Lightning Rod Mutual Ins. Co. v. Rick L. Saffle, 91-LW-4383

• Decision Date: 06 November 1991
• Docket Number: 15134,91-LW-4383
• Parties: LIGHTNING ROD MUTUAL INSURANCE CO., Plaintiff-Appellant v. RICK L. SAFFLE, Defendant-Appellee C.A.
• Court: Ohio Court of Appeals

LIGHTNING ROD MUTUAL INSURANCE CO. Plaintiff-Appellant v. RICK L. SAFFLE, Defendant-Appellee

No. 15134

91-LW-4383 (9th)

Court of Appeals of Ohio, Ninth District Summit

November 6, 1991

APPEAL FROM JUDGMENT ENTERED IN THE COMMON PLEAS COURT COUNTY OF SUMMIT, OHIO CASE NO. CV 90 11 4001

PER CURIAM

This cause was heard upon the record in the trial court. Each error assigned has been reviewed and the following disposition is made:

This appeal presents the question of whether a clause of an automobile insurance policy allowing a trial despite a prior arbitration award is unconscionable or violative of public policy.

Plaintiff-appellant, Lightning Rod Mutual Ins. Co., issued an automobile insurance policy to defendant-appellee, Rick L Saffle. Saffle was an employee at Nowsco Well Service where he was required to drive a company truck. On January 8, 1986 his vehicle was struck from behind by a truck operated by a fellow employee. Saffle received workers' compensation benefits for his injuries but his attempt to sue his employer was unsuccessful. Saffle v. Nowsco Well Service (July 27, 1987), stark App. No. CA-7074, unreported.

Saffle then sought relief from Lightning Rod Mutual for uninsured motorist coverage. In accordance with the insurance contract, this matter was submitted to arbitration. On October 19, 1990, Saffle was awarded $15,000.00.

Lightning Rod Mutual filed a complaint in the Summit County Court of Common pleas on November 19, 1990 seeking a trial on the question of its contractual liability to Saffle. In response, Saffle maintained that this civil claim was barred as a result of the prior arbitration decision. The trial court agreed, confirmed the award, and issued a judgment in favor of Saffle. This appeal follows.

Assignment of Error I

"The lower court erred in failing to find that uninsured motorists benefits were improperly awarded here as a matter of law, because of the tortfeasor's immunity under the statutory fellow immunity doctrine."

On October 10, 1990, the Supreme Court of Ohio held in the syllabus of State Farm Mut. Auto Ins. Co. v. Webb (1990), 54 Ohio St. 3d 61, that:

"An insurer is not liable to its insured on an uninsured motorist claim where the claim arises from an accident in which the tortfeasor-motorist causing the insured's injuries has liability insurance but is immune pursuant to the statutory fellow-employee doctrine, because the insured is not legally entitled to a recovery from the tortfeasor. (Thiel v. Allstate Ins. Co. [1986], 23 Ohio St. 3d 108, 23 OBR 267, 491 N.E. 2d 1121, overruled.)"

See, also, Nobles v. Wolf (1990), 54 Ohio St. 3d 75. Lightning Rod Mutual contends that as a result of this change in the law nine days prior to the arbitrators' award, it could not be held liable under the uninsured motorist provisions of the policy.

The jurisdiction of to review arbitration awards courts is narrow and confined pursuant to legislative decree. Warren Edn. Assn. v. Warren City Bd. of Edn. (1985), 18 Ohio St. 3d 170, 173. Once arbitration is completed, the judiciary is limited to confirming, vacating, modifying, or enforcing the award pursuant to R.C. 2711.09 et seq. Lockhart v. American Res. Ins. Co. (1981), 2 Ohio App. 3d 99, 101. The legal and factual conclusions of the panel are reversible only in extreme circumstances in accordance with express statutory directives. Russo v. Chittick (1988), 48 Ohio App. 3d 101, 104. The General Assembly has instructed that:

"In any of the following cases, the court of common pleas shall make an order vacating the award upon the application of any party to the arbitration if:

"(A) The award was procured by corruption, fraud, or undue means.

"(B) There was evident partiality or corruption on the Part of the arbitrators, or any of them.

"(C) The arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.

"(D) The arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made."

"***."

R.C. 2711.10. Likewise, this court's review is isolated to the common pleas court's order confirming the award and we have no authority to scrutinize the original arbitration proceedings. R.C. 2711.15 and Comment; see Lockhart, supra, at 101.

The record is devoid of evidence that the arbitration proceedings were tarnished by any of the infractions set forth in R.C. 2711.10. Lightning Rod Mutual has failed to demonstrate that the panel somehow abused its authority by finding in favor of Saffle. The common pleas court was therefore justified in confirming the award.

This assignment of error is overruled.

Assignment of Error II

"(a) The lower court erred in finding unconscionable a contract provision making arbitration awards below $12,500.00 binding and arbitration awards above $12,500.00 non-binding.

"(b) The lower court compounded its error by selecting the wrong remedy (i.e., denying jurisdiction, making all awards binding) to redress this alleged unconscionability, instead of the correct remedy (i.e., making all awards non-binding)."

The crux of this appeal Focuses upon whether Lightning Rod Mutual was legally entitled to avoid the arbitrators' award and seek a retrial pursuant to the insurance policy agreement. The pertinent provision declares that:

"*** A decision agreed to by two of the arbitrators will be binding as to:

"1. Whether the covered person is legally entitled to recover damages; and

"2. The amount of damages. This applies only if the amount does not exceed the minimum limit for bodily injury liability specified by the financial responsibility law of the state in which your covered auto is principally garaged. If the amount exceeds that limit, either party may demand the right to a trial. This demand must be made within 60 days of the arbitrators decision. If this demand is not made, the amount of damages agreed to by the arbitrators will be binding"

Saffle argued, and the trial court agreed, that this clause was unconscionable, as well as violative of public policy, and hence unenforceable. As a result, Lightning Rod Mutual was bound to the award.

It is well settled that Ohio law favors arbitration as an expedient and inexpensive alternative to civil litigation. Menardi v. Petrigalla (1983), 11 Ohio App. 3d 9, 11. Nevertheless, absent a statutory directive, the duty to arbitrate, including the scope of the proceedings, is dependent solely upon the parties' agreement. See Ohio Council 8, AFSCME v. Ohio Dept. of Mental Health (1984), 9 Ohio St. 3d 139; Teramar Corp. v. Rodier Corp. (1987), 40 Ohio App. 3d 39, 40. Alternative dispute resolution techniques may be tailored to cover some or all claims in a manner suitable to those concerned. See, e.g., Spitaleri v. Forest City Ents. Inc. (Nov. 25, 1987), Summit App. No. 13144, unreported.

By the plain and unambiguous terms of the "contractual trial" ^[1] clause contained in, the insurance policy, Lightning Rod Mutual was entitled to its "right to a trial" since the damages imposed exceeded the financial responsibility minimum of $12,500.00 per person: ^[2] R.C. 4509.01(K). The burden of proving the contract's illegality is, of course, upon, the party seeking to avoid the obligation imposed. See, generally, Bear v. Bear (1928), 29 Ohio App. 272, 274; Charles Melbourne & Sons, Inc. v. Jesset (1960), 110 Ohio App. 502, 505. Saffle's defenses of unconscionability and public policy will be analyzed separately.

A. Unconscionality.

Restatement of the Law 2d Contracts (1981) 107, Section 208, instructs that:

"If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result."

The concept of unconscionability is not readily susceptible to a hard and fast definition. Judge Skelly Wright explained in Williams v. Walker-Thomas Furniture Co. (C.A. D.C. 1965), 350 F.2d 445, 449, that:

"Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.***." (Footnote omitted).

See, also, Orlett v. Suburban Propane (1989), 54 Ohio App. 3d 127, 129. Accordingly, there are two components to unconscionability: 1) Procedural unconscionability which concerns defects in the bargaining process which preclude any "meaningful choice" by the aggrieved party and 2) substantive unconscionability which focuses upon the terms of the contract and whether they are "unreasonably favorable" to the other party. See Murray on Contracts (3 Ed. 1990) 490, Section 96(B)(2)(b); 1 Farnsworth on Contracts (1990) 506, Section 4.28. A claim of unconscionability must be viewed by courts with caution as overapplication of this doctrine "leads inexorably to individual irresponsibility, social instability and multifarious litigation." Blount v. Smith (1967), 12 Ohio St. 2d 41, 47.

The determination of whether a contract is unconscionable is a question of law for the court. See Ins. Co. of North America v. Automatic Sprinler Corp. (1981), 67 Ohio St. 2d 91, 98 examining unconscionability provision of Ohio Uniform Commercial Code Article II, R.C. 1302.15). Ordinarily, a factual inquiry into the particular circumstances surrounding the transaction is required. Central Ohio Co-op. Milk Producers v Rowland (1972), 29 Ohio App. 2d 236, 239-240; see Murray, sup...