-fault act, she secured a referral slip after the fact. Western argued that this amounted to a lapse in treatment.
The Court of Appeals reinstated the arbitrator’s award, holding:
…Minn. Stat. § 65B.55, subd. 2 sets forth a two-prong test for a lapse provision to properly apply, each of which is necessary for termination of no-fault benefits…The plain language of the statute requires a lapse of both medical treatment and disability.[141]
In addition the court commented on burden of proof for affirmative defenses:
The lapse provision provides a basis for excluding what would otherwise be a covered loss. As such, this is an affirmative defense, and the insurer bears the burden of persuasion as to the application of the exclusion.[142]
Fair Claims notice. The Fair Claims Act requires insurers to provide at least 60 days notice of the one-year lapse.[143] There are few insurers sending appropriate lapse warnings. An arbitrator should not enforce a lapse provision where there has been no notice.
Some insurers attempt to skirt this requirement by sending notice of the lapse provision immediately after the accident, rather than when the lapse is about to occur. Such a notice clearly subverts the letter and spirit of the Act, and should not be given any effect.
Permanent Injury. Finally, where there is a finding of a permanent injury, there can be no lapse of disability.[144]
Injured persons are required to mitigate their income losses if they are capable of performing substitute work:
Compensation . . . shall be reduced by any income from substitute work . . . the injured person would have earned in available appropriate substitute work which the injured person was capable of performing but unreasonably failed to undertake.[145]
Of course, the substitute work must be appropriate and the failure to work must have been unreasonable. In addition, if no appropriate work is immediately available, the no fault carrier should continue to pay benefits for a reasonable time. If not for the accident, the person would still have the original job.[146]
Claims against no-fault insurers of $10,000 or less on the date of filing must be arbitrated.[147] Claims may not be split into multiple arbitrations to avoid the jurisdictional limit.[148] The total amount of damages claimed includes losses incurred, but not yet denied by the insurer at the time the petition is filed.[149] However, filing an arbitration for $2,600 in medical bills 19 days before surgery pushed the outstanding bills to $35,000 was acceptable.[150]
Even if outstanding benefits are more than $10,000 as of the date of the filing of the arbitration, the claimant may voluntarily limit the claim to $10,000 to maintain AAA jurisdiction.[151]
What if the outstanding benefits are less than $10,000, but the statutory interest penalty forces the total over $10,000? Must the excess penalty be waived to maintain jurisdiction? Recently, the Court of Appeals ruled that the interest/penalty was not counted as part of the $10,000 jurisdictional limit.[152]
This makes sense. The statute details that mandatory submission to binding arbitration occurs:
[W]here the claim at the commencement of the arbitration is in an amount of $10,000 or less against any insured's reparation obligor for no-fault benefits....[153]
The interest award is a penalty for non-payment in a timely manner, not a "no-fault benefit" as defined by 65B.44 or 65B.45.
Similarly, the courts have held that the penalty must be paid, even when it exceeds the no-fault policy limits.[154] It would be unfair to force the claimant to waive the penalty, or file a lawsuit in district court.
Claims for medical and wage benefits cannot be split into separate arbitrations in order to maintain arbitration jurisdiction.[155]
