Allstate Ins. Co. v. Stinebaugh

• Decision Date: 12 May 2003
• Docket Number: No. 81,81
• Citation: 374 Md. 631,824 A.2d 87
• Parties: ALLSTATE INSURANCE COMPANY, v. John C. STINEBAUGH.
• Court: Maryland Court of Appeals

824 A.2d 87

374 Md. 631

ALLSTATE INSURANCE COMPANY, v. John C. STINEBAUGH.

No. 81, September Term, 2002.

Court of Appeals of Maryland.

May 12, 2003.

Chris S. Mason (Webb, Burnett, Jackson, Cornbroooks, Wilber, Vorhis & Douse LLP, on brief), Salisbury, for appellant.

Andrew B. Greenspan, Annapolis, for appellee.

Argued before BELL, C.J., ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL and BATTAGLIA, JJ BATTAGLIA, Judge.

In this appeal from the denial of a motion to compel arbitration, we must decide two issues. First, whether it is for courts, or for arbitrators, to determine if a particular dispute is for the courts or arbitrators to decide when parties enter into a general arbitration agreement, but subsequently bind themselves to a Consent Order that contemplates judicial resolution of a particular controversy. Second, what is the legal effect of an agreement that contemplates judicial resolution of a particular dispute, upon a prior, general arbitration agreement. As to the first issue, we conclude that courts, not arbitrators, should decide whether a prior agreement to arbitrate disputes applies when a subsequent agreement calls for a judicial resolution of the particular controversy. With respect to the second issue, we conclude, under the facts of this case, that the subsequent Consent Order called for a judicial resolution of the dispute at issue and, therefore, discharged the prior arbitration agreement with reference to the liability issue in controversy.

I. Background

On May 19, 1996, Constance Lee was riding as a passenger in a vehicle operated by Charles Kirkpatrick, which was involved in an accident in Ocean City, Maryland. The Kirkpatrick vehicle was stopped at a traffic signal in a left turn lane on Coastal Highway. A second vehicle, stopped directly behind the Kirkpatrick vehicle, was operated by John Stinebaugh, who was insured by Nationwide Mutual Insurance Company. A third vehicle, operated by an unknown person (hereinafter "phantom vehicle"), was stopped to the right of the Kirkpatrick vehicle in a second left turn lane. When the traffic light turned green, Kirkpatrick attempted to complete the left turn but was cut off by the phantom vehicle. Kirkpatrick applied his brakes to avoid hitting the phantom vehicle, but when he did so, his vehicle was struck from behind by the vehicle operated by Stinebaugh.

On April 26, 1999, Lee filed a complaint in the Circuit Court for Worcester County against Kirkpatrick, Stinebaugh, and Allstate Insurance Company, Kirkpatrick's uninsured motorist carrier, seeking damages for injuries allegedly arising out of the automobile accident. Prior to trial, the parties reached an agreement which was memorialized in an April 10, 2001 Consent Order. That Order states that, "by agreement of all parties, Plaintiff's claim against all Defendants is hereby settled for the amount of Forty Thousand Dollars ($40,000.00), to be split evenly between Defendants Allstate Insurance Company and John Stinebaugh (Nationwide Mutual Insurance Company)...."¹ With respect to each insurer's rights against the other, however, the Consent Order states, "each insurer's contribution towards the settlement shall be subject to reimbursement and indemnification from the other insurer pending final determination of liability of the Defendants pursuant [to] Fireman's Fund Insurance Co. v. Bragg, 76 Md.App. 709, 548 A.2d 151 (1988)...." Specifically, the Order states that "the Cross-claims between Defendants shall remain at issue and subject to resolution on the currently scheduled trial date of May 17, 2001, or may be resolved by other means mutually agreed to by all Defendants."

Within three weeks after the Consent Order was filed, Allstate filed a Motion to Compel Arbitration, pursuant to Maryland Code, §§ 3-202, 3-206, and 3-207 of the Courts and Judicial Proceedings Article (1974, 1998 Repl.Vol.).² In that motion, Allstate stated that it was "the automobile liability carrier for Defendant Estate of Charles Kirkpatrick" and that it was also "a party to the above-captioned case as a result of the uninsured motorist claims of Plaintiff, Constance Lee, which assert[s] that the automobile collision in the case at bar was caused by an unknown motorist" and that Nationwide and Allstate had "resolved claims filed by Plaintiff Constance Lee" by "each contributing 50% toward the settlement" of Lee's claim, but asserted that they still "dispute[d] liability as between themselves pursuant to Fireman's Fund v. Bragg, 76 Md.App. 709, 548 A.2d 151 (1988)." Allstate further asserted that, "[c]urrently and since the date of the occurrence [of] this lawsuit, Nationwide and Allstate have been signatory members of Arbitration Forums Inc., a special Arbitration forum for disputes arising between automobile liability insurers who transact business in the State of Maryland." According to Allstate, "[p]ursuant to the terms of the Arbitration Agreement signed by Nationwide and Allstate, Allstate and Nationwide agreed to submit all disputes arising between signatory members to arbitration," but Nationwide, according to Allstate, refused to arbitrate, despite Allstate's written demand to do so. Thus, Allstate requested the Circuit Court "to Order arbitration between Allstate and Nationwide in accordance with the terms of the Arbitration Agreement...."³

In opposition to the motion to compel arbitration, Stinebaugh argued, among other things, that the April 10, 2001 Consent Order required that the case remain in the Circuit Court unless all parties had mutually agreed otherwise, and that no such agreement had been made with respect to him. Initially, on May 7, 2001, Judge Groton of the Circuit Court granted Allstate's Motion to Compel Arbitration. Thereafter, however, Stinebaugh filed a motion for reconsideration, which Judge Groton granted on August 3, 2001, thereby rescinding his earlier order compelling arbitration, and ordering that the matter be set "for trial on the merits on the parties' cross-claims." In granting Stinebaugh's motion for reconsideration, Judge Groton opined that because Stinebaugh was "the party to the suit" and because Stinebaugh had not himself signed the insurer's arbitration agreement, Stinebaugh could not "be forced [in]to arbitration."⁴

Despite the Circuit Court's ruling, Allstate initiated arbitration with Arbitration Forums, Inc., a company that Allstate and Nationwide had agreed to use for the arbitration. Over Nationwide's objection, Arbitration Forums determined, notwithstanding Judge Groton's order to the contrary, that it had the authority to decide the merits of the case. Armed with that arbitrational determination, on March 13, 2002, Allstate filed a motion with the Circuit Court requesting that it reconsider its August 3, 2001 order granting Stinebaugh's motion for reconsideration and denying its motion to compel arbitration.

The Circuit Court denied Allstate's motion for reconsideration on March 18, 2002, the same day that the jury trial commenced. In denying Allstate's motion, Judge Groton explained:

There was also a motion for reconsideration for arbitration, and in chambers we discussed that matter. My ruling was based on the order that was passed April the 10th of 2001, in which the last paragraph of that particular order indicated that the cross claims between the Defendant shall remain at issue and subject to resolution on the currently scheduled trial date of May 17th, although the issue was brought up, in fact, that the trial date wasn't conducted May 17th, the important wording in that particular part of the sentence is "trial date." That, in fact, the order, the way I read it, contemplated that the matter would be resolved by a trial, or may be resolved by other means mutually agreed by all Defendants. There has been no mutual agreement by the Defendant subsequent to this agreement. [Allstate's] position was that there was an agreement that was signed by both parties in general and prior to that date. My ruling is based on the fact that this order would take precedent over that because of the fact that it was signed subsequent to the agreement, and contained the phrase `may be resolved by other means mutually agreed to by all Defendants,' meaning it would be subject to the agreement signed April the 10th.

The jury returned a special verdict on March 18, 2002, finding that the operator of the phantom vehicle was negligent and that Stinebaugh was not negligent. The Circuit Court entered judgment in the amount of $20,000 in favor of Stinebaugh and against Allstate. On July 14, 2002, Arbitration Forums reaffirmed its position that it had the power to decide the merits of the dispute and determined that Stinebaugh had been negligent.

Allstate appealed to the Court of Special Appeals, arguing that the Circuit Court erred in rendering judgment against it because the parties had agreed to have the dispute resolved in arbitration. This Court, on its own initiative and prior to any proceedings in the Court of Special Appeals, issued a writ of certiorari, Allstate v. Stinebaugh, 371 Md. 613, 810 A.2d 961 (2002).

Before this Court, Allstate presents the following question:

In light of the Consent Order of April 10, 2001, was jurisdiction to determine the liability between Co-Defendants Allstate Insurance Company and John Stinebaugh on their Cross-Claims vested in the Circuit Court for Worcester County, or with Arbitration Forums, Inc?

For the reasons discussed herein, we hold that the Circuit Court did not err in addressing the issue of the effect the Consent Order had upon the prior arbitration agreement. We further hold that the Circuit Court correctly concluded that, pursuant to the Consent Order, the liability issue was to be resolved in court rather than in arbitration. We shall, therefore, affirm.

II. Discussion

Allstate contends that "the trial court erred by conducting an inquiry into whether the April 10, 2001 [Consent] Order took precedence over...