Bole v. Nationwide Ins. Co.
| Decision Date | 22 December 1975 |
| Citation | 238 Pa.Super. 138,352 A.2d 472 |
| Parties | Edward Harry BOLE, Appellant, v. NATIONWIDE INSURANCE COMPANY, Appellee. |
| Court | Pennsylvania Superior Court |
Louis Kwall, Pittsburgh, for appellant.
James E. Coyne, Charles J. Duffy, Jr., Pittsburgh, for appellee.
Before WATKINS, President Judge, and JACOBS, HOFFMAN, CERCONE, PRICE, VAN der VOORT and SPAETH, JJ.
Appellant was severely injured when an automobile in which he was a passenger was involved in an accident with another automobile in November, 1970. When his recovery by way of settlement with the insurance carrier of the other automobile's driver proved inadequate, appellant made a claim against appellee under the uninsured motorist coverage provisions of an insurance policy that appellant had purchased from appellee. The parties submitted the claim to common law arbitration pursuant to a clause in the policy that provided that each party should select a 'competent and disinterested arbitrator,' and that the two arbitrators so selected should select a third. When appellee selected Carl W. Brueck, Jr., Esquire, appellant objected, since Brueck had provided legal representation to appellee in the past. Brueck, however, refused to disqualify himself.
The arbitrators found against appellant and in favor of appellee; the arbitrator whom appellant had selected dissented. On appeal, the Court of Common Pleas of Allegheny County confirmed the award. This appeal ensued.
A majority of the court agree that remand is required. There is substantial disagreement, however, as to the scope of the remand. Judge Van der Voort, joined by the President Judge, would apply a Per se rule disqualifying an arbitrator who has in the past represented one of the parties to the arbitration, without regard to whether the arbitrator is actually biased in that party's favor. They would therefore remand with directions that a new panel of arbitrators be selected, and another hearing be held. Judge Price, joined by Judge Jacobs, is of the view that arbitrators selected by the parties need not be neutral. They would therefore affirm the lower court's order confirming the award. Judge Hoffman and Judge Cercone have joined me in a middle position. I cannot join Judge Price, and Judge Jacobs, in what seems to me a limited view of our responsibility to ensure fairness; nor can I agree with them that the arbitration here was 'bargained for.' I do, however, agree with them that the record does not disclose actual bias. Therefore, while I concur with Judge Van der Voort, and the President Judge, that relief should be granted, I would grant less relief, and therefore would order a more limited remand, than they would.
The difficulty in this case arises from a paradox inherent in the process of arbitration. Arbitration is 'a system designed to provide an expeditious and inexpensive method of resolving disputes with the further winning attribute of helping to ease congested court calendars.' Allstate Ins. Co. v. Fioravanti, 451 Pa. 108, 116, 299 A.2d 585, 589 (1973). Consequently, judicial review of a common law arbitration award is severely circumscribed:
. . . appellant, to succeed, must show by clear, precise and indubitable evidence that he was denied a hearing, or that there was fraud, misconduct, corruption or some other irregularity of this nature on the part of the arbitrator which caused him to render an unjust, inequitable or unconscionable award, the arbitrator being the final judge of both law and fact, his award not being subject to disturbance for a mistake of either.
Allstate Insurance Co. v. Fioravanti, supra at 114, 299 A.2d at 588. 1 The paradox is that this very circumscription, or insulation from judicial supervision, requires the courts to be particularly vigilant to ensure that the arbitration is impartial. As Mr. Justice Black has explained:
. . . we should, if anything, be even more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts and are not subject to appellate review.
From this responsibility it follows, as Judge (later Chief Judge) Fuld of the Court of Appeals of New York has stated, that 'in an appropriate case, the courts have inherent power to disqualify an arbitrator before an award has been rendered.' Matter of Astoria Medical Group, 11 N.Y.2d 128, 132, 227 N.Y.S.2d 401, 403, 182 N.E.2d 85, 86 (1962). The present case in my judgment presents circumstances eminently justifying the exercise of this inherent power.
It is true, as Judge Price observes, that the arbitration arose from a contract, but this is no reason to stay our hand.
In the first place, the arbitration provision was consigned to the fine print of a standard automobile insurance policy purchased by appellant. The provision was not the result of negotiation between parties of equal bargaining power dealing at arms' length. It is therefore unrealistic to say that it was 'bargained for.' Indeed, where one of the parties is in a superior bargaining position, as is typically true of the relationship between insurance company and policyholder, I question whether such a fine print provision can be said to be part of the 'contract.' See Slawson, Standard Form Contracts and Democratic Control of Lawmaking Power, 84 Harv.L.Rev. 529 (1971).
In the second place, assuming Arguendo that the parties did bargain for and agree to the arbitration provision, the provision requires each party to appoint 'a competent and Disinterested arbitrator.' (Record at Exhibit B; emphasis added.) This language distinguishes the present case from those holding that prior association with one of the parties does not require disqualification of an arbitrator. Petition of Dover Steamship Co., 143 F.Supp. 738 (S.D.N.Y.1956); Matter of Astoria Medical Group, supra. In Dover Steamship, the parties submitted to arbitration pursuant to a provision of a voyage charter party that did not require the appointed arbitrators to be 'disinterested.' 143 F.Supp. at 740. In Astoria Medical Group, Judge Fuld specifically noted that 'the provision relating to arbitration contains no word of limitation on the identity, status or qualifications of the arbitrators; Had the parties intended that their appointees be completely impartial or disinterested, they could have readily so provided.' 11 N.Y.2d at 135, 227 N.Y.S.2d at 406, 182 N.E.2d at 88 (emphasis added.) Here, the insurance policy did so provide. It is therefore our responsibility to enforce the provision.
It does not follow from the foregoing, however, that we must disqualify the arbitrator and remand for a new appointment and arbitration. Instead, what we should do, in my judgment, is to prescribe a procedure by which the parties may obtain a judicial ruling upon the arbitrator's alleged partiality.
Section 18 of the Rules of the American Arbitration Association provides an appropriate point of departure:
Disclosure by Arbitrator of Disqualification--At the time of receiving his notice of appointment, the prospective arbitrator is requested to disclose any circumstances likely to create a presumption of bias or which he believes might disqualify him as an impartial Arbitrator . . .
See Keystone Insurance Co. Appeal, 224 Pa.Super. 404, 406, 307 A.2d 55, 56 (1973). Once disclosure is made, a party may, of course, agree to have the arbitrator participate in the decision of the case. If the party objects, however, and the arbitrator, as here, nevertheless refuses to disqualify himself, I would hold that the party may seek a rule to show cause from a court of common pleas. The court should hold a hearing on the rule, and if the evidence shows actual bias on the part of the arbitrator, should order him disqualified and direct that a new arbitrator be appointed. Cf. Sanko S.S. Co., Ltd. v. Cook Industries, Inc., 495 F.2d 1260, 1263 (2d Cir. 1973).
In suggesting this procedure, I realize that I differ with Judge Van der Voort's opinion to the extent that it would hold that prior representation of one of the parties, without more, requires an arbitrator's disqualification. However, requiring a showing of actual bias rather than imposing a Per se rule of disqualification will, I suggest, promote the goal of an impartial arbitration while at the same time recognizing that less stringent rules should apply to the review of an arbitration award than to the review of a decision by a court.
On the record here, I cannot determine whether arbitrator Brueck was actually biased in favor of appellee. Appellant's July 16, 1974, 'Petition and Rule to Vacate the Award of Arbitrators' merely states, in paragraph 9, that arbitrator Brueck had been asked to disqualify himself on the ground that 'he represents Nationwide Insurance Company (appellee) in various matters of litigation.' However, the record does not reveal what these matters were, nor when or how often or how regularly they arose, nor what the extent of Brueck's representation was. The lower court's opinion only states that Brueck had acted as Nationwide's counsel in 'various unrelated matters.' (Lower court opinion at 3.)
Therefore, although I agree that remand is required, I would not direct the lower court to order a new appointment and arbitration. I would remand for a hearing on arbitrator Brueck's actual bias Vel non. If after hearing the lower court determines that Brueck was not biased, the arbitration award should not be disturbed. Only if the lower court finds actual bias should it vacate the award and order a new appointment and arbitration.
VAN der VOORT, J., files a concurring and dissenting opinion in which WATKINS, President Judge, joins.
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