author:
TOUSSAINT, Chief Judge.
      RANDALL, Judge

text:
    STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Petitioner, Appellant, v. CINCINNATI INSURANCE COMPANY, Respondent.
    No. C4-02-396.
    Court of Appeals of Minnesota.
    Oct. 1, 2002.

      Owen L. Sorenson, Stringer & Rohleder, Ltd., St. Paul, MN, for appellant.
    Rolf E. Sonnesyn, Chandelle Lee Heyer, Tomsche, Sonnesyn & Tomsche, P.A., Min-neapohs, MN, for respondent.
    Considered and decided by TOUSSAINT, Chief Judge, RANDALL, Judge, and HARTEN, Judge.
   OPINION

TOUSSAINT, Chief Judge.

Respondent insurance company refused to arbitrate a car accident because its insured instructed it not to provide coverage, pay or defend the action. Appellant insurance company moved to compel arbitration, and the district court denied the motion. Appellant contends that (1) the district court erred by denying its motion to compel respondent to arbitrate; (2) respondent’s refusal to pay the claim based on the instruction of the insured violates public policy and the Unfair Claims Practices Act, Minn.Stat. § 72A.201, subd. 8(3) (2000); (3) appellant is entitled to attorney fees under the arbitration agreement; and (4) the proceedings in the underlying action against respondent’s insured should be stayed pending conclusion of arbitration. We affirm.

FACTS

This case arises out of a motor-vehicle accident. Glen Meyer hired Michelle Miller’s husband, Loren, to plow his driveway. As Loren was plowing Meyer’s driveway, Michelle drove in the driveway to speak to Loren. At about the same time, Meyer backed out of his garage, drove forward around his rock garden, and then, while looking at and waving to Loren, collided with Michelle’s vehicle.

At the time of the accident, the Millers were insured by appellant State Farm Mutual Insurance Company (State Farm). State Farm paid for the property damage to Michelle’s vehicle, but Michelle also sustained out-of-pocket expenses as a result of the policy’s $500 deductible. State Farm attempted to recover from Meyer, the amounts it had paid to Michelle and Michelle’s out-of-pocket expenses. When Meyer refused to disclose the identity of his insurer, State Farm and Michelle sued him. State Farm later learned that Meyer was insured by respondent Cincinnati Insurance Company (Cincinnati), but Meyer had instructed Cincinnati not to provide coverage, pay the claim, or defend him. Cincinnati stood ready to defend and indemnify Meyer, but Meyer elected not to invoke his liability coverage and instead decided to defend the matter himself.

State Farm filed a petition for arbitration pursuant to its intercompany arbitration agreement with Cincinnati. While Cincinnati admitted that it was a signatory to the agreement it argued that the agreement only takes effect if Cincinnati’s insured invokes coverage.

State Farm moved to compel Cincinnati to arbitrate. The district court denied State Farm’s motion, concluding that (1) the disputed claim does not fall within the scope of the arbitration agreement; (2) Cincinnati is under no obligation to defend, indemnify, or arbitrate on its insured’s behalf because its insured had not tendered defense of the claim to it; (3) the insurance policy between Cincinnati and its insured did not confer third-party-beneficiary status on State Farm; and (4) the Minnesota Unfair Claims Practices Act does not affect State Farm’s claim. State Farm appeals.

ISSUES

I. Did the district court err by denying appellant’s motion to compel arbitration?

II. Did respondent’s refusal to pay the claim based on the instruction of its insured violate public policy and the Unfair Claims Practices Act, Minn. Stat. § 72A.201, subd. 8(3) (2000)?

III. Did the district court err by denying appellant’s request for attorney fees under the terms of the parties’ inter-company arbitration agreement?

IV. Did the district court err by denying appellant’s motion to stay the underlying proceeding between appellant’s insured and respondent’s insured?

ANALYSIS

Motion to Compel Arbitration

This court reviews the district court’s denial of a motion to compel arbitration de novo. Johnson v. Piper Jaffray, Inc., 530 N.W.2d 790, 795 (Minn.1995). When considering a motion to compel arbitration, the court’s inquiry is limited to determining (1) whether a valid arbitration agreement exists; and (2) whether the dispute falls within the scope of the arbitration agreement. Amdahl v. Green Giant Co., 497 N.W.2d 319, 322 (Minn.App.1993).

State Farm argues that the district court erred by denying its motion to compel Cincinnati to arbitrate. The parties do not dispute that a valid arbitration agreement exists. We are asked to determine whether the dispute falls within the scope of the arbitration agreement. See id. Whether or not a party has agreed to arbitrate a particular dispute is a matter of contract interpretation, which this court reviews de novo. Stiglich Constr., Inc. v. Larson, 621 N.W.2d 801, 802 (Minn.App.2001) (citation omitted), review denied (Minn. Mar. 27, 2001).

State Farm and Cincinnati are parties to an intercompany automobile-insurance arbitration agreement. The agreement requires arbitration of any questions or disputes which may arise from any automobile physical damage' subrogation or property damage claim not in excess of $100,000. The parties concede that this is such a claim. But the agreement expressly does not apply and arbitration is not required as to claims against which a company asserts a defense of lack of coverage on grounds other than delayed notice, no notice, or noncooperation.

Cincinnati argues that the agreement does not apply to the present claim because its insured never tendered to it the defense of the claim, and thus, Cincinnati’s duty to defend and indemnify its insured never materialized. We agree with Cincinnati. [TJender of defense is a condition precedent to the creation of an obligation to indemnify. Seifert v. Regents of Univ. of Minn., 505 N.W.2d 83, 87 (Minn.App.1993), review denied (Minn. Oct. 28, 1993). Likewise, the tender of defense is a condition precedent to the duty to defend. Pedro Cos. v. Sentry Ins., 518 N.W.2d 49, 51 (Minn.App.1994). To constitute tender of defense, the insurer must have knowledge that the suit is potentially within the policy’s coverage coupled with knowledge that the insurer’s assistance is desired. Home Ins. Co. v. Nat’l Union Fire Ins. of Pittsburgh, Pennsylvania, 643 N.W.2d 307, 320 (Minn.App.2002) (quotation omitted). State Farm attempts to bring the dispute under the terms of the parties’ arbitration agreement by arguing that Meyer’s failure to tender defense of the claim to Cincinnati amounts to noncooperation. The duty of the insured to cooperate with its insurer, however, arises after a tender of defense.

State Farm also asserts that the district court erred by concluding it was not a third-party beneficiary of. the arbitration agreement signed by Cincinnati. Even if State Farm were to establish that it was a beneficiary to the arbitration agreement, the condition precedent required for the arbitration agreement to take effect, a tender of defense, still has not occurred.

Because Meyer has not tendered the defense ,to Cincinnati, the district court did not err by denying State Farm’s motion to compel arbitration.

Unfair Claims Practices Act

State Farm argues that Cincinnati’s refusal to pay the claim based on the instruction of the insured violates public policy and Minnesota’s Unfair Claims Practices Act, Minn.Stat. § 72A.201, subd. 8(3) (2000). We disagree.

The act defines various acts by-an insurer that constitute unfair settlement practices, including denying a liability claim because the insured has requested that the claim be denied. Id. But the act provides for administrative enforcement and does not create a private cause of action. Morris v. American Family Mut. Ins. Co., 386 N.W.2d 233, 235 (Minn.1986). Even if the act had some impact on State Farm’s private claim against Cincinnati, which it does not, Cincinnati’s actions do not constitute an unfair practice. Although Meyer instructed Cincinnati not to pay the claim, tendering of the defense was a condition precedent to this provision taking effect. In other words, Meyer’s actions could not constitute requesting that the claim be denied when he had not yet tendered the defense to Cincinnati.

State Farm also asserts that Cincinnati’s actions in refusing to arbitrate and in denying the claim based on the request of their insured is against public policy. Cincinnati has taken a legally permissible stance in this matter, however, and it is not authorized to defend and indemnify against the instructions of its insured. Therefore, we conclude there is no violation of public policy.

Attorney Fees

State Farm argues that the district court erred by denying its request for attorney fees under the arbitration agreement. It contends that Cincinnati has not acted in good faith, in violation of the Minnesota Unfair Claims Practices Act. We disagree.

“The construction and effect of a contract are questions of law for the court”. Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn.1979). The parties’ arbitration agreement provides that

[i]n the event that, after removal, the case is discovered to have been properly placed in arbitration and the Applicant refiles the case in arbitration, the Respondent must reimburse Applicant for all reasonable legal expenses and court costs incurred because of the improper objection to jurisdiction.

Because Meyer did not tender the defense, and Meyer’s actions did not amount to noncooperation under the agreement, the dispute does not fall under the arbitration agreement. Even if it did fall within the agreement, however, Cincinnati has not made an improper objection to jurisdiction. We conclude the district court did not err by determining that State Farm’s request for attorney fees was unwarranted.

Stay of Proceedings

State Farm asserts that because this dispute falls under the parties’ arbitration agreement, the district court erred when it denied its motion to stay the underlying proceeding between the insureds. We disagree. While a court must stay the proceedings and compel arbitration of claims subject to arbitration under a valid agreement, Minn.Stat. § 572.09 (2000), no such duty to arbitrate arose here. Accordingly, the district court did not err by denying State Farm’s motion to stay the underlying proceeding.

DECISION

This dispute does not fall within the parties’ intercompany arbitration agreement because Meyer refused to tender the defense to Cincinnati. Absent this condition precedent, Meyer’s actions did not amount to noncooperation under the agreement, and Cincinnati did not have a duty to arbitrate. The district court, therefore, did not err by denying State Farm’s motions to compel arbitration, to award attorney fees, or to stay the underlying proceeding.

Affirmed.

RANDALL, Judge

(dissenting).

I respectfully dissent.

On the issue of compelling arbitration, I would require Cincinnati to go to arbitration, award State Farm reasonable attorney fees for having to bring this matter to court, and remand to the district court to stay the underlying lawsuit between Michelle Miller and respondent’s insured Glen Meyer.

To me, it is questionable law, and bad ;public policy, egregious public policy, not to compel State Farm and Cincinnati to abide by the terms of their arbitration agreement. Minnesota’s strong public policy of providing for public safety on our highways, as exemplified by our mandatory insurance law, Minn.Stat. § 65B.48, subd. 1 (2000), is trashed and turned over to the whims and caprice of each individual insured, in this case, Meyer, who is allowed to blithely state, I can give the benefits of my liability coverage to anyone I please and withhold it from anyone I please, and I am accountable to no one, neither the law nor the party I have injured.

I will discuss the arbitration issue first. The two insurance companies, State Farm and Cincinnati, are both signatories to an inter-company arbitration agreement. Several insurance companies belong to the arbitration agreement, the purpose of which is simple and exemplified by the facts in this case. State Farm supplies collision insurance to Michelle Miller, who sustained approximately $2,000 in property damage when Meyer drove into Miller’s vehicle, which was stopped in his driveway. Miller has a $500 collision deductible. State Farm honored their policy and paid Miller the property damage minus the deductible, and pursuant to the inter-company arbitration agreement, served notice on Cincinnati that they wished to arbitrate the matter of their $1,500 out-of-pocket expense plus Miller’s $500 deductible. Cincinnati refused to arbitrate and blamed it on their insured Meyer. They said Meyer had refused to tender the defense to them, had told them in no uncertain terms that he did not want coverage and would handle the matter on his own and, therefore, Gee, our hands 'are tied; we have to honor our policyholder’s (Meyer’s) request. It is worth noting' that the briefs and Cincinnati’s position at oral argument are replete with manifestations of good faith (obviously to avoid a bad-faith lawsuit). Cincinnati insisted time after time that there is liability coverage for Meyer and that they are ready, willing, and able to stand in and do their duty. It is just that they cannot move because Mr. Meyer .doesn’t want us to.

The district court and the majority bought Cincinnati’s argument that tender by Meyer is such an integral part of his liability policy and the inter-company arbitration agreement that everyone’s hands are tied in this matter until Meyer gives the go-ahead, and he has not done so yet. I suggest that is bad law. The automobile-subrogation-arbitration agreement is in evidence, and all parties agree on its wording. It says in pertinent part that

[signatory companies are bound to fore-go litigation and in place thereof submit to arbitration any questions or disputes which may arise from any automobile physical damage subrogation or property damage claim not in excess of $100,000.
This articles shall not apply to
any claim as to which a company asserts a defense of lack of coverage on grounds other than
(1) delayed notice
(2) no notice
(3) noncooperation [.]

(Emphasis added.) The majority confuses noncooperation, which is specifically not a bar to arbitration, with the word tender. As to noncooperation, Meyer’s actions are the classic essence of noncooperation. The record shows that Meyer, from the start, refused to disclose the identity of the liability insurance company to Miller. That forced Miller to apply to State Farm under her own collision policy for coverage. Thus, State Farm and Miller had to sue Meyer for the approximate $2,000 in property damage, meaning State Farm’s payment of approximately $1,500 plus Miller’s $500 deductible.

Meyer continued to refuse to cooperate in any way and continued to refuse to notify his insurance company, Cincinnati. When State Farm learned on its own that Cincinnati provided automobile insurance coverage for Meyer and contacted Cincinnati to start the arbitration process, Meyer instructed Cincinnati not to pay the claim, not to cover him, and not to defend him. The record is clear as to Meyer’s stubborn position. He has such a questionable driving record that Cincinnati informed him that even on this $2,000 fender-bender, he was in danger of having his insurance with Cincinnati not renewed. It can be safely assumed that Meyer would then have to go into the open market and pay even more to get new insurance coverage (as stated, Minnesota has a mandatory insurance law, which is a condition precedent to obtain vehicle license plates and to be allowed to drive legally). Thus, Meyer, to keep his insurance with Cincinnati (who is complicit in this scheme), arbitrarily takes the position that he is going to withhold his liability coverage from Miller and force her to deal with him directly. Meyer is an attorney. The file reflects that his actions in instructing Cincinnati not to defend him, and his countersuit against the Millers for his property damage, are delaying tactics to hopefully wear down Miller and State Farm and get them to settle for approximately fifty cents on the dollar. The record reflects an offer by Meyer to settle State Farm’s and Miller’s claim for fifty percent, meaning $1,000. Meyer has calculated that $1,000 out of his own pocket is less expensive than not getting renewed by Cincinnati and running the risk of having to get another insurance company to cover him.

To put it bluntly, Meyer’s pecuniary interests are not part of the inter-company arbitration agreement to which State Farm and Cincinnati are signatories. Cincinnati concedes that Meyer is not. To cover exactly this type of situation, the inter-company arbitration agreement excludes as a defense noncooperation. As stated, you could not find a better definition of noncooperation than Meyer’s actions. This entire matter resolves itself simply, peacefully, and with judicial economy if Cincinnati steps forward and arbitrates a $2,000 fender-bender. State Farm stipulated on the record that if Cincinnati goes to arbitration, it and the Millers will drop their lawsuit in district court for property damage. That would in no way prejudice Meyer’s counterclaim for property damage, as that is a stand-alone issue. He has a right to sue Miller and see if he can prevail. He does not need Cincinnati’s permission to sue Miller. He simply has to take his case into court and proceed.

The issue of tender on which the district court and the majority hang their analysis is not before us. The inter-company arbitration agreement specifically excludes noncooperation as an issue. In another lawsuit, not ours, it is possible that Cincinnati and Meyer might have a tender issue. Assume that Miller had extensive property damage and personal injuries to the point where Meyer wanted coverage. Assume Meyer’s actions, lack of tender, and other noncooperative actions were egregious. Cincinnati, as any insurance company, would have the right to go into district court and seek a declaratory judgment that they had no obligation to defend and indemnify their insured because cooperation with the insurance company is a boilerplate phrase in every insurance contract written. Obviously, even a self-interested insurance company has a right to expect its insured to give it the details of what happened so they are in a position to evaluate coverage, legal tactics, protect the insured’s interests, and evaluate the potential claim for loss-reserve purposes. That is not our case. Between Cincinnati and Meyer on another set of facts, lack of tender and noncooperation could be an issue. See, e.g., Rieschl v. Travelers Ins. Co., 313 N.W.2d 615 (Minn.1981) (insurer brought action seeking to declare that insured breached cooperation clause of policy). Between State Farm and Cincinnati, noncooperation is not an issue. It is written right out of the arbitration agreement and cannot constitute a bar to arbitration.

Now to the issue of public policy. This refusing-to-tender tactic (entirely at the whim of the insured) increases the litigation burden on the court system and results in payments to an injured party taking significantly longer than if the insurance companies were involved. This defeats the principles behind the No Fault Act, including injured parties receiving prompt payment of benefits and easing the burden of litigation on courts. See Minn.Stat. § 65B.42(4) (2000). Notably, another purpose of the No Fault Act is

[t]o create a system of small claims arbitration to decrease the expense of and to simplify litigation, and to create a system of mandatory intercompany arbitration to assure a prompt and proper allocation of the costs of insurance benefits between motor vehicle insurers!.]

Minn.Stat. § 65B.42(4). Meyer is not a signatory to the arbitration agreement. His participation, or lack thereof, does not affect the agreement between two insurers to arbitrate.

Judicial economy, public policy, and the intent of mandatory auto insurance require that signatories to the inter-company auto-insurance arbitration agreement comply with the letter and spirit of their agreement and the mandatory auto-insurance statute.

Assume that Meyer caused both property damage and personal injury to Miller or hit a pedestrian walking in the vicinity. Under Cincinnati’s and Meyer’s theory, he could still refuse coverage to save himself money in future auto premiums and force the injured victims to take their chances on whether any judgment would be collectible.

It is bizarre to put the issue of who has insurance in the hands of a driver whose record with his own company is so questionable that over a routine $2,000 fender-bender with no personal injuries, the company stands ready not to renew his policy. The majority’s decision permits Meyer to avoid the problem that he, not Miller, created, simply by snapping his finger and saying, I don’t want insurance on this claim! See Minn.Stat. § 645.17(1) (2000) (stating legislature does not intend absurd result). Minnesota’s mandatory auto-insurance law is effectively eliminated if any driver can opt out whenever he feels it is advantageous to do so.

According to the Minnesota Department of Public Safety, Office of Traffic Safety, [a]t the end of the 2001 calendar year, 3,685,499 people held Minnesota driver licenses and 4,376,815 motor vehicles were registered in the state. Minnesota Dep’t of Pub. Safety, Minnesota Motor Vehicle Crash Facts (2001).

It is beyond comprehension that 3.6 million different individuals control Minnesota’s mandatory liability-insurance ■ law without any legislative standards or accountability of any kind! It is egregious public policy to give each individual driver, after requiring them to carry liability insurance to drive legally in this state, the power to vest pocket their liability insurance; bestow it on those people that they like and in those situations that they want to; but withhold it from injured victims they do not like in other situations, as Meyer is doing. Even Cincinnati concedes that Meyer is doing this to avoid the possibility of them not renewing his automobile insurance because of his past driving record. I ask one simple question in this dissent. Is the letter and the spirit of Minnesota’s mandatory liability-insurance law to protect bad drivers or injured victims?

I dissent. I would reverse the ruling of the district court and compel Cincinnati to proceed to arbitration. I would award State Farm reasonable attorney fees for having to go to district court and then this court to compel arbitration. I would remand to the district court to stay the property-damage lawsuit of State Farm and Miller against Meyer, and Meyer’s property damage counterclaim against Miller until State Farm and Cincinnati have finished arbitration. I would instruct the district court to then allow Meyer to proceed on his counterclaim against the Millers for his property damage.

This described sequence gives a reasonable interpretation to not a difficult word, noncooperation. It serves the purpose and the public policy of the inter-company arbitration agreement, serves the strong public policy of the State of Minnesota as evidenced by the No-Fault Act and the mandatory insurance law, allows Meyer to proceed on his property-damage claim in a court of law, and judicial economy and integrity are furthered. Meyer and Cincinnati, as of now, mock both.


source: Caselaw Access Project

author: NEUMANN, Justice. SANDSTROM, Justice,

license: Public Domain

text:
    2002 ND 138
    Mark HOFFMAN, Claimant and Appellant v. NORTH DAKOTA WORKERS COMPENSATION BUREAU, Appellee and Mor-Gran-Sou Electric Coop., Respondent.
    No. 20010310.
    Supreme Court of North Dakota.
    Aug. 22, 2002.

      Kathryn L. Dietz, Dietz & Little Lawyers, Bismarck, N.D., for claimant and appellant.
    Lawrence A. Dopson, Special Assistant Attorney General, Zuger Kirmis & Smith, Bismarck, N.D., for appellee.
   NEUMANN, Justice.

[¶ 1] Mark Hoffman appealed from a district court judgment affirming a Workers Compensation Bureau order terminating his disability and vocational rehabilitation benefits. Because the Bureau failed to address uncontradicted medical evidence and other evidence favorable to Hoffman, we reverse the judgment and remand the case to the Bureau for further proceedings.

I

[¶ 2] In November 1993, Hoffman injured his low back while employed as -a lineman with Mor-Gran-Sou Electric Cooperative in Flasher. The Bureau accepted liability and paid associated medical expenses and disability benefits. Hoffman returned to work in a different capacity at Mor-Gran-Sou for a while, but in 1996 the Bureau began vocational rehabilitation efforts. On April 29, 1999, the Bureau issued an order awarding Hoffman a vocational training program as a computer support specialist at Bismarck State College (“BSC”). The program was scheduled to begin June 5, 1999 and continue through May 8, 2001, or until completion of the required course work, whichever first occurred. Hoffman’s medical limitations restricted him to “light level work,” and his physician, Dr. Carol Krause, approved the training program. Hoffman did not appeal the Bureau’s order.

[¶ 3] After Hoffman failed to register for classes, the Bureau issued an order suspending his disability benefits because he was in noncompliance with the rehabilitation program. Because Hoffman was not allowed to register at BSC until his 1970 probation from North Dakota State University (“NDSU”) had been lifted, the Bureau found good cause for his not registering and reinstated Hoffman’s benefits effective July 1, 1999, after the NDSU probation had been lifted. The Bureau also ordered that Hoffman’s training program would begin August 24, 1999 and continue through May 11, 2001. , Hoffman was allowed to take his classes over the Internet from his home in Flasher. Hoffman did not appeal this order.

[¶ 4] On February 11, 2000, the Bureau issued an order suspending Hoffman’s disability and vocational rehabilitation benefits effective January 18, 2000, because he had failed to submit school assignments and had received a failing grade in all four of his courses. The Bureau found this constituted a first instance of noncompliance with his rehabilitation plan and advised Hoffman that if the noncompliance continued for 30 days or there was a second instance of noncompliance without good cause, the Bureau would terminate vocational and disability benefits. This order was not appealed. On March 23, 2000, the Bureau reinstated benefits because Hoffman had come back into compliance by registering for courses in the spring 2000 semester and by acquiring a cumulative 2.0 grade point average in his courses by midterm.

[¶ 5] Hoffman visited Dr. Krause on April 20, 2000. Hoffman complained that he had difficulty working at his computer because he was unable to sit for long periods of time. Dr. Krause explained in her psychiatry follow-up notes:

We reviewed his functional capacity assessment done in August, 1998. It put him in the light category of work. Some how [sic] they stated he could do sitting on a frequent basis. He has consistently told me that he has trouble sitting on a frequent basis. I have never seen him sit in my office at all. Rather, he stands and paces. He has been trying to do his school work. [I]t seems the sitting is his major complaint. He states he is getting behind and concerned about failing. My recommendation at this time would therefore be to have him cut down his course work to 2 classes per semester to see if he can succeed at this. My second recommendation would be to have a physical therapist visit his home and look at his computer set up to make recommendations about how it could be set up more comfortably for him. Perhaps on an elevated table so- he could stand and work at the computer.

[¶ 6]- Hoffman’s rehabilitation consultant’ asked Dr. Krause for clarification. Dr. Krause told the rehabilitation consultant that Hoffman could not continue with his four classes for the remaining two weeks of the semester because “[h]e is not tolerating it!!” Hoffman failed' all four spring semester courses and was placed on academic suspension. However, because Dr. Krause had placed on Hóffman a medical restriction of two courses, BSC allowed Hoffman a medical extension to complete two of the four courses after the spring semester ended. The Bureau further required that Hoffman register and enroll in an additional class during summer school. The vocational consultant contacted Hoffman and informed him a tutor had been approved once per week and the Bureau would pay his travel expenses to meet with the tutor, but Hoffman said it was too difficult for him to drive to Bismarck. Although Hoffman’s home work station was evaluated and improvements were suggested, Hoffman testified he -had already tried the improvements suggested to no avail.

[¶ 7] In June 2000, Dr. Krause recommended that Hoffman undergo another functional capacity evaluation (“FCE”), which was conducted in July. The physical therapist reported that the FCE was not a “reliable test effort” because Hoffman “did not give maximum, consistent effort” during the test. The'physical • therapist reported Hoffman was either “unable or unwilling to fully participate,” and “[s]ig-nificant pain behaviors were an interfering factor with the testing.” Following the FCE, Hoffman again visited Dr. Krause, whose impression of Hoffman upon examination was “[c]hronic low back pain recently flared up by his FCE.” Dr. Krause reported:

He did have his FC[E] done on Wednesday and Thursday of this week. States part way through his first day, the pain got so bad that he was unable to tolerate continuing things. States things locked up really bad. He tried to get in to see me yesterday but my schedule was full. States that last night shifting around he felt something pop and things to day [sic] aren’t quite as bad as they were yesterday but he’s still more sore than usual. We did get the report from the FC[E] and it was an inconsistent test. He was unable to complete enough of it for it to be an accurate test.

[¶ 8] Hoffman received a “B” in each of the two spring semester courses he was allowed to complete during the summer, but he failed the summer school course he had taken, resulting in his cumulative grade point average dropping below 2.0. On September 27, 2000, the Bureau issued an order terminating disability and vocational rehabilitation benefits because Hoffman had failed to comply with the vocational rehabilitation plan without good cause under N.D.C.C. § 65-05.1-04. The Bureau ruled Hoffman did not comply because he failed the summer school course he had taken, which constituted a second act of noncompliance, and he did not fully cooperate in the FCE. Hoffman requested a formal hearing.

[¶ 9] Before the evidentiary hearing, Hoffman’s attorney asked Dr. Krause her opinions about Hoffman’s medical condition and his capabilities. Dr. Krause responded:

Your first question asked whether “Mr. Hoffman’s behavior during FC[E] of July 21, 2000 and March 30, 2001 GATB testing is more likely than not causally related to chronic [pain] which he experiences?” To this I would reply yes. In regards to your questions about whether he can sit and concentrate at a computer terminal more than 10 or 15 minutes at a time? My answer to this would be no. He is [sic] consistently complained of an inability to sit still. And in the years that I’ve known him; I’ve never seen him sit in my office. He usually stands and paces.
In answer to your final question; I do not believe Mr. Hoffman is consciously malingering or exaggerating his pain. I think his pain does keep him from participating in many usual daily activities.

[¶ 10] At the evidentiary hearing, Hoffman presented evidence from the chairman of the computer office technology department at BSC, who testified that because of the compressed summer school schedule the on-line summer course in which Hoffman had enrolled would be the equivalent of two. regular semester courses. The chairman also testified a lack of basic keyboarding skills would add more time to the 20 to 25 hours per week required to successfully complete the course. Hoffman had not successfully completed the basic keyboarding course.

[¶ 11] The administrative law judge (ALJ) recommended upholding the Bureau’s decision to terminate benefits. The ALJ concluded Hoffman had engaged in a second instance of noncompliance with vocational rehabilitation services without good cause:

The greater weight of the evidence reveals that the claimant, Mark Hoffman, was noncompliant with his vocational training program at Bismarck State College. Hoffman received a failing grade in his Database class during the summer 2000 session at BSC without good cause. The greater weight of the evidence has also revealed that the North Dakota Workers Compensation Bureau and its vocational consultant(s) undertook extensive efforts to work with Hoffman, and to closely monitor his condition and his course work while he was enrolled in the computer support specialist program. The greater weight of the evidence reveals that Hoffman was capable of completing the work assignments and passing the required courses at BSC. However, he was admittedly “too burned out” with college and computers were not an area of interest for him.

[¶ 12] The Bureau adopted the ALJ’s recommendations, and the district court affirmed the Bureau’s decision. Hoffman appealed.

II

[¶ 13] On appeal, we review the decision of the administrative agency, rather than that of the district court, although the district court’s analysis is entitled to respect. Paul v. North Dakota Workers Comp. Bureau, 2002 ND 96, ¶ 6, 644 N.W.2d 884. Under former N.D.C.C. §§ 28-32-19 and 28-32-21, which, effective August 1, 2001, are currently codified at 28-32-46 and 28-32-49, we affirm the Bu reau’s decision unless its findings of fact are not supported by a preponderance of the evidence, its conclusions of law are not supported by its findings of fact, its decision is not supported by its conclusions of law, its decision is not in accordance with the law or violates the claimant’s constitutional rights, or its rules or procedure deprived the claimant of a fair hearing. Id. In reviewing the Bureau’s findings of fact, we determine only whether a reasoning mind reasonably could have determined the findings were proven ‘by the weight of the evidence. Klein v. North Dakota Workers Comp. Bureau, 2001 ND 170, ¶ 6, 634 N.W.2d 530. Questions of law, including whether the Bureau correctly interpreted a statute, are fully reviewable on appeal. Lawrence v. North Dakota Workers Comp. Bureau, 2000 ND 60, ¶ 11, 608 N.W.2d 254.

A

[¶ 14] The purpose of vocational rehabilitation is to return a disabled employee to substantial gainful employment with a minimum of retraining, as soon as possible after an injury occurs. N.D.C.C. § 65-05.1-01(3); Hoffman v. North Dakota Workers Comp. Bureau, 1999 ND 66, ¶ 8, 592 N.W.2d 533. The relevant statute in this case, N.D.C.C. § 65-05.1-04(6), provides in part:

If, without good cause, the injured employee fails to attend specific vocational testing, remedial, or other vocational services determined necessary by the bureau or the rehabilitation consultant, the employee is in noncompliance with vocational rehabilitation. If, without good cause, the injured employee fails to attend 'a scheduled medical or vocational assessment, fails to communicate or cooperate with the vocational consultant, or fails to attend a specific qualified rehabilitation program within ten days from the date the rehabilitation program commences, the employee is in noncompliance with vocational rehabilitation. If, without good cause, the employee discontinues a training program in which the employee is enrolled, 'the employee is in noncompliance with vocational rehabilitation. If at any time the employee is noncompliant without good cause, subsequent efforts by the employee to come into compliance with vocational rehabilitation are not considered successful compliance until the employee has successfully returned to the job or training program for a period of thirty days. In all cases of noncompliance by the employee, the bureau, by administrative order, shall discontinue disability and vocational rehabilitation benefits. If, after issuance of the order, the period of noncompliance continues for thirty days, or a second instance of noncompliance occurs without good cause, the bureau may not pay any further disability or vocational rehabilitation benefits, regardless of whether the employee sustained a significant change in medical condition due to the work injury.

In Fuhrman v. North Dakota Workers Comp. Bureau, 1997 ND 191, ¶ 9, 569 N.W.2d 269, we said a “claimant has good cause for failing to attend a rehabilitation program if the claimant has a reason that would cause a reasonably prudent person to refuse to attend the rehabilitation program under the same or similar circumstances.” Whether a claimant has “good cause” under the statute is determined under an objective, reasonable person standard. See Hoffman, at ¶ 15.

[¶ 15] Just as the Bureau has the burden of establishing that a rehabilitation plan is appropriate, see Paul, 2002 ND 96, ¶ 8, 644 N.W.2d 884, the Bureau also has the burden of showing noncompliance with a rehabilitation plan. Once the Bureau establishes noncompliance, it becomes the claimant’s burden to establish good cause for noncompliance. See Fuhrman, 1997 ND 191, ¶ 7, 569 N.W.2d 269; compare Wright v. North Dakota Workers Comp. Bureau, 2001 ND 72, ¶ 25, 625 N.W.2d 256 (holding claimant has burden of demonstrating a good faith work search); Maginn v. North Dakota Workers Comp. Bureau, 550 N.W.2d 412, 416 (N.D.1996) (holding same); Johnson v. North Dakota Workers Comp. Bureau, 539 N.W.2d 295, 299 (N.D.1995) (holding same). Here, the Bureau met its burden of showing noncompliance with the rehabilitation plan. The issue in this case is whether Hoffman met his burden of demonstrating good cause for noncompliance.

[¶ 16] The ALJ and the Bureau relied on evidence of continuing efforts by vocational rehabilitation consultants who monitored his school performance and attempted to provide assistance for him when necessary. Hoffman’s inability to succeed indicated to the ALJ and the Bureau that he had simply failed to put forth the effort required to pass his course work. The ALJ also found:

On July 7, 2000, the vocational consultant contacted Hoffman. See Claimant Exhibit No. 469. At that time Hoffman said he was just “too burned out” with school; that computers were not for him; and that he was not an “inside person.” Id. Hoffman again said that he did not have enough keyboarding skills to complete the Database class. The vocational consultant informed Hoffman that tutoring assistance may only require 1-2 meetings with a tutor. Hoffman responded and said he would not drive to Bismarck and that the air in Bismarck bothered his asthma. The consultant then informed Hoffman that he would need to remain in the Database class to be compliant with his vocational rehabilitation program. Id.
On July 19, 2000, Hoffman underwent a functional capacities evaluation (FCE) at St. Alexius Human Performance Center. See Claimant Exhibit Nos. 456-460. The therapist stated that Hoffman did not give maximum ■ consistent effort in the test and that very few of Hoffman’s maximal abilities were able to be documented. Id. The physical therapist further indicated that Hoffman’s participation was nqt a reliable test effort. The therapist said that Hoffman was unwilling or unable to fully participate in the musculoskeletal evaluation or the .positional tolerance activities. Hoffman’s heart rate did not change significantly during his complaints of increased pain. The therapist indicated that most of Hoffman’s testing was incomplete or at less than maximal levels. The therapist stated that she was unable to test Hoffman to maximal safe abilities but he generally fell between sedentary and light categories of work.

While this evidence, if uncontradicted, would support a finding of an absence of good cause for noncompliance with a vocational rehabilitation plan, the ALJ and the Bureau did not address any of the medical or other evidence favorable to Hoffman.

[¶ 17] In Fuhrman, 1997 ND 191, 569 N.W.2d 269, the Bureau’s rehabilitation plan required the claimant to relocate from Bismarck to Minneapolis, Minnesota to attend school. The claimant advised the Bureau that he did not have the financial ability to relocate for training while maintaining his home and family in Bismarck without additional benefits or an advance on his statutory household allowance. The Bureau denied the request for additional financial support, and when the claimant failed to attend the training classes, the Bureau informed him he was in noncompliance with the rehabilitation plan and suspended his disability and' rehabilitation benefits. We reversed the order terminating benefits and rejected the Bureau’s determination that a claimant’s failure to comply with a rehabilitation plan for economic reasons cannot constitute good cause for noncompliance:

The purpose of a vocational retraining program is to substantially rehabilitate a worker to his pre-injury earning capacity. Held v. N.D. Workers Compensation Bureau, 540 N.W.2d 166, 169 (N.D.1995). To meet this objective, the Bureau must devise a training plan which is practically workable and economically feasible for the claimant. When a claimant comes forward, as Fuhrman did in this case, with a credible objection that he does not have the financial ability to relocate and attend an out-of-state training program, the Bureau cannot simply reject the claimant’s assertion and evidence of financial inability without further investigation of the ■ claimant’s financial and economic circumstances. The Bureau, acting as both a factfinder and an advocate in considering a worker’s claim, cannot place itself in a fully adversarial position to the claimant, but must consider the entire record, clarify inconsistencies, [and] explain its reasons for disregarding evidence favorable to the claimant ...

Fuhrman, at ¶ 11 (footnote omitted). The Bureau’s obligation to adequately explain its disregard of evidence favorable to the élaimant applies with particular force to favorable medical evidence. See, e.g., Geck v. North Dakota Workers Comp. Bureau, 1998 ND 158, ¶ 13, 583 N.W.2d 621; Loberg v. North Dakota Workers Comp. Bureau, 1998 ND 64, ¶ 11, 575 N.W.2d 221; Flink v. North Dakota Workers Comp. Bureau, 1998 ND 11, ¶¶ 12-13, 574 N.W.2d 784; McDaniel v. North Dakota Workers Comp. Bureau, 1997 ND 154, ¶¶ 17, 20, 567 N.W.2d 833; Blanchard v. North Dakota Workers Comp. Bureau, 1997 ND 118, ¶¶ 23, 27, 565 N.W.2d 485.

[¶ 18] Section 28-32-46(7), N.D.C.C., requires that we affirm an agency order unless “[t]he findings of fact made by the agency do not sufficiently address the evidence presented to the agency by the appellant.” Because the Bureau’s order precedes the effective date of N.D.C.C. § 28-32-46(7), it is questionable whether this statutory amendment is applicable in this case. See N.D.C.C. § 1-02-10 (providing no statute is retroactive unless expressly declared to be so). It has been suggested that our prior caselaw obligating the Bureau to explain its disregard of evidence favorable to a claimant, decided before the effective date of N.D.C.C. § 28-32-46(7), does not apply in this case because nothing in former N.D.C.C. § 28-32-19 authorized this Court to judicially impose that requirement. However, we presume the Legislature is aware of judicial construction of a statute, and when it fails to amend a particular statutory provision, we further presume it has acquiesced in that construction. See Rodenburg v. Fargo-Moorhead YMCA, 2001 ND 139, ¶ 26, 632 N.W.2d 407. The Legislature’s failure to amend statutory language interpreted by the courts is evidence that the court’s interpretation accords with the legislative intent. Id. Former N.D.C.C. § 28-32-19 was not amended to change our construction of the statute, and when it was recodified in 2001, the Legislature specifically added the requirement that an administrative agency sufficiently address the evidence presented by the appellant. The enactment of N.D.C.C. § 28-32-46(7), although not retroactive, certainly provides a “clear sense of direction” in determining the legal standard to be applied under the former statute. Jerry Harmon Motors, Inc. v. Farmers Union Grain Terminal Ass’n, 337 N.W.2d 427, 432 (N.D.1983). Therefore, if N.D.C.C. § 28-32-46(7) is inapplicable in this case, our prior caselaw directing the Bureau to explain its disregard of evidence favorable to the claimant controls.

[¶ 19] The Bureau in this case ignored evidence favorable to Hoffman. The only medical evidence in the record is from Hoffman’s physician, Dr. Krause. She recommended no more than two classes for Hoffman because he was not tolerating the amount of time it took to sit at the computer and take the courses. Her reports, combined with the testimony of the chairman of the computer office technology department at BSC about the compressed summer school schedule, indicates Hoffman was simply unable, for medical reasons, to successfully complete the summer course. Dr. Krause also said Hoffman was not unwilling, but was “unable” to complete the FCE because of his pain. Because the Bureau failed to give any explanation for its disregard of this evidence, the case must be remanded to the Bureau for reconsideration.

B

[¶ 20] Hoffman argues a willful failure to give a maximum consistent effort during an FCE cannot be an act of noncompliance under N.D.C.C. § 65-05.1-04(6) because the statute lists as an incident of noncompliance only an injured employee’s failure “to attend a scheduled medical or vocational assessment, ...” Because Hoffman was present at the FCE, he argues his performance at the FCE cannot serve as the basis for a second act of noncompliance under the statute.

[¶ 21] The primary purpose of statutory construction is to ascertain legislative intent. Shiek v. North Dakota Workers Comp. Bureau, 2001 ND 166, ¶ 17, 634 N.W.2d 493. We construe statutes to avoid absurd and ludicrous results. Id. We think Hoffman’s interpretation of the statute leads to an absurd and ludicrous result. Under Hoffman’s construction, all he needed to do to comply with the statute is be physically present for the FCE. We believe the word “attend” in the statute clearly contemplates not only a mere physical presence, but also participation in the medical'or vocational assessment. We therefore conclude a willful failure to give a maximum consistent effort during an FCE can constitute an act of noncompliance under N.D.C.C. § 65-05.1-04(6).

Ill

[¶ 22] The judgment is reversed and the case is remanded to the Bureau for further proceedings.

[¶ 23] VANDE WALLE, C.J., MARING, and JAMES M. BEKKEN, District Judge, concur.

[¶ 24] The Honorable JAMES M. BEKKEN, District Judge, sitting is place of KAPSNER, J., disqualified.

SANDSTROM, Justice,

dissenting.

[¶ 25] I respectfully dissent. The majority wrongly concludes that prior to August 1, 2002, the Workers Compensation Bureau’s “failure to adequately explain its disregard of favorable medical evidence” automatically requires that this Court remand the case to the Bureau for further consideration. In addition, the majority’s application of the doctrine of legislative acquiescence is not consistent with the standard recently articulated by a majority of this Court in State ex rel. Clayburgh v. American West Community Promotions, Inc., 2002 ND 98, 645 N.W.2d 196.

I

[¶ 26] When reviewing an administrative agency’s factual findings, we determine only whether “a reasoning mind reasonably could have determined, -the findings were proven by the weight of the evidence from the entire record.” Flink v. N.D. Workers Compensation Bureau, 1998 ND 11, ¶ 9, 574 N.W.2d 784; see also Power Fuels, Inc. v. Elkin, 283 N.W.2d 214, 220 (1979). “In considering whether the Bureau’s findings of fact are supported by a preponderance of the evidence, we exercise restraint and do not make independent findings of fact or substitute our judgment for the Bureau’s determination.” Symington v. N.D. Workers Compensation Bureau, 545 N.W.2d 806, 808 (N.D.1996).

[¶ 27] Under N.D.C.C. § 28-32-19 (1991), the statutory authority in effect at the time of the Bureau’s order:

the court must affirm the order of the agency unless it shall find that any of the following are present:
1. The order is not in accordance with the law. •
2. The order is in violation of the constitutional rights of the appellant.
3. Provisions of this chapter have not been complied with in the proceedings before the agency.
4. The rules or procedure of the agency have not afforded the appellant a fair hearing.
5. The findings of fact made by the agency are not supported by a preponderance of the evidence.
6. The conclusions of law and order of the agency are not supported by its findings of fact.

[¶ 28] Here, rather than relying on the enumerated statutory provisions for modifying or reversing an agency’s order, the majority incorrectly concludes, at ¶ 19, that “[b]ecause the Bureau failed to give any explanation for its disregard of this evidence, the case must be remanded to the Bureau for reconsideration.” This basis relied on by the majority is not an enumerated ground under the statute in effect at the relevant time. The statute is exclusive and mandatory. The “court must affirm the order of the agency unless ” it finds one of the enumerated grounds is present.

[¶ 29] This Court is not permitted to create an additional method for modifying or reversing an agency’s order when a statute explicitly provides the means by which an agency decision may be overturned. Section 1-01-06, N.D.C.C., specifically provides: “In this state there is no common law in any case where the law is declared by the code.” The common law is the “body of law derived from judicial decisions, rather than from’ statutes or constitutions.” Black’s Law Dictionary 270 (7th ed.1999).

[¶ 30] If a particular statute is designed to cover the entire field to which it relates, it does so to the exclusion of the common law. In re White, 69 N.D. 61, 284 N.W. 357, 358-59 (1939). The statute in question is unambiguous, mandatory, and exclusive. Under N.D.C.C. § 28-32-19 (1991), this court must affirm, because none of the enumerated exceptions are present.

II

[¶ 31] The majority attempts to justify its conclusion and reliance on previous judicial error by invoking, at ¶ 18, the doctrine of legislative acquiescence. The doctrine of legislative acquiescence is a method of determining legislative intent. Clayburgh, 2002 ND 98, ¶ 50, 645 N.W.2d 196 (Sandstrom, J., dissenting). Legislative intent is used to clarify the meaning of a statute when its intent is not clear on its face; accordingly, when a statute is clear and unambiguous on its face, “it is improper for the courts to attempt to construe the provisions so as to legislate additional requirements or proscriptions which the words of the provisions do not themselves provide.” Haggard v. Meier, 368 N.W.2d 539, 541 (N.D.1985); see also N.D.C.C. § 1-02-05 (“When the wording of a statute is clear and free of all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit.”). Section 28-32-19, N.D.C.C. (1991), is unambiguous. The majority has not asserted that N.D.C.C. § 28-32-19 is unclear or ambiguous. Also unambiguous is N.D.C.C. § 1-01-06: “In this state there is no common law in any case where the law is declared by the code.” The majority’s use of the doctrine of legislative acquiescence is improper when the statute in question is neither unclear nor ambiguous.

[¶ 32] In addition, the majority violates its own standards for ascertaining legislative acquiescence to the interpretations by other branches. The majority does not apply the recently redefined law of legislative acquiescence, as articulated in Clayburgh, 2002 ND 98, ¶¶ 11-12, 645 N.W.2d 196. In Clayburgh, a majority of this Court concluded the doctrine of legislative acquiescence did not apply to an administrative agency’s interpretation of a statute because the legislature’s attention had not been, specifically directed to the agency’s interpretation. Id. at ¶ 12. Here, the majority, at ¶ 18, cites our case law prior to Clayburgh, and concludes “[t]he Legislature’s failure to amend statutory language interpreted by the courts is evidence that the court’s interpretation accords with the legislative intent,” with no mention of whether the Legislature’s attention was specifically directed to the Court’s interpretation.

[¶ 33] The majority opinion’s disregard of the standard articulated in Clayburgh either limits the Clayburgh standard to instances when the doctrine of legislative acquiescence is applied to the executive branch’s interpretation of a statute, or signals a reluctance to reaffirm the standard. The former would create two separate doctrines of legislative acquiescence dependent upon whether the executive branch interprets a statute or whether the judicial branch interprets a statute — a distinction not supported by any meaningful discussion or authority. The latter result is preferable because it would restore our formulation of legislative acquiescence law prior to Clayburgh — the legislature is presumed to know the construction of its statutes by the executive and judicial branches, and the failure to amend the statute indicates legislative acquiescence in that construction. See, e.g., Western Nat’l Mut. Ins. Co. v. University of North Dakota, 2002 ND 63, 643 N.W.2d 4; Clarys v. Ford Motor Co., 1999 ND 72, 592 N.W.2d 573; Effertz v. N.D. Workers Compensation Bureau, 525 N.W.2d 691 (N.D.1994); Eklund v. Eklund, 538 N.W.2d 182 (N.D.1995); Capital Electric Coop., Inc. v. Public Service Comm’n, 534 N.W.2d 587 (N.D.1995).

[¶ 34] Because the relevant statutes are unambiguous, exclusive, and mandatory, legislative acquiescence does not apply under either the Clayburgh or the pre-Clayburgh standard. The majority’s failure to address Clayburgh is lacking in principle.

Ill

[¶ 35] Here, as in Horob v. N.D. Workers Compensation Bureau, 2000 ND 114, ¶ 20, 611 N.W.2d 875, there is evidence from which a reasoning mind could reasonably find that Hoffman did not have good cause for his failure to comply with his vocational rehabilitation. See id. The record reveals: (1) Hoffman had a previous instance of noncompliance without good cause; (2) Hoffman declined the assistance of a tutor; (3) Hoffman “did not give maximum, consistent effort” during a functional capacity evaluation; (4) Hoffman’s grade point average dropped below the required level; and, (5) Hoffman admitted he was “too burned out” with college, and computers were not an area of interest for him.

[¶ 36] Because, from this evidence, a reasoning mind reasonably could have determined the Bureau’s findings, that Hoffman did not have “good cause” for his noncompliance with his vocational rehabilitation plan, were proven by the weight of the evidence in the record, I would affirm the Bureau’s decision to terminate. Hoffman’s disability and vocational rehabilitation benefits.

[¶ 37] Dale V. Sandstrom

      . The ALJ did not require the Bureau at the evidentiary hearing to proceed first and establish a prima facie case of noncompliance before allowing Hoffman to demonstrate good cause for noncompliance. However, Hoffman concedes this error in the order of proof was harmless.