Applehans v. Farmers Ins. Exchange

• Decision Date: 13 March 2003
• Docket Number: No. 02CA0490.,02CA0490.
• Parties: Linda V. APPLEHANS, Plaintiff-Appellant, v. FARMERS INSURANCE EXCHANGE, Defendant-Appellee.
• Court: Colorado Court of Appeals

68 P.3d 594

Linda V. APPLEHANS, Plaintiff-Appellant, v. FARMERS INSURANCE EXCHANGE, Defendant-Appellee.

No. 02CA0490.

Colorado Court of Appeals, Div. V.

March 13, 2003.

William J. Hunsaker, P.C., William J. Hunsaker, William J. Hunsaker, Jr., Wheat Ridge, Colorado, for Plaintiff-Appellant.

Joel N. Varnell & Associates, John T. Scherling, Denver, Colorado, for Defendant-Appellee.

Opinion by Judge CASEBOLT.

Plaintiff, Linda V. Applehans, appeals the orders denying her motion to vacate, correct, or modify an amended arbitration award (final award), and to confirm the original award entered in her favor against defendant, Farmers Insurance Exchange. We affirm in part, vacate in part, and remand the case for further proceedings.

Following plaintiff's injury in an automobile accident, she settled her claim in return for the payment of policy limits of $25,000 from the tortfeasor's insurance company. Thereafter, plaintiff submitted a claim for underinsured motorist coverage to Farmers, her own auto insurer.

Plaintiff's policy with Farmers contained a limit of $50,000 for underinsured motorist coverage and provided for an offset against that amount for any payments received from underinsured tortfeasors. It also had a provision requiring arbitration to settle disputes.

When the parties could not agree on the amount that plaintiff was entitled to recover, they proceeded to arbitration. The arbitration agreement the parties signed provided that the only issue for the arbitrator to decide was the "amount of damages to which [plaintiff] is entitled as a result of her injuries sustained, if any, in the accident."

During the initial arbitration hearing, neither party presented evidence of the Farmers policy limits or of the amount plaintiff had received from the tortfeasor's insurance company.

Following the hearing, the arbitrator awarded plaintiff $95,000 plus interest and costs. Within ten days thereafter, Farmers filed a request for modification with the arbitrator, asserting that the award should be reduced to $25,000, representing the policy limit less a $25,000 setoff for the settlement amount previously received from the tortfeasor's insurance company.

Before the arbitrator decided the request for modification, plaintiff filed a motion in the district court requesting the court to confirm the arbitrator's initial $95,000 award. Because the request for modification was pending with the arbitrator, the court denied that motion.

Subsequently, the arbitrator held a hearing on the modification request and issued the final award. On disputed evidence, he concluded the parties had stipulated that "[plaintiff] [would] not disclose to the chosen arbitrator either the policy limits or any information concerning potential setoffs" and that any award would be "limited in amount to the applicable policy limits set forth in the insurance policy." Consequently, he entered the final award in favor of plaintiff for $25,000 plus costs and interest.

Plaintiff then filed a motion under §§ 13-22-214 and 13-22-215, C.R.S.2002, seeking to vacate, modify, or correct the final award. The court denied that motion, and this appeal followed.

I.

Plaintiff contends that the court erred in denying her motion to vacate, modify, or correct the final award. Specifically, she argues that the arbitrator exceeded his powers because his power to change an award, as described in § 13-22-211, C.R.S.2002, is limited to the grounds stated in § 13-22-215(1)(a) and (c), C.R.S.2002. She asserts that, because those statutory grounds do not apply here, the arbitrator exceeded the scope of his authority by rendering the final award, and therefore the court erred in refusing to vacate it. We agree.

The issue here is whether the reasons stated in § 13-22-211 provide the only grounds upon which an arbitrator may modify the award. The scope of the arbitrator's ability to modify an award under this statute is an issue of first impression in Colorado.

Statutory construction involves a question of law. Fogg v. Macaluso, 892 P.2d 271 (Colo.1995). In interpreting a statute, we must give effect to the intent of the General Assembly. See Dawson v. Reider, 872 P.2d 212 (Colo.1994)

. To discern that intent, we look to the language employed in the statute. If the words used are plain and unambiguous, our task is accomplished by giving effect to the commonly accepted meaning of those words. Brock v. Nyland, 955 P.2d 1037 (Colo.1998).

A strained or forced construction of a statutory term is to be avoided, and we must look to the context in which a statutory term is employed. Miller v. Byrne, 916 P.2d 566 (Colo.App.1995). Further, we must construe the statute as a whole so as to give consistent, harmonious, and sensible effect to all its parts and, if possible, give effect to every word in the statute. City of Grand Junction v. Sisneros, 957 P.2d 1026 (Colo. 1998).

If the statutory language does not clearly establish the General Assembly's purpose, or if the statute appears to conflict with other provisions, then we may determine the meaning of the statute by considering other factors, such as legislative history, prior law, the consequences of a given construction, and the end to be achieved by the statute. Section 2-4-203, C.R.S.2002; Martin v. People, 27 P.3d 846, 851 (Colo.2001).

As pertinent here, § 13-22-211 provides: "On application of a party ... the arbitrators may modify or correct the award upon the grounds stated in section 13-22-215(1)(a) and (1)(c) or for the purpose of clarifying the award." The "grounds stated" in § 13-22-215(1)(a) and (c) are a miscalculation of figures; mistake in description of a person, thing, or property; and imperfection in a matter of form of the award, not affecting the merits of the controversy.

We do not discern that the statute's meaning is wholly plain. Therefore, under the canon of construction expressio unius est exclusio alterius—the inclusion of one thing implies the exclusion of another—we conclude that the inclusion of specific grounds for modification implies the exclusion of other grounds. See City of Arvada v. Colo. Intergovernmental Risk Sharing Agency, 19 P.3d 10, 13 (Colo.2001)

.

Our interpretation is supported by the prior common law. At common law, an arbitrator's ability to modify or amend an award was limited by the doctrine of functus officio. Under that doctrine, once an arbitrator issued an award and delivered it to the parties, his or her power and authority to proceed in the matter terminated. See 1 Domke on Commercial Arbitration §§ 22.01, 32.01 (Gabriel M. Wilner ed., 2000). The official commentary to the Uniform Arbitration Act, upon which the Colorado act is modeled, notes that the provision allowing an arbitrator to change an award was intended to address the doctrine of functus officio and to provide only a limited opportunity for parties to request a modification from the arbitrator when the award contains a miscalculation or misdescription that is evident on its face. See Uniform Arbitration Act § 20 official cmt. 2 (2000). Hence, we must apply the rule that statutes in derogation of the common law should be strictly construed, and therefore we conclude that the reasons for modification are limited to those expressly set forth in the statute. See Preston v. Dupont, 35 P.3d 433 (Colo.2001)

.

Accordingly, we conclude that when an arbitrator issues an award and delivers it to the parties, amendment or modification of the award by the arbitrator is permitted only under the narrow circumstances listed in § 13-22-211. See Foust v. Aetna Cas. & Ins. Co., 786 P.2d 450 (Colo.App.1989)

(an award can be vacated, modified, or corrected by the court only for the statutory grounds set forth in §§ 13-22-214 and 13-22-215); cf. Farmers Ins. Exch. v. Taylor, 45 P.3d 759 (Colo.App.2001)(in the absence of statutory grounds to modify, vacate, or correct an award, a trial court may not review the merits of the award).

We find support for our interpretation in decisions from other jurisdictions that have adopted the Uniform Arbitration Act. See Conn. Valley Sanitary Waste Disposal, Inc. v. Zielinski, 436 Mass. 263, 763 N.E.2d 1080 (2002)(an arbitrator is without power to modify the award except where the controlling statute or the parties authorize modification); Chaco Energy Co. v. Thercol Energy Co., 97 N.M. 127, 637 P.2d 558 (1981)(an arbitration award that is amended for purposes other than those enumerated by the statute is void and of no effect).

Here, the final award dramatically changed the amount of plaintiff's recovery; thus, it affected the merits of the controversy. The final award did not correct a miscalculation or mistake as to form, nor did it clarify the previous award. Plaintiff did not agree that the award could be modified. Thus, the arbitrator exceeded the scope of his power to modify under § 13-22-211. Accordingly, we conclude that the trial court erred in declining to vacate the final award. See § 13-22-214(1)(a)(III), C.R.S.2002 (the court shall vacate an award where the arbitrators exceed their powers).

Farmers asserts that Swan v. American Family Mutual Insurance Co., 8 P.3d 546 (Colo.App.2000), requires a different result because the Swan division recognized the arbitrators' authority to reduce the award to conform to policy limits. We disagree.

In Swan, in an uninsured motorist context similar to that present here, the arbitrators entered an initial award that exceeded the available policy limits. Eleven days following the award, the insurer filed an application with the arbitrators under § 13-22-211, requesting modification of the award to reduce it to policy limits. The arbitrators declined to modify the award, but ordered that the maximum amount recoverable under the law was the applicable policy limit. Within thirty days following entry of the amended award, but more than thirty days after the initial award, the insurer asked the court to vacate and modify the initial...