Deeds v. Regence Blueshield of Idaho

• Decision Date: 28 July 2006
• Docket Number: No. 31180.,31180.
• Citation: 143 Idaho 210,141 P.3d 1079
• Parties: Brooke DEEDS, a single woman, Plaintiff-Respondent, v. REGENCE BLUESHIELD OF IDAHO, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 1079

141 P.3d 1079

143 Idaho 210

Brooke DEEDS, a single woman, Plaintiff-Respondent, v. REGENCE BLUESHIELD OF IDAHO, Defendant-Appellant.

No. 31180.

Supreme Court of Idaho, Boise, April 2006 Term.

July 28, 2006.

Ramsden & Lyons, Coeur d'Alene, for appellant. Michael E. Ramsden argued.

Racine Olson Nye Budge & Bailey, Chtd., Pocatello, for respondent. Richard A. Hearn argued.

TROUT, Justice.

This case involves the enforceability of an arbitration agreement under a health care insurance policy. Appellant Regence Blue Shield of Idaho (Regence) appeals from a district court order and decision, concluding the disputed arbitration agreement is unenforceable and vacating the court's prior order compelling arbitration.

I. FACTUAL AND PROCEDURAL BACKGROUND

Respondent Brooke Deeds (Deeds), the insured, filed a complaint against Regence after it declined to pay for Deeds' treatment for injuries resulting from a motor vehicle accident. In answer to the complaint, Regence demanded the claim be arbitrated pursuant to a provision in the health insurance policy that mandates "arbitration in accordance with the applicable rules of the American Arbitration Association [AAA]". The district judge agreed and stayed the proceedings, pending arbitration.

Thereafter, Deeds discovered that after the health insurance policy was written, the AAA had implemented a policy, declaring that in health insurance cases "it will no longer accept the administration of cases involving individual patients without a post-dispute agreement to arbitrate" signed by both parties. Deeds refused to sign a post-dispute agreement and filed a motion to vacate the arbitration order. The district court concluded that based on the change in AAA's policy, the entire arbitration agreement failed. It therefore granted Deeds' motion and lifted the order to arbitrate, ordering the matter to trial.

Regence then filed a Notice of Appeal pursuant to I.C. § 7-919 and the matter is now before us without any final resolution as to the remainder of the case. In addition to the briefing on the enforceability of the arbitration clause, this Court requested supplemental briefing regarding the issue of whether or not this appeal originates from a final, appealable order or judgment under I.A.R. 11.

II. STANDARD OF REVIEW

"On appeal, this Court must address finality even if the parties fail to raise it because the issue is jurisdictional." Hartman v. Double L Mfg. Co., 141 Idaho 456, 457, 111 P.3d 141, 142 (2005). "In disputes involving arbitration, this court has stated: "The question of arbitrability is a question of law properly decided by the court. When questions of law are presented, this court exercises free review. . . .'" Murphy v. Mid-West Nat. Life Ins. Co. of Tennessee, 139 Idaho 330, 331 78 P.3d 766, 767 (2003) (internal citations omitted).

III. DISCUSSION

The principal issues on appeal are (1) whether the district court's Order Lifting Partial Stay and Vacating Arbitration Order is a final appealable order; and (2) whether the arbitration clause in the health insurance policy is enforceable. Deeds also requests attorney fees on appeal.

A. Final appealable order

Idaho Code § 7-919 states, in pertinent part, "(a) [a]n appeal may be taken from: (1) An order denying an application to compel arbitration. . . ." I.C. § 7-919(a)(1).¹ By enacting I.C. § 7-919, the legislature, as a substantive matter, clearly created the right to appeal an order denying a motion to compel arbitration. Regarding the procedure for bringing the appeal, however, I.C. § 7-919 specifically states: "(b) The appeal shall be taken in the manner and to the same extent as from orders or judgments in a civil action." I.C. § 7-919(b). In turn, I.C. § 13-201 provides the procedure for appealing civil judgments and orders: "An appeal may be taken to the Supreme Court from a district court in any civil action by such parties from such orders and judgments, and within such times and in such manner as prescribed by Rule of the Supreme Court." I.C. § 13-201. See Camp v. East Fork Ditch Co., Ltd., 137 Idaho 850, 860, 55 P.3d 304, 314 (2002) ("The right to appeal to this Court as a matter of right is governed by the Idaho Appellate Rules.").

Analogous to the directives contained in I.C. §§ 7-919 and 13-201, the Idaho legislature created the right to appeal from an Industrial Commission order in I.C. § 72-724, and likewise instructed the appeal be brought pursuant to Supreme Court Rules: "An appeal may be made to the Supreme Court by such parties from such decision and order of the [Industrial] commission and within such times and in such manner as prescribed by Rule of the Supreme Court." Despite the language in I.C. § 72-724 creating the right to appeal from an Industrial Commission order, this Court has held on numerous occasions that this type of order is only appealable if, under our rules, it is final. See Hartman v. Double L Mfg., 141 Idaho 456, 111 P.3d 141 (2005) (holding Industrial Commission's order did not constitute a final appealable order under Idaho Supreme Court rules and was, therefore, not appealable). Thus, while the legislature originally creates the right to appeal, it is this Court's responsibility to then determine the procedures for bringing the appeal. This determination includes ruling on the finality of a particular judgment or order.

Under our rules, in a civil action "[a]n appeal as a matter of right may be taken to the Supreme Court from . . . [j]udgments, orders and decrees which are final, including orders of the district court granting or denying peremptory writs of mandate and prohibition." I.A.R. 11(a)(1). This Court has held an order is final under I.A.R. 11 "if the instrument `ends the suit,' `adjudicate(s) the subject matter of the controversy,' and represents a `final determination of the rights of the parties'. . . ." Idah Best, Inc. v. First Sec. Bank, N.A., Hailey Branch, 99 Idaho 517, 519, 584 P.2d 1242, 1244 (1978).

An order denying a motion to compel arbitration does not meet our Rule 11 requirements by ending the suit in its entirety. Yet, the legislature has indicated these orders may be appealed, and as a practical matter, these orders are final with respect to arbitration. It does not make sense to force parties to an arbitration agreement to proceed through litigation only to discover later the matter should have been arbitrated. Thus, we hold that an order denying a motion to compel arbitration (or here, an order vacating an earlier order to arbitrate) is final for the purposes of our rules and is therefore appealable as a matter of right.

B. Enforceability of arbitration clause

Under the Uniform Arbitration Act "arbitration and agreements to arbitrate are encouraged and given explicit recognition as effective means to resolve disputed issues." Lovey v. Regence BlueShield of Idaho, 139 Idaho 37, 41, 72 P.3d 877, 881 (2003) (quoting Loomis, Inc. v. Cudahy, 104 Idaho 106, 108, 656 P.2d 1359, 1361 (1982)). In this case, the arbitration clause in the health insurance policy provides as follows:

ARBITRATION

Any controversy or claim arising out of or relating to this Policy, or the breach thereof, shall be settled by arbitration in accordance with the applicable rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitration shall be held at such place as may be selected by mutual agreement. All fees and expenses of the arbitration shall be borne by the parties equally. However, each party to the arbitration proceeding shall bear the expenses of its own counsel, experts, witnesses, and preparation and presentation of proofs. (emphasis added).

Because under its new policy the AAA will not designate an AAA arbitrator to administer the dispute without a post-dispute agreement to arbitrate, Deeds claims the entire arbitration clause fails. This Court sees no reason, however, why the arbitration cannot proceed "in accordance with the applicable rules of the AAA" using a different arbitrator. With the exception setting forth the method for parties to appoint a designated AAA arbitrator, the AAA rules governing this dispute are simple procedural rules of general applicability. For example, the rules sets forth time frames for filing various documents, the manner in which the final award will be delivered and generic evidentiary guidelines, giving the arbitrator broad discretion to allow in evidence. There is no reason only an AAA arbitrator could comply with these basic procedures.

In addition, there is no evidence the AAA itself is central to the agreement to arbitrate. "Only if the choice of forum is an integral part of the agreement to arbitrate, rather than an `ancillary logistical concern' will the failure of the chosen forum preclude arbitration." Brown v. ITT Consumer Financial Corp., 211 F.3d 1217 (11th Cir.2000). Deeds misguidedly directs this Court to case law in which the courts held selection of the forum was central to the parties' agreement to arbitrate and, therefore, refusal by the organization to hear the case rendered the arbitration agreement unenforceable. See In re Salomon Inc., 68 F.3d 554 (2nd Cir.1995); Smith Barney, Inc. v. Critical Health Sys. of North Carolina, Inc., 212 F.3d 858 (4th Cir. 2000); Alan v. UBS PaineWebber, 111 Cal.App.4th 217, 3 Cal.Rptr.3d 377 (2003). These cases involve federal securities law and the decision to arbitrate before a self-regulatory organization (SRO), a forum which must operate in strict compliance with the Securities and Exchange Act of 1934(SEC):

"As part of the comprehensive system of federal regulation of the securities industry, the Exchange Act authorizes SROs within the securities to self-regulate their members subject to oversight by the United States Securities and Exchange Commission (SEC). SROs are subject to extensive oversight, supervision, and control by the...