Minnesota Court Of Appeals Approves Double Recovery Of Benefits For Post-Trial No-Fault Claims.

In a recent published decision the Minnesota Court of Appeals held that a plaintiff may obtain double recovery of no-fault benefits after recovering those same expenses in a negligence action.  In the consolidated appeal of State Farm Mut. Auto. Ins. Co. v. Lennartson, — N.W.2d —, No. A14-0132 (Minn. Ct. App. Dec. 1, 2014), claimants Angela Lennartson and Katie Foss were injured in separate car accidents.  Both received no-fault benefits, which were discontinued after the results of the independent medical examinations.  Lennartson and Foss then brought negligence actions.

The jury awarded Lennartson more in past medical expenses than State Farm had paid in no-fault benefits.  After the court reduced the award by the medical benefits paid by State Farm under the no-fault offset statute, Minn. Stat. § 65B.51, subd. 1, the court awarded Lennartson a net recovery of $11,671.  Lennartson then petitioned for no-fault arbitration, seeking reimbursement for the same $11,671 in past medical expenses that the jury had awarded in her negligence action.  The arbitrator awarded her the past medical benefits.  State Farm moved to vacate the award.  The district court agreed, holding that the award: (1) violated the policy behind the No-Fault Act, which is to prevent double recoveries; (2) Lennartson had no compensable “economic loss” within the meaning of Minn. Stat. § 65B.43, subd. 7; and (3) collateral estoppel barred her from arbitrating the same past medical expenses she already recovered in her negligence action.  Lennartson appealed.

Unlike Lennartson, the jury awarded Foss less in past medical expenses than she received from her no-fault carrier.  After the statutory offset, Foss was left with no net past medical award.  Foss petitioned for no-fault arbitration, seeking the no-fault benefits that were not awarded by the jury.  The arbitrator granted Foss’s petition, and awarded additional past medical expenses and wage losses.  The trial court denied State Farm’s motion to vacate the arbitration award and held collateral estoppel did not bar recovery.  State Farm appealed.

In the consolidated appeal, the Minnesota Court of Appeals held that the No–Fault Act and the doctrine of collateral estoppel do not prevent an insured from seeking economic-loss benefits in a no-fault arbitration proceeding after the insured has litigated economic-loss damages in a negligence action – even if the result is a double recovery.   The court held that neither the statutory offset provision, Minn. Stat. § 65B.51, subd. 1, nor the stated purpose of the act to “avoid duplicate recovery” required the district court to reduce an arbitration award by amounts the insured previously recovered in a tort action.  The court also determined that Lennartson and Foss had both incurred an “economic loss” under the No-Fault Act because the “loss” arose at the time of the accident.  Finally, the court held the doctrine of collateral estoppel did not apply because causes of action under the No-Fault Act are contractual and statutory, whereas negligence actions are not.

The case creates a potential “backdoor” window for claimants to avoid no-fault offsets by first bringing a negligence action, and then recovering no-fault benefits for the same amounts sought at trial.

Some have argued the legislature intended to prevent this sort of double recovery by allowing defendants in tort cases to deduct “payable” (i.e. unpaid) no-fault benefits under the offset statute, Minn. Stat. § 65B.51, subd. 1, which could have been awarded from the no-fault carrier but were not.  Enforcing the “payable” language requires claimants to first exhaust no-fault benefits before seeking to recover the same benefits after a negligence action.

We will continue to monitor this case and other decisions concerning economic loss benefits under the No-Fault Act.  If you have any questions about this case, or any other matter, please contact Matt Johnson.