Balian v. Allstate Ins. Co.

• Decision Date: 01 June 1992
• Docket Number: No. 90-615-APPEAL,90-615-APPEAL
• Citation: 610 A.2d 546
• Parties: Rebecca BALIAN v. ALLSTATE INSURANCE COMPANY.
• Court: Rhode Island Supreme Court

Page 546

610 A.2d 546

Rebecca BALIAN v. ALLSTATE INSURANCE COMPANY.

No. 90-615-APPEAL.

Supreme Court of Rhode Island.

June 1, 1992.

James Donelan, Warwick, for plaintiff.

Carol Zangari, Anderson, Anderson & Zangari, Providence, for defendant.

OPINION

KELLEHER, Justice.

This controversy is before us as a result of an appeal by the defendant, Allstate Insurance Company (Allstate), from a portion of a declaratory judgment in which the plaintiff, Rebecca Balian (Balian), was awarded underinsured-motorist benefits from Allstate. Additionally Balian appeals the denial of her motion to dismiss Allstate's declaratory-judgment action and that portion of the declaratory judgment decided in Allstate's favor. We sustain Allstate's appeal in part and sustain the denial of Balian's motion to dismiss.

On December 11, 1987, Balian's vehicle was struck by another vehicle owned and operated by William Aptt (Aptt). Balian sustained injuries requiring medical assistance. At the time of the collision Aptt was insured by an insurance policy that contained a liability limit of $100,000, and Balian was covered by an Allstate insurance policy that contained an uninsured-motorist-liability limit of $100,000 per person and a medical-payment-benefits limit of $5,000 per person. After Balian submitted a claim to Allstate contending that Aptt was an underinsured motorist as defined by G.L.1956 (1979 Reenactment) § 27-7-2.1(B), as amended by P.L.1987, ch. 435, § 1 and making a demand for benefits pursuant to the provisions of her policy, a dispute arose between Balian and Allstate regarding Balian's right to receive damages as well as the amount of such damages. In accordance with Allstate's policy the dispute was submitted to a three-member arbitration panel (panel).

On April 21, 1990, the panel rendered a decision in favor of Balian and awarded her "$85,000 plus interest and costs of suit." Allstate moved to stay the arbitration award and counter-petitioned for a declaratory judgment, contending that Balian was not entitled to recover any underinsured-motorist benefits as neither Balian's applicable policy limits nor her damages were in excess of Aptt's liability limits. The parties subsequently filed cross-motions to resolve the legal issues regarding whether Balian's damages or limits exceeded Aptt's liability limits.

While resolution of the cross-motions was pending, the trial justice remanded the case to the panel for clarification of its award regarding interest. On October 16 1990, the panel stated that it intended "the award to be comprised of $85,000.00 plus 12% interest per annum from the date of the incident until April 21, 1990, the date of the award." Following the panel's clarification, the trial justice ruled that Balian's damages did not exceed tortfeasor Aptt's $100,000-liability limits because interest and costs awarded by the panel were not elements of damages for purposes of the uninsured/underinsured-motorist statute. Consequently the trial justice decided that Balian was entitled to receive more money under her own coverage than under Aptt's coverage by combining her uninsured/underinsured-motorist coverage of $100,000 with the medical-payments coverage of $5,000 for a total of $105,000. Additionally the trial justice found that tortfeasor Aptt was underinsured to the extent of $5,000 and that Balian was therefore entitled to uninsured/underinsured-motorist coverage because Aptt's coverage was less than her own. Furthermore the trial justice denied Balian's motion to dismiss Allstate's declaratory-judgment petition.

We find it helpful to separate this discussion into three issues. We shall ask first whether the trial justice erred in failing to dismiss Balian's motion for declaratory judgment after the panel rendered its decision and award for Balian; second, whether Balian may be entitled to uninsured/underinsured-motorist coverage pursuant to § 27-7-2.1(B); and third, whether medical-payment limits may be added to uninsured/underinsured-motorist limits to trigger underinsured-motorist coverage also pursuant to § 27-7-2.1(B).

In the first matter to be resolved on appeal, Balian contends that the trial justice erred in denying her motion to dismiss Allstate's declaratory-judgment petition because both she and Allstate are bound by the panel's decision since arbitration is the exclusive method for resolving any dispute regarding the insured person's right to receive damages pursuant to his or her Allstate policy. Countering, Allstate argues that the issues submitted to the panel, that is, tort liability and the amount of compensatory damages, are separate from the issues raised in its declaratory-judgment action. The distinction in the approach of the respective parties is critical. This is not a case, as Balian argues, of relitigating issues previously addressed in arbitration, which cannot be examined by a court in a declaratory-judgment action. City of Pawtucket v. Pawtucket Lodge No. 4, Fraternal Order of Police, 545 A.2d 499, 502-03 (R.I.1988). However, Allstate does not contest the validity of Balian's award but instead asks whether, given the award rendered by the panel, Balian may now be entitled to receive uninsured-motorist-coverage benefits from Allstate.

Since a party is bound to arbitrate only those issues that he or she has consented to arbitrate, we are compelled to examine the applicable policy language. Part 5 of Allstate's insurance policy, entitled "Uninsured Motorists Insurance Coverage SS," provides that Allstate "will pay damages for bodily injury or property damage which an insured person is legally entitled to recover from the owner or operator of an uninsured auto." Part 5 of the policy also states that "[t]he right to benefits and the amount payable will be decided by agreement between the insured person and Allstate. If an agreement can't be reached, the decision will be made by arbitration." It also provides that "[i]f the insured person or we [Allstate] don't agree on that person's right to receive any damages or the amount * * * the disagreement will be settled by arbitration." (Emphases added.)

Previously we have construed arbitration clauses in insurance policies to include only the issues of liability and damages. Bush v. Nationwide Mutual Insurance Co., 448 A.2d 782, 785 (R.I.1982). See also State Farm Fire & Casualty Co. v. Rossini, 14 Ariz.App. 235, 482 P.2d 484, vacated on other grounds, 107 Ariz. 561, 490 P.2d 567 (1971); International Service Insurance Co. v. Ross, 169 Colo. 451, 457 P.2d 917 (1969); State Farm Fire & Casualty Co. v. Glass, 421 So.2d 759 (Fla.Dist.Ct.App.1982); Liberty Mutual Insurance Co. v. Morgan, 138 Ill.App.3d 938, 93 Ill.Dec. 557, 487 N.E.2d 1 (1985); Flood v. Country Mutual Insurance Co., 41 Ill.2d 91, 242 N.E.2d 149 (1968); Liddy v. Companion Insurance Co., 181 Ind.App. 16, 390 N.E.2d 1022 (Ind.App.1979); Rosenbaum v. American Surety Co. of New York, 11 N.Y.2d 310, 183 N.E.2d 667, 229 N.Y.S.2d 375 (1962); compare, e.g., Lane v. Aetna Casualty & Surety Co., 203 Conn. 258, 524 A.2d 616 (1987); Oliva v. Aetna Casualty and Surety Co., 181 Conn. 37, 434 A.2d 304 (1980); State Farm Fire and Casualty Co. v. Yapejian, 217 Ill.App.3d 516, 161 Ill.Dec. 196, 578 N.E.2d 323 (1991); Michigan Mutual Liability Co. v. Graham, 44 Mich.App. 406, 205 N.W.2d 289 (1973); Keystone Insurance Co. v. Bowman, 138 N.J.Super. 544, 351 A.2d 767 (1976); see generally Annot., 29 A.L.R.3d 328 (1970).

In Bush this court held that because the arbitration agreement was limited to the issues of fault and damages, "[a]ll other issues are for determination by the court." 448 A.2d at 785. The court concluded that "the arbitrator was without jurisdiction to decide the question of coverage." Id. Although the language of the insurance policy in the present controversy differs slightly from that in Bush, ¹ the language of the present policy clearly denotes a party's "right to receive damages," a description that we believe is a liability issue and one properly submitted to the panel. Absent a specific submission of a coverage issue to arbitration, the question of coverage is one reserved exclusively for a court. In this instance the panel had neither the opportunity nor the authority to decide specifically whether Balian was legally entitled to recover damages under Allstate's uninsured-motorist-coverage provision of her policy. As there was no determination of the underinsured-motorist-coverage issue specifically submitted to arbitration, the trial justice was correct in his decision to grant Allstate's declaratory-judgment petition.

Having decided that the panel was properly empowered to render its decision on the issues of liability and damages, our second inquiry on appeal is whether Balian's damages award of $85,000 plus prejudgment interest is in excess of the tortfeasor Aptt's coverage so as to trigger Balian's recovery under the uninsured/underinsured-motorist statute § 27-7-2.1(B). ²

This court has had occasion to discuss the nature of prejudgment interest following G.L.1956 (1985 Reenactment) § 9-21-10, as amended by P.L.1989, ch. 555, § 2. Prejudgment interest has been appropriately awarded as damages in situations in which interest is characterized as "an integral part of damages" and not "an item of expense or cost." Lombardi v. Merchants Mutual Insurance Co., 429 A.2d 1290, 1293 (R.I.1981)(prejudgment interest representing an item of damages properly included in jury award); see also Rucco v. Rhode Island Public Transit Authority, 525 A.2d 43, 45 (R.I.1987); Lepore v. Rhode Island Public Transit Authority, 524 A.2d 574, 575 (R.I.1987)(immunity does not apply so as to bar attachment of prejudgment interest where RIPTA performs proprietary function). Cases brought under the State Tort Claims Act, however, limit the definition of damages so as not to include prejudgment interest because such interest is purely statutory and is peremptorily added to a jury verdict...