Hackett v. Bonta

• Decision Date: 21 December 1993
• Docket Number: No. 924SC1147,924SC1147
• Court: North Carolina Court of Appeals
• Parties: Laura HACKETT, Plaintiff, v. Theresa J. BONTA, Defendant.

Page 687

437 S.E.2d 687

113 N.C.App. 89

Laura HACKETT, Plaintiff, v. Theresa J. BONTA, Defendant.

No. 924SC1147.

Court of Appeals of North Carolina.

Dec. 21, 1993.

Brumbaugh & Mu by Richard A. Mu, Jacksonville, for plaintiff-appellant.

Marshall, Williams & Gorham by William Robert Cherry, Jr., Wilmington, for defendant-appellee State Farm Mut. Auto. Ins. Co.

Hamilton, Bailey, Way & Brothers by Glenn S. Bailey, Morehead City, for defendant-appellee Theresa J. Bonta.

EAGLES, Judge.

Plaintiff appeals from the trial court's 27 July 1992 and 26 August 1992 orders. After careful review, we reverse and remand for entry of an order compelling arbitration.

I.

In her first two assignments of error, plaintiff contends that the trial court committed reversible error in denying plaintiff's motion to compel arbitration and in granting defendant's motion to stay arbitration "on the grounds that plaintiff's insurance contract with defendant State Farm Mutual Insurance Company grants plaintiff a contractual right to arbitrate." We agree.

This is an interlocutory appeal arising from the denial of plaintiff's motion to stay the proceedings and compel arbitration. Initially, we note that a trial court's " 'order denying arbitration, although interlocutory, is immediately appealable because it involves a substantial right which might be lost if appeal is delayed.' " Bennish v. N.C. Dance Theater, 108 N.C.App. 42, 44, 422 S.E.2d 335, 336-37 (1992) (quoting Prime South Homes v. Byrd, 102 N.C.App. 255, 258, 401 S.E.2d 822, 825 (1991)); Sims v. Ritter Constr., Inc., 62 N.C.App. 52, 302 S.E.2d 293 (1983); G.S. 1-277(a); G.S. 7A-27(d)(1).

Our Supreme Court has held that:

Waiver of a contractual right to arbitration is a question of fact. E.g., Davis v. Blue Cross of Northern California, 25 Cal.3d 418, 158 Cal.Rptr. 828, 600 P.2d 1060 (1979); Doers v. Golden Gate Bridge Etc. Dist., 23 Cal.3d 180, 151 Cal.Rptr. 837, 588 P.2d 1261 (1979). Because of the strong public policy in North Carolina favoring arbitration, see N.C.Gen.Stat. § 1-567.3 (1983); Thomas v. Howard, 51 N.C.App. 350, 355-56, 276 S.E.2d 743, 747 (1981), courts must closely scrutinize any allegation of waiver of such a favored right. See Keating v. Superior Court, 31 Cal.3d 584, 183 Cal.Rptr. 360, 645 P.2d 1192 (1982), dismissed in part and rev'd in part on other issues sub nom. Southland Corp. v. Keating, 465 U.S. 1 79 L.Ed.2d 1 (1984); Doers v. Golden Gate Bridge Etc. Dist., 23 Cal.3d 180, 151 Cal.Rptr. 837, 588 P.2d 1261. See also Moses H. Cone Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25 , 74 L.Ed.2d 765, 785 (1983) ("[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability."). Because of the reluctance to find waiver, we hold that a party has impliedly waived its contractual right to arbitration if by its delay or by actions it takes which are inconsistent with arbitration, another party to the contract is prejudiced by the order compelling arbitration. See, e.g., Carolina Throwing Co. v. S & E Novelty Corp., 442 F.2d 329, 331 (4th Cir.1971) (" 'waiver ... may not rest mechanically on some act such as the filing of a complaint or answer but must find a basis in prejudice to the objecting party' ") (quoting Batson Y. & F.M. Gr., Inc. v. Saurer-Allma GmbH-Allgauer M., 311 F.Supp. 68, 73 (D.S.C.1970)).

Cyclone Roofing Co. v. LaFave Co., 312 N.C. 224, 229, 321 S.E.2d 872, 876 (1984) (footnote omitted). See also Servomation Corp. v. Hickory Constr. Co., 316 N.C. 543, 544, 342 S.E.2d 853, 854 (1986); Bennish, 108 N.C.App. 42, 422 S.E.2d 335. Here, our close scrutiny leads us to conclude that given the terms of plaintiff's policy with State Farm and given State Farm's actions, plaintiff's demand for arbitration of her UIM claim was timely made.

State Farm contends that because plaintiff filed suit against defendant Bonta (another State Farm insured) several months prior to her (plaintiff's) written demand for arbitration, she thus nullified the effect of her demand to arbitrate under the terms of her own UIM policy. We disagree.

We note that plaintiff has two potential claims under two separate State Farm policies: the first is a claim against defendant Bonta's personal automobile liability policy with State Farm, while the second is a claim arising under the UIM coverage of her (plaintiff's) own personal automobile policy with State Farm. We further note that despite the existence of these separate claims brought forward by its own named insured, State Farm initially refused to assign two different adjusters and subsequently refused to assign two different attorneys to handle the respective claims against each policy. The North Carolina State Bar has issued an ethics opinion ruling that "an attorney may not represent the insured, her liability insurer, and the same insurer relative to underinsured motorist coverage carried by the plaintiff." See N.C. R.P.C. 154 (proposed 21 October 1992; approved 15 January 1993). State Farm contends that "[i]t should be noted that by letter dated July 27, 1990, the defendant-appellee State Farm had clearly stated to counsel for the plaintiff-appellant that the company did not subrogate against their own insureds when payment was made under the underinsured motorist coverage for another State Farm insured." Nevertheless, we do not find this argument persuasive as to the issue of plaintiff's right to arbitration under the express terms of her UIM policy.

Plaintiff argues that by the express terms of her UIM policy she "did not have a right to seek payment from her State Farm UIM coverage (and thus arbitrate) until State Farm, as the...