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In a dispute over payment of insurance claims, a Minnesota federal court ordered consolidation of "shortpay" claims, as consolidating claims for purposes of arbitration is more efficient, expeditious, and less costly than separately arbitrating fourteen hundred factually similar claims.
In Alpine Glass, Inc. v. American Family Ins. Co., No. 06-4213 (DSD/SRN), 2007 WL 1567630 (D. Minn. May 29, 2007), Alpine Glass alleged that American Family had shortpaid, or systematically underpaid it for work, performed on approximately 1,400 glass repair claims. Alpine Glass moved to have the 1,400 claims consolidated for purposes of arbitration.
The Court ordered consolidation of the 1,400 claims. The No-Fault Act governs the shortpay claims. The Act requires Minnesota courts to compel arbitration for claims under $10,000 and does not permit aggregation of claims to avoid arbitration. The statute does, however, allow a court to consolidate claims and send the consolidated claims to arbitration. The Minnesota Supreme Court has found the decision to consolidate claims rests on "the efficiencies of consolidation, the danger of inconsistent judgments, and prejudices that parties may suffer as a result of consolidation."
The Court found that common issues of law and fact exist with respect to the alleged systematic underpayment. Moreover, efficiency interests and the desire to avoid inconsistent results favored arbitration. Further, the Court concluded that the cost of separately arbitrating fourteen hundred claims would be cost prohibitive to the point that the costs of separately arbitrating the claims may exceed the disputed amount. Finally, American Family offered no evidence illustrating prejudice if the Court consolidated the claims. Therefore, the Court consolidated the claims and ordered the arbitration to move forward.
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