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Insurance: After Failing to Participate in a Mediation and an Arbitration, Allstate (Web)

In Mathena v. Allstate Insurance Co., No. A06-647, 2007 WL 152225 (Minn.App. Jan. 23, 2007)(available at, a Minnesota state appellate court affirmed a district court's holding that bound Allstate to an arbitration award it did not take part in.

The unanimous panel in the unpublished opinion reasoned that Allstate had waived its right to a jury trial by failing to intervene in a timely manner in the underlying action after having been provided appropriate notice and opportunity for involvement.

The plaintiff has sent notice to Allstate that her underinsured motorist’s coverage would be needed to settle her injury claim from an auto accident with another driver. She invited the insurer to participate in mediation, which didn’t settle the case, and in a binding arbitration that was a product of the mediation. Allstate requested information, which the plaintiff provided, but either ignored or declined the invitations to participate.

Plaintiff-respondent Shari Mathena was injured in a 1999 automobile accident with Sara Jean Clough. Clough had a liability insurance policy with a $50,000 limit, and Mathena maintained $50,000 in underinsured motorist (UMI) coverage through Allstate.

At the unsuccessful mediation, Mathena and Clough stipulated to submit the matter to binding arbitration. Before the mediation, Mathena notified Allstate by letter of her claim against Clough, and specifically noted that damages would likely exceed Clough's policy limit. Mathena told Allstate that she likely would make a claim against the insurer for UMI benefits.

Allstate responded with a letter requesting additional information, which Mathena promptly provided. Allstate did not respond to Mathena's follow-up.

After the mediation and before the arbitration, Mathena again notified Allstate of her intention to put the matter to arbitration. She invited Allstate to intervene in the arbitration proceedings.

Allstate declined, and informed Mathena that it did not intend to be bound by the arbitration award.

Mathena was awarded $67,500 in damages. Because the amount exceeded Clough's $50,000 insurance policy limit, Mathena sought UIM benefits from Allstate. Allstate responded by arguing that it did not agree to arbitration and was not bound by the award.

Allstate filed a motion to intervene in the action, which was denied by the district court because it arrived too late in the litigation process, and presented substantial prejudice to Mathena and Clough.

The Court of Appeals upheld the district court's decision granting Mathena's summary judgment motion binding Allstate to the arbitration award and estopping it from relitigating the damages.issue. The court held that because Allstate was given notice and invited at every litigation stage to intervene in the action between Mathena and Clough, and did not act for the nearly nine-month period those two parties were participating in mediation and arbitration, Allstate had effectively waived its right to a jury trial.

The Court of Appeals also found that because Allstate was given notice and invited to participate, there was no violation of the insurer’s procedural due process rights.

–Jennie Chen, CPR Intern