Farmers Ins. Exchange v. Taylor, No. 99CA2388.

• Decision Date: 16 August 2001
• Docket Number: No. 99CA2388.
• Citation: 45 P.3d 759
• Parties: FARMERS INSURANCE EXCHANGE, Applicant-Appellant and Cross-Appellee, v. Colleen TAYLOR, Respondent-Appellee and Cross-Appellant.
• Court: Colorado Court of Appeals

45 P.3d 759

FARMERS INSURANCE EXCHANGE, Applicant-Appellant and Cross-Appellee, v. Colleen TAYLOR, Respondent-Appellee and Cross-Appellant.

No. 99CA2388.

Colorado Court of Appeals, Div. A.

August 16, 2001.

Rehearing Denied November 1, 2001.

Certiorari Denied April 29, 2002.

Levy, Morse & Wheeler, P.C., Marc Levy, Jane E. Young, Englewood, CO, for Applicant-Appellant and Cross-Appellee.

Kidneigh & Kaufman, P.C., Stephen C. Kaufman, Denver, CO, for Respondent-Appellee and Cross-Appellant.

Opinion by Judge ROY.

Farmers Insurance Exchange (the insurer) appeals the trial court's order denying its motion to modify or correct an arbitration award and confirming that award in favor of Colleen Taylor (the insured). We affirm.

In October 1993, the insured was involved in an automobile accident in Tennessee while driving her daughter's vehicle. The insured settled with the underinsured tortfeasor for $25,000. She settled with her daughter's insurance carrier for $75,000, the limits of the daughter's policy less the settlement with the underinsured tortfeasor.

The insured also submitted an underinsured motorist claim to her own carrier, the insurer here. While there is disagreement as to its applicability, it is undisputed that the insured's policy contained an uninsured or underinsured motorist claim limit of $100,000. The parties then entered into arbitration on the claim pursuant to the terms of the policy.

The policy provided for arbitration as follows:

If an insured person and we do not agree (1) that the person is legally entitled to recover damages from the owner or operator of an uninsured motor vehicle, or (2) as to the amount of payment under this part, either that person or we may demand that the issue be determined by arbitration.

....

The arbitrator shall determine (1) the existence of the operator of an uninsured motor vehicle, (2) that the insured person is legally entitled to recover damages from the owner or operator of an uninsured motor vehicle, and (3) the amount of payment under this part as determined by this policy or any other applicable policy. (underlining added)

It is also undisputed that the uninsured motorist coverage also includes underinsured motorists coverage and that at the arbitration the insurer did not submit any evidence establishing the policy limits or the insured's previous recovery from third parties. The arbitrator awarded the insured $513,960 in damages together with $270,968.93 in costs and interest.

The insurer did not file an application with the arbitrator pursuant to § 13-22-211, C.R.S.2000, to modify or change the award. Instead, the insurer filed an application with the trial court pursuant to § 13-22-214, C.R.S.2000, to vacate the award and pursuant to § 13-22-215, C.R.S.2000, to modify or correct the arbitration award. The insured filed a counterclaim requesting confirmation of the award.

The trial court denied the insurer's application, confirmed the award, and stated in part:

[T]he arbitration clause in this case placed "the amount of payment" [from the insurer] directly before the Arbitrator. Further, the arbitration clause in this matter does not state that the Arbitrator is to determine the amount of payment subject to the policy limitations. The court finds that in light of ... the fact that the Arbitrator in this matter was not presented with the policy limitations prior to or during the arbitration hearing, the plain meaning of the phrase "amount of payment," and the absence of any language qualifying the Arbitrator's power to determine the amount of payment within the arbitration clause, the Arbitrator had jurisdiction to determine the amount of payment that should be made, without qualification.

The trial court entered judgment against the insurer in the amount of $784,928.93. By subsequent order, the trial court granted the insured postjudgment interest from the date of the arbitration award, pursuant to § 5-12-102(4)(b), C.R.S.2000.

This appeal followed. Also, the insured filed a cross-appeal concerning the trial court's failure to strike the insurer's untimely reply to the amended counterclaim.

I.

The insurer contends that the trial court erred in not modifying the arbitration award because the arbitrator exceeded his authority. The insurer specifically claims that: (1) the arbitration clause did not empower the arbitrator to determine the amount of payment the insured was to receive from the insurer under the underinsured motorist coverage; (2) the arbitrator impermissibly awarded the insured "damages against" the insurer; (3) the award, including the prejudgment interest, impermissibly exceeds the applicable policy limit; and (4) the arbitrator failed to subtract from the damages awarded the amounts the insured received from the tortfeasor and her daughter's insurer. We find no error in the trial court's ruling.

Colorado adopted the Uniform Arbitration Act (UAA), § 13-22-201, et seq., C.R.S.2000, to provide a uniform statutory framework for arbitration and to encourage the settlement of disputes through the arbitration process. To facilitate confidence in the finality of this process and to discourage piecemeal litigation, the role of the courts in evaluating an arbitration award is strictly limited, and there is a heavy burden on a party attacking an arbitration award. The arbitrator is the final judge of both fact and law. See generally Judd Construction Co. v. Evans Joint Venture, 642 P.2d 922 (Colo. 1982)

.

In the absence of statutory grounds to vacate, modify, or change an arbitration award, a trial court may not review the merits of the award. McNaughton & Rodgers v. Besser, 932 P.2d 819 (Colo.App.1996). These statutory grounds include, as applicable here, that the court must vacate an award when an arbitrator exceeds his or her authority. Section 13-22-214(1)(a)(III), C.R.S.2000.

To determine whether the arbitrator exceeded his authority here within the meaning of § 13-22-214(1)(a)(III), we must determine the scope of the arbitration clause contained in the insurance policy.

When a contractual clause is clear and unambiguous, courts should neither rewrite it nor limit its effect by a strained construction. State Farm Mutual Automobile Insurance Co. v. Stein, 940 P.2d 384 (Colo.1997). Thus, in the absence of ambiguity, an insurance policy must be given effect according to the plain and ordinary meaning of its terms. Farmers Insurance Exchange v. Dotson, 913 P.2d 27 (Colo.1996).

The insurer argues that the arbitration clause is limited and empowers the arbitrator only to determine the "amount of payment" the insured is legally entitled to recover from the underinsured motorist, not from the insurer. Without admitting that the policy is ambiguous, the insurer urges us to consider that other states have construed similar provisions to limit the arbitration to the damages recoverable from the uninsured or underinsured motorist. See, e.g., Assicurazioni Generali, S.P.A. v. Clover, 195 F.3d 161 (3d Cir.1999)

; Allstate Insurance Co. v. Cook, 21 Ariz.App. 313, 519 P.2d 66 (1974); Liberty Mutual Insurance Co. v. Morgan, 138 Ill. App.3d 938, 93 Ill.Dec. 557, 487 N.E.2d 1 (1985); Selected Risks Insurance Co. v. Schulz, 136 N.J.Super. 185, 345 A.2d 349 (1975); but see, Zimmerman v. Illinois Farmers Insurance Co., 317 Ill.App.3d 360, 251 Ill.Dec. 57, 739 N.E.2d 990 (2000). Consequently, in the insurer's view, the arbitrator exceeded his authority by awarding "damages against" the insurer.

However, the authority relied upon by the insurer construes language similar to that in the first quoted paragraph, but does not concern the second paragraph. The second quoted paragraph specifies that the arbitrator is to determine "the amount of payment under this part as determined by this policy or any other applicable policy." The cases relied upon by insurer interpret policies that do not contain language similar to this second paragraph. Further, the terms of the policy do not govern the extent of the liability of the underinsured motorist to the insured.

Thus, in our view, the...