HARTFORD STEAM v. Underwriters at Lloyd's

• Decision Date: 12 October 2004
• Docket Number: No. 17024.,17024.
• Court: Connecticut Supreme Court
• Parties: HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY v. UNDERWRITERS AT LLOYD'S AND COMPANIES COLLECTIVE et al.

857 A.2d 893

271 Conn. 474

HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY v. UNDERWRITERS AT LLOYD'S AND COMPANIES COLLECTIVE et al.

No. 17024.

Supreme Court of Connecticut.

Argued March 22, 2004.

Decided October 12, 2004.

Thomas E. Birsic, pro hac vice, with whom were Paul K. Stockman, pro hac vice, and Maurice T. Fitz-Maurice, Hartford, for the appellant-appellee (plaintiff).

Linda L. Morkan, with whom were Clayton H. Farnham, pro hac vice, and, on the brief, Patrick J. Sweeney, Hartford, for the appellees-appellants (defendants).

SULLIVAN, C.J., and BORDEN, NORCOTT, PALMER and ZARELLA, Js.

ZARELLA, J.

The determinative issue in this appeal is whether the judgment of the trial court directing a rehearing by the arbitration panel to clarify the award constitutes a final judgment or an otherwise appealable interlocutory order, thereby implicating our subject matter jurisdiction. We determine that the trial court's remand order does not constitute a final judgment or an appealable interlocutory order and, therefore, that we lack subject matter jurisdiction to review the merits of the claims of the plaintiff, Hartford Steam Boiler Inspection and Insurance Company (Hartford Steam Boiler), on its appeal and of the defendants, Underwriters at Lloyd's and Companies Collective et al.¹ (underwriters), in their cross appeal.

The following facts are relevant to this case. On August 11, 1993, a catastrophic explosion at an electrical generating facility near Newark, Arkansas, caused more than $28 million in damage. The owners of the facility, Arkansas Power and Light Company and others (collectively referred to as the insureds), submitted claims to two insurance providers, Hartford Steam Boiler, which provided boiler and machinery insurance, and the underwriters, which provided "all risks" property insurance. After investigating the losses, however, both providers denied coverage for the claims, determining that their respective policies did not cover such losses.

Thereafter, the insureds invoked the "Loss Adjustment Endorsements" provisions contained in both policies. These provisions enabled the insureds to recover the total losses caused by the explosion by collecting one half of the amount in dispute from each insurance company. As a result, Hartford Steam Boiler paid $10,933,435.86 to the insureds and the underwriters paid $11,880,525.33. The loss adjustment endorsements also contained a provision enabling Hartford Steam Boiler and the underwriters, after payment to the insureds, to submit any dispute as to respective liability to arbitration, which they did. The initial arbitration, referred to by the parties as phase I, commenced in Memphis, Tennessee, in 1996, and was governed by procedures agreed to by Hartford Steam Boiler and the underwriters. On January 9, 1997, the arbitration panel issued an interim award and, thereafter, it issued a supplemental clarified decision in response to the parties' questions as to the meaning of the initial award. As a result of these decisions, Hartford Steam Boiler and the underwriters agreed that each of their policies covered a portion of the losses but they did not agree as to the apportionment of their respective liability.

Because of this disagreement as to the allocation of the losses, Hartford Steam Boiler and the underwriters resubmitted the matter to the arbitration panel, thereby commencing phase II of the arbitration. The parties stipulated to a statement of issues, which was limited to a determination of: "1. which costs are directly attributable to the collapse of the coutant support structure (i.e., the `bottom' costs); 2. which costs are directly attributable to explosion and/or overpressurization associated with Unit Two (i.e., the `top' costs); 3. which costs are directly attributable to fire, firefighting, or the explosion in D Mill; 4. which costs are common or general project costs that are not allocable into categories (a), (b) or (c); and 5. any costs whose purpose or allocation cannot be determined from available evidence, or that do not otherwise fall within categories (a), (b) or (c)." The statement of issues also called upon the panel to "resolve all liability and allocation issues with respect to each category of costs identified in Paragraph 1, including, without limitation, all coverage issues."² Hartford Steam Boiler and the underwriters also agreed to a revised set of general procedures that would govern phase II of the arbitration. Among these procedures, the parties agreed that "[t]he arbitration award shall be in writing and shall contain findings of fact and conclusions regarding the interpretation of the insurance policies that are the subject of this arbitration as necessary to support the award."

After a hearing on the allocation issue in Windsor Locks, Connecticut, on June 28 and 29, 2001, the arbitration panel issued a decision on January 24, 2002, in which it responded to each question set forth in the parties' joint statement of issues. With respect to the first five issues, the panel presented dollar amounts reflecting the allocation of costs corresponding to each question.³ The panel also determined that "[t]he allocation of $21,182,561.13 paid under the Joint Loss Agreement has been resolved in accordance with policy coverages as follows: Boiler & Machinery — $14,489,833.52; All Risk — $7,375,012.59; Total $21,864,846.11."

Subsequently, on February 22, 2002, Hartford Steam Boiler moved to vacate the award, and the underwriters moved to confirm the award or, alternatively, to remand the case to the panel for clarification. After a hearing on May 22, 2002, the trial court found in favor of the underwriters and remanded the case to the arbitration panel for a rehearing to clarify the award, so that the arbitrators' decision would include findings of fact and interpretations of the policies, as required by the governing procedures.

Hartford Steam Boiler appealed from the judgment of the trial court and the underwriters cross appealed.⁴ We transferred the appeal to this court pursuant to General Statutes § 51-199(c) and Practice Book § 65-1. We will set forth additional facts as necessary.

Hartford Steam Boiler claims that the trial court improperly remanded the award to the panel after the expiration of the applicable time period set forth in General Statutes § 52-418(b),⁵ and relies on our holdings in Aetna Life & Casualty Co. v. Bulaong, 218 Conn. 51, 588 A.2d 138 (1991), and Chmielewski v. Aetna Casualty & Surety Co., 218 Conn. 646, 591 A.2d 101 (1991), to support this proposition. In addition, Hartford Steam Boiler claims that we have subject matter jurisdiction to review the merits of this case pursuant to General Statutes § 52-423⁶ because the trial court, in relying on § 52-418(b), "necessarily vacated the underlying award, in the course of directing a rehearing before the arbitrators." Hartford Steam Boiler further argues that we have jurisdiction over this matter under our holding in State v. Curcio, 191 Conn. 27, 30-31, 463 A.2d 566 (1983), and that its claim is appealable because "if the Superior Court's order remanding the case is read not to embody an implicit vacatur, then it is clear that the court exceeded its statutory authority under [§] 52-418(b)'s express terms (which of course require vacatur as a condition precedent to remand)." Hartford Steam Boiler also contends that § 52-418(b) represents the sole means by which a court may remand an arbitration award for a rehearing.

The underwriters claim that the trial court's order remanding the award to the arbitration panel for rehearing does not constitute an appealable final judgment or interlocutory order, and, therefore, that we lack jurisdiction to entertain Hartford Steam Boiler's appeal. Specifically, the underwriters urge that: "(1) the appeal is not authorized by [§] 52-423 which covers appeals from arbitration decisions; and (2) the Superior Court order from which [Hartford Steam Boiler] seeks relief has only returned the case to the arbitrators for additional information, and therefore is not yet appealable." They maintain that the language of § 52-423 does not include remands for rehearings within the class of appealable judgments, and that the remand does not qualify as an appealable interlocutory order pursuant to State v. Curcio, supra, 191 Conn. 27, 463 A.2d 566. We agree with the underwriters.

In order to determine whether we have jurisdiction to review the merits of this appeal, we first must ascertain whether the trial court rendered a final judgment or an otherwise appealable interlocutory order, or whether the court issued a nonappealable remand order. Thus, we must decide initially whether, in its memorandum of decision, the court intended to vacate the award and direct a rehearing pursuant to § 52-418(b) or whether it intended to remand the arbitrators' award to the panel for clarification.

In its memorandum of decision, the trial court determined, and the parties do not dispute, that both the Federal Arbitration Act (arbitration act), 9 U.S.C. § 1 et seq., and § 52-418, applied, noting that "[t]he language is essentially the same, and the criteria applied to the application to vacate is the same [and provides that an award may be vacated] ... `if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.'" The court determined that the arbitrators' award failed to conform with the submission of the parties because the arbitrators did not specify the factual basis for the award.⁷ The court stated: "There are no supporting facts or allocation of liability or the reasons for the numbers that have been awarded as well as to which party liability should attach for each of these figures.... The findings are not sufficiently specific or comprehensive to comply with the requirement that all liability and allocation issues...