Detroit Auto. Inter-Insurance Exchange v. Reck

• Decision Date: 22 May 1979
• Docket Number: INTER-INSURANCE,Docket No. 78-513
• Citation: 90 Mich.App. 286,282 N.W.2d 292
• Parties: DETROIT AUTOMOBILEEXCHANGE, Plaintiff-Appellant, v. Donald Alen RECK, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 292

282 N.W.2d 292

90 Mich.App. 286

DETROIT AUTOMOBILE INTER-INSURANCE EXCHANGE, Plaintiff-Appellant, v. Donald Alen RECK, Defendant-Appellee.

Docket No. 78-513.

Court of Appeals of Michigan.

May 22, 1979.

Released for Publication Aug. 22, 1979.

Selby, Dickinson, Pike, Mourad & Brandt by Charles T. McCutcheon, Jr., Detroit, for plaintiff-appellant.

Sheldon L. Miller, Detroit, for defendant-appellee.

Before DANHOF, C. J., and BRONSON and BEASLEY, JJ.

BRONSON, Judge.

Plaintiff insurer appeals an order denying its motion to vacate the arbitration award entered in favor of defendant insured.

Defendant, who was insured by plaintiff, was operating a motorcycle when he collided with another motorcyclist, Daniel Baranowski, who was insured by Cavalier Insurance Company. The accident between defendant and Baranowski occurred at the end of a race. The insurance policy between Cavalier and Baranowski provided that coverage was excluded "during such periods as the motorcycle is used in, or in preparation for any race, speed contest, hill climbing exhibition, or a contest of any nature".

Defendant sued Baranowski. Cavalier defended under a reservation of rights clause, and denied liability coverage for the accident on the basis of the racing exclusion. Upon notification of the denial of coverage, defendant filed a claim for uninsured motorist benefits under his policy with plaintiff. Plaintiff denied coverage and defendant sought arbitration pursuant to the arbitration clause in the insurance contract. ¹ Plaintiff objected to the arbitration on the grounds that the arbitrators lacked authority to determine what coverage existed between Baranowski and Cavalier, and therefore the arbitrators could not make a determination on whether defendant was entitled to uninsured motorist benefits. The arbitrators overruled plaintiff's objections and entered an award in favor of defendant. Plaintiff moved to vacate the award in circuit court, the motion was denied and plaintiff now appeals by right.

The question of what issues are arbitrable under an insurance policy's uninsured motorist arbitration clause has not been answered uniformly by the courts in this country. See Anno.: What Issues Are Arbitrable Under Arbitration Provision of Uninsured Motorist Insurance, 29 A.L.R.3d 328. The New York Court of Appeals, taking a narrow view of the scope of arbitration, held that such clauses afford arbitration on the issues of who was at fault for the accident and the amount of damages that the insured is entitled to recover, but do not subject to arbitration issues involving matters of insurance coverage, such as whether the other driver was an uninsured motorist. In re Rosenbaum, 11 N.Y.2d 310, 229 N.Y.S.2d 375, 183 N.E.2d 667 (1962). This Court in Western Casualty & Surety Co. v. Strange, 3 Mich.App. 733, 143 N.W.2d 572 (1966), adopted the reasoning in the Rosenbaum case. Somewhat surprisingly, plaintiff insurer did not cite this case even though it supported its position and was on point. The possible explanation for this omission is that the rationale and rule announced in Western has been specifically rejected by this Court in subsequent decisions. See, E. g., Detroit Automobile Inter-Insurance Exchange v. Spafford, 62 Mich.App. 365, 233 N.W.2d 283 (1975); Maryland Casualty Co. v. McGee, 32 Mich.App. 539, 189 N.W.2d 44 (1971).

The reason for this change in position has been the strong public policy in this state in favor of arbitration as a simple expeditious means of resolving disputes without necessitating resort to the court system. M.C.L. § 600.5001(2); M.S.A. § 27A.5001(2), Maryland Casualty Co. v. McGee, supra, P. R. Post Corp. v. Maryland Casualty Co., 68 Mich.App. 182, 186-187, 242 N.W.2d 62 (1976), Modified on other grounds, 403 Mich. 543, 271 N.W.2d 521 (1978). The policy in favor of this expeditious alternative to the judicial system is thwarted if all disputed issues in an arbitration proceeding must be segregated into categories of "arbitrable sheep and judicially-triable goats". McGee, supra, 32 Mich.App. 545, 189 N.W.2d 44.

"(A)n interpretation of an arbitration agreement which would have the effect of chopping up a dispute between an insured and his insurer and requiring separate determinations of each portion thereof in different forums militates against the very benefits sought by arbitration and which benefits tend to make arbitration a reasonable remedy under the insurance code." McGee, supra, 32 Mich.App. 546, 189 N.W.2d...