Dunshee v. State Farm Mut. Auto. Ins. Co.

Decision Date18 April 1975
Docket NumberNo. 45124,45124
Citation228 N.W.2d 567,303 Minn. 473
PartiesDonald DUNSHEE, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.
CourtMinnesota Supreme Court

Syllabus by the Court

1. The Uniform Arbitration Act, Minn.St. c. 572, governs judicial interference with and arbitration of existing or future controversies arising between the insurer and insured under an uninsured-motorist endorsement of an automobile liability insurance policy where the endorsement includes an agreement to arbitrate such controversies.

2. The intended scope of an arbitration clause included in an uninsured-motorist endorsement to the liability insurance policy issued by defendant to plaintiff is reasonably debatable where such clause grants to the insured the right to arbitrate the question of whether he 'is legally entitled to recover damages from the owner or operator of an uninsured motor vehicle.' SC 3. Where, in response to defendant's declaratory judgment action to determine coverage, plaintiff, pursuant to Minn.St. 572.09, sought to compel arbitration of his claim that he was injured by a hit-and-run motor vehicle defined as an uninsured motor vehicle in defendant's policy, the trial court erred in refusing to order the parties to proceed to arbitration and in failing to stay defendant's declaratory judgment action since the question of the scope of the arbitration clause is reasonably debatable and should be initially determined by arbitration subject to defendant's right to judicial review pursuant to § 572.19.

James R. Schwebel, Minneapolis, for appellant.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp & Brennan and M. J. Coyne and O. C. Adamson II, Minneapolis, for respondent.

Considered and decided by the court en banc.

ROGOSHESKE, Justice.

Plaintiff, Donald Dunshee, an insured policyholder under a policy of motor vehicle liability insurance issued by defendant, State Farm Mutual Automobile Insurance Company, appeals from an order of Hennepin County District Court denying his motion, filed pursuant to the Uniform Arbitration Act, Minn.St. 572.09, to arbitrate his claim that he was entitled to damages for bodily injuries from defendant. His claim arises out of an automobile collision with an alleged 'hit-and-run motor vehicle' included as an 'uninsured motor vehicle' by policy definition. An arbitration provision of the policy empowers arbitrators to determine an insured's legal entitlement to recover damages from the owner or operator of an uninsured motor vehicle. Determining that the scope of the arbitration clause is reasonably debatable under standards previously adopted by decisions of this court construing the Uniform Arbitration Act, we reverse and order arbitration of the controversy.

At the time of the accident, plaintiff was insured by defendant under two policies, both containing the following pertinent provisions relating to uninsured-motorist coverage:

'COVERAGE U--DAMAGES FOR BODILY INJURY CAUSED BY UNINSURED MOTOR VEHICLES

'To pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured motor vehicle provided, for the purposes of this coverage, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured or such representative and the company or, if they fail to agree, by arbitration.

'DEFINITIONS--SECTION III

'Hit-and-Run Motor Vehicle--means a land motor vehicle which causes Bodily injury to an Insured arising out of physical contact of such vehicle with the Insured or with a vehicle which the Insured is Occupying at the time of the accident, provided:

(1) there cannot be ascertained the identity of either the operator or owner of such Hit-and-run motor vehicle; * * *

'Uninsured Motor Vehicle--means:

(2) a Hit-and-run motor vehicle as defined; * * *.

'10. Arbitration. If any Person making claim under coverage U and the company do not agree that such Person is legally entitled to recover damages from the owner or operator of an Uninsured motor vehicle because of Bodily injury to the Insured, or do not agree as to the amount payable hereunder, then each party shall, upon written demand of either, select a competent and disinterested arbitrator. The two arbitrators so named shall select a third arbitrator, or if unable to agree thereon within 30 days, then upon request of the Insured or the company such third arbitrator shall be selected by a judge of a court of record in the county and state in which such arbitration is pending. The arbitrators shall then hear and determine the question or questions so in dispute, and the decision in writing of any two arbitrators shall be binding upon the Insured and the company, each of whom shall pay his or its chosen arbitrator and shall bear equally the expense of the third arbitrator and all other expenses of the arbitration, provided that attorney fees and fees paid to medical or other expert witnesses are not deemed to be expenses of arbitration but are to be borne by the party incurring them. Unless the parties otherwise agree, the arbitration shall be conducted in the county and state in which the Insured resides and in accordance with the usual rules governing procedure and admission of evidence in courts of law.'

In April 1973, plaintiff was driving his motor vehicle west on Interstate Highway No. 494 (I--494) at a slow speed due to blowing snow and poor visibility. Approaching the Cedar Avenue overpass in Bloomington, he observed that a multivehicle accident ahead of him obstructed all three lanes of traffic on I--494. He came to a complete stop east of the overpass. While stopped, his vehicle was struck from the rear by another, seriously injuring him and rendering him immediately unconscious. Postaccident investigation by his lawyers and investigators has proved fruitless in determining the identity of the offending motorist. Plaintiff, in February and again in March 1974, submitted to defendant his demand for arbitration pursuant to provision 10 of the policy. Defendant refused to proceed with arbitration and instead instituted a declaratory judgment action to determine whether coverage extended to plaintiff's claim. In response, plaintiff moved the district court to compel arbitration pursuant to § 572.09 of the uniform act. The court denied his motion, leading to this appeal.

1. The issue thus presented is, where an arbitration clause of an uninsured-motorist endorsement calls for the determination of the insured's legal entitlement to recover damages from the owner or operator of an uninsured motor vehicle, whether this, as well as the insured's claim that he was injured by a hit-and-run vehicle as defined in the policy, is within the scope of the arbitration clause. This question of the intended scope of the arbitration clause regarding a so-called 'coverage' issue is one of first impression in this state. It must be decided by resort to the pertinent provisions of the Uniform Arbitration Act which manifests this state's policy favoring arbitration for the informal, speedy, and inexpensive resolution of present and future disputes arising between contracting parties where the contract contains an arbitration clause. 2 Dunnell, Dig. (3 ed.) § 487 et seq. 1

Considering this longstanding policy, Minnesota for many years provided for arbitration of certain disputes by statute. 2 Continuing that policy, on April 24, 1957, Minnesota became the first state to adopt the Uniform Arbitration Act, codified as Minn.St. 572.08 to 572.30. Approved in 1955 by the National Conference of Commissioners on Uniform State Laws and the American Bar Association, the uniform act has now been adopted by 17 states. 3 The pertinent provision is § 572.08, which provides in part:

'A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration Any controversy thereafter arising between the parties is valid, enforceable, and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract.' (Italics supplied.)

Although the language of the act appears not to limit its scope, over the years it has generally been applied to commercial disputes, such as labor-management, construction, franchising, and other types of business contracts. 4 However, we find no court or commentator declaring that the act applies only to commercial disputes. Thus, at the outset we hold that the act as adopted and enacted by the legislature applies to a dispute involving an arbitration provision in an uninsured-motorist endorsement of an automobile liability policy. Defendant so conceded. Perhaps the main reason that the uniform act has not been declared to cover the type of situation presented is that for the most part uninsured-motorist endorsements did not start appearing in automobile liability policies until the mid-1960's. 5 By that time, much of the original case law had, by implication, 'limited' the act to commercial areas and left doubt as to its application to automobile insurance disputes.

Our prior decisions construing the act recognize that § 572.09(a, b, and d) 6 authorizes not only an application to compel arbitration but also authorizes a court to interfere and to protect a party from being compelled to submit to arbitration proceedings where no arbitration agreement exists, either in fact or because the controversy sought to be arbitrated is not within the scope of the arbitration clause of the contract. Layne-Minnesota Co. v. Regents of the University, 266 Minn. 284, 123 N.W.2d 371 (1963). However, regarding the latter, we recognized that problems arise when the scope of...

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