MINNESOTA'S NO-FAULT ACT RECOGNIZES THE VALUE OF SERVICES PROVIDED TO THE FAMILY AND HOME
By Stephanie A. Ball

Minnesota drivers have been protected by the Minnesota No-Fault Act since its passage in 1974. Minnesota's No-Fault Act outlines the benefits available to residents of Minnesota and those injured in automobile accidents in the state of Minnesota. Such benefits include up to $20,000 for reasonable and necessary medical expenses related to injuries caused by an automobile accident, and up to $20,000 for income loss and replacement services loss, subject to per week restrictions.

Replacement services benefits, a relatively unknown feature of the No-Fault Act, recognize the value of the services provided by a "person who cares for and maintains a home." An individual injured in an automobile accident is eligible for replacement service loss benefits if she or he is not able to care for a home due to injuries sustained as a result of the accident.

For example, if the injured person's physician restricts him to bed rest for a period of time, he may need to hire someone to perform tasks he would otherwise do, such as cooking meals, driving children to school or doing laundry. In such an instance, amounts paid to household help would be eligible for reimbursement under the No-Fault Act.

In most cases, the reimbursement must be for replacement services expenses actually incurred. The law provides an exception, however, when the injured person "as a full time responsibility, provides care and maintenance of the home with or without children." This does not mean that the individual must work full time in the home, but instead recognizes that one injured family member may have had primary responsibility for taking care of the household. In such cases, replacement service loss benefits are payable for the reasonable value of the care and maintenance of the home, even if no actual expenses are incurred.

While the No-Fault Act does not define "full time responsibility," Minnesota case law provides some guidelines. In Rindahl v. National Farmer's Union Insurance Company, the court determined that full time responsibility is not limited to those homemakers who are not employed outside the home. Rather, the court stated that the determining factor is the nature and extent of the responsibilities performed by the injured person and how much of the aggregate family time devoted to household care is contributed by the injured person in comparison to other members of the family. In Rindahl, the injured woman worked forty hours a week outside the home, and spent twenty-eight hours a week caring for the household. The court determined that the woman was entitled to replacement service loss benefits for those weeks during which she could not perform any household tasks due to her disability.

Replacement service loss benefits are subject to a maximum payment of $200 per week. Additionally, no benefits are available during a waiting period which includes the date of the injury and the first seven days thereafter.

MINNESOTA'S MANDATORY ALTERNATIVE DISPUTE RESOLUTION
(ADR) RULE: Minnesota's effort to resolve disputes outside the court system
By Stephanie A. Ball

Effective July 1, 1994, the Minnesota Supreme Court established certain rules concerning the use of alternative dispute resolution ("ADR") in civil litigation. Any person or organization who becomes a party to a lawsuit will very likely be affected by the new ADR rule. This article provides a brief summary of the ADR process generally, the requirements of Minnesota's ADR rule, and the role of the ADR rule in civil litigation.

Alternative Dispute Resolution: An Overview

ADR includes a variety of processes or ways of attempting to resolve or settle a dispute before trial. ADR has been in existence since 1952, when Pennsylvania courts were first authorized to establish compulsory arbitration. ADR is enjoying increased popularity due to the large volume of civil cases filed in state courts annually and the costs associated with litigation. Nationally, nearly 18,000,000 civil cases are filed in state courts annually and 3% to 4% of those cases actually go to trial. Minnesota's enactment of an ADR rule follows the trend of more than half the states which have already enacted legislation authorizing ADR in the court system.

One possible benefit of ADR is that it may reduce the costs of civil litigation- by decreasing the volume or number of claims, decreasing the expected value of claims (the probability of a plaintiff win multiplied by the average payout for a win) or by decreasing attorneys' fees and costs and disbursements related to litigation. The studies to date concerning implementation of ADR indicate mixed results on whether it actually reduces costs for civil litigants. In at least one national legal publication, National Law Journal, the author concluded after much investigation that too few cases were settled before trial to offset the costs of implementing an ADR program, that court-administered arbitration does not reduce attorneys fees' and costs, and that ADR may in fact encourage claims by providing a forum for dispute resolution at a lower cost. "Does ADR Really Save Money: The Jury Is Still Out," National Law Journal, April 11, 1994. The value of ADR may simply be that it provides an alternative forum for resolving disputes.

The Elements of Minnesota's Mandatory ADR Rule

Minnesota's ADR rule requires that ADR be implemented in most civil cases. ADR is not mandated in certain civil matters where, because of the nature of the dispute involved, ADR is impractical. Examples of cases which are not subject to mandatory ADR include: conciliation court actions; family court matters; unlawful detainer actions; civil commitment proceedings; probate court proceedings; proceedings related to harassment; restraining orders; juvenile court proceedings; proceedings for registration of land titles; and applications to compel or stay arbitration. In addition to the specifically recognized exceptions to the ADR rule, a presiding judge may, within his/her discretion, choose "for good cause" not to require ADR.

Types of ADR

Individuals or organizations involved in litigation in Minnesota may use any one of a number of ADR processes. A detailed discussion of the advantages and disadvantages of the different types of ADR is beyond the scope of this article. Highlighted on the following page are the ADR processes available to litigants in Minnesota, a general description of the process involved, and the objectives of each type of ADR. (Internet community: The ADR processes chart is not included; if you would like a copy of this chart, please e-mail or call our firm and we will provide you with one). Each of the different types of ADR may be advantageous or disadvantageous in a a given case depending upon the temperaments of attorneys and parties involved, the type of litigation, and the costs for the type of ADR selected.

This article was prepared by Stephanie Ball, who practices in the area of civil litigation at the firm's Duluth office.

Ms. Ball is a co-author of Minnesota seminar materials entitled "Minnesota's New Mandatory ADR Rule, Rule 114, General Rules of Practice for District Courts." 

OBTAINING JUDGMENTS IN SMALL CLAIMS COURT
By Martha M. Markusen

Contractors and suppliers are often faced with unpaid bills for labor and materials. Depending upon the amount in controversy, they often can bring a lawsuit in conciliation court. Conciliation court is an economical and effective remedy on smaller transactions. In Minnesota, the conciliation court dollar limitation is $7,500. You may reduce your claims to meet this limit. There is a lower limit of $4,000 for consumer credit transactions involving the purchase or financing of personal property. Often the only cost involved is the filing fee, which is generally less than $25. The court administrator will assist you in preparing a summons and complaint and in serving the debtor. A court hearing without a jury is generally held within thirty days. You must appear in court with all your witnesses and with originals of all documents to support your claim. You must communicate to the judge a concise, chronological statement of all facts giving rise to your claim against the debtor.

In Wisconsin, the small claims court dollar limit is $5,000. The court clerk will work with you in preparing a summons and complaint. The summons will set a time for the parties to go to court. The summons and complaint are served by mail if the defendant lives in the county where the court is located, otherwise, personal service through a process server or sheriff is required. If the defendant does not appear, the court most likely will enter a judgment in your favor at the initial hearing. If the defendant files an answer to the complaint or appears at the initial hearing and contests the lawsuit, the court schedules a second hearing when the parties can present their cases.

You can reduce the number and amount of unpaid accounts by taking an active, rather than passive, approach to collections. A clear written agreement with payment terms and money up front will reduce the likelihood of an unpaid bill. If a bill is not paid when due, immediately follow-up with a telephone call to the debtor. Do not continue to do work or supply materials when an account is past due. This will only increase the amount owed. If the work is done and not paid for in full, do not wait to pursue remedies. The sooner action is taken, the more likely payment will be made.

LEARN RULES OF THE GAME BEFORE CONSTRUCTION BEGINS
By Joseph Mihalek

Spring is traditionally considered the beginning of three seasons: pollen and hay fever season, road building and repair season and building construction season. If you have problems with the first, see your doctor. If you have problems with the second, contact your favorite politician. If you have problems with the third, keep reading.

Building construction projects can be a lot more profitable (or at least a lot less stressful) for both the owner and the contractor if both parties spend extra time at the beginning of the relationship to insure that they have a solid understanding of their contract. The contract forms the "rules of the game" that will govern the relationship between the owner and the contractor during construction. It also sets forth the rights and obligations of the parties after the work is completed. Every minute spent thinking about, analyzing, negotiating and fine-tuning the detailsof the contract will mean less time spent later when your energy should be devoted to the construction work itself. Here's a handy check list of some significant points to consider when you are negotiating your business for the construction season.

Put it in writing. Although oral contracts are enforceable (with some exceptions) it is better to put your contract in writing. This avoids disputes about who promised what. An excellent practice is to get a copy of the standard AIA contract for contractors. Review the standard and select those portions of the contract that relate to your project. Even if you end up crossing out large portions of the standard form contract, reviewing it will force you to think about whether a particular provision is necessary for your project.

Clearly define the scope of the project. If you have a project architect, you should be provided with detailed drawings and specifications that spell out exactly what you are expected to do. If you don't have this luxury, you must prepare written specifications and/or written drawings so that the owner knows exactly what the contractor is going to do for the price that is being charged.

Have a clear understanding of the timetable for completion. Many disputes between owners and contractors evolve from the parties' failure to agree upon realistic timetables for completion. A contractor should not promise more than can be delivered; however, the contractor should have sufficient experience and expertise to know how long it should take to complete the project, barring unforeseeable delays. A project timetable or flow sheet is an excellent tool which helps to insure sanity in scheduling work by subcontractors and delivery of materials and supplies.

Be sure the owner knows what allowances have been built into the contract price. Allowances enable the contractor to determine a contract price even before the owner has made final selections on lighting fixtures, wall coverings, plumbing fixtures and other amenities. When it is not possible to have all selections made before the work begins, be sure both parties understand what is covered by the allowance.

Use a written change order procedure. Whether the contract is for a fixed price or on a time and materials basis, a procedure for change orders is critical. Generally no changes in the scope of the contract should be undertaken or permitted without the written consent of both parties and a written agreement on the method for determining the additional cost or credit resulting from the change. Many contractors include a change order clause in the contract but then fail to follow it. This is a big mistake which frequently leads to lawsuits.

Give the necessary mechanics lien "pre-lien" notices. The statute requires that specific written notices be given to the owner if subcontractors are going to be used on the job and the project is residential in character. Failure to provide the required notice will result in a waiver of lien rights.

Know the project boundary lines and location of utilities. Before beginning any work, determine the location of all utilities. This will save headaches later when the subcontractors begin excavation. Have a clear understanding of and mark the boundary lines of the project. If necessary, the owner or contractor may need to obtain temporary easements to enable the contractors to have access to the job site and to have a place to store materials or equipment. The last thing you want is to find out that a subcontractor cut down trees on or excavated the wrong property.

Purchase appropriate insurance coverage. Even if the owner does not require that the contractor provide proof of insurance or post payment and performance bonds, adequate insurance coverage is a must. Many commercial general liability policies contain so many exceptions that it seems nothing is covered. Review your insurance coverage with your agent to be sure that it provides the type of coverage appropriate for your work and the amount of coverage necessary to keep any errors from destroying your business.

Obtain the required permits. Do not assume that the owner is going to obtain permits. Get the necessary permits and be sure that all phases of the work requiring inspection are inspected by the appropriate building inspection officials.

Designate one person to act as construction manager. Management of the construction project is likely to result in fewer glitches if one person is designated as construction manager. This person should be on site frequently and should be the point person for all communications involving the owner, material suppliers and subcontractors. The construction manager gains an "ownership" interest in the timely and professional completion of the project. The manager should hold regular meetings with subcontractors and vendors to insure that the project is efficiently scheduled and all work is done in sequence, on time and at the lowest possible cost.

Keep meticulous records. During the construction project, it is critical that you keep meticulous records of all aspects of the work, including written estimates and proposals from subcontractors, invoices from material suppliers, invoices from subcontractors, time records for direct labor costs, and invoices for direct job costs. It is a good practice to take photographs of the work as it progresses to have documentation of certain critical aspects of the work and the timing of completion of phases. These records will be important in determining the cost of change orders and in resolving disputes that may arise.

Agree on an appropriate payment schedule. It is a good practice to require a significant portion of the contract price to be paid in advance to allow the contractor to purchase materials and labor. As the work progresses, payment requests should coincide with the percentage of work that has been completed. A retainage of five to ten percent is appropriate to insure that all punch list items have been addressed. Without a retainage pending final inspection and acceptance of the project, the owner has little leverage to insure that the final details are completed. When payments are made, lien waivers should be signed to the extent of the payments received. If payments are not received, file mechanics liens within six months of the last work performed.

Elect binding arbitration of all disputes pursuant to the Construction Industry Rules. Even the best laid plans sometimes go awry. Lawsuits are expensive; they take a long time to resolve and the ultimate decision may be made by a jury or judge who have no understanding whatsoever of the construction industry or technical terms of the trade. By electing to have disputes resolved by binding arbitration, you can decide that a construction industry expert will make the decision. This will mean less cost to you because you don't have to educate your lawyer, the judge or the jury. It may take up to two years to resolve a case in court; arbitration can be completed much faster.

Careful attention to these basic rules will help you to have a more successful construction season. It will increase the odds of having satisfied customers. This will mean more referrals and the chance to enjoy the fruits of your work during the other season: winters in Florida.