Marlowe v. Ids Prop. Cas. Ins. Co.

Citation346 Wis.2d 450,2013 WI 29,828 N.W.2d 812
Decision Date05 April 2013
Docket NumberNo. 2011AP2067.,2011AP2067.
PartiesMary E. MARLOWE and Leslie R. Marlowe, Plaintiffs–Respondents–Petitioners, v. IDS PROPERTY CASUALTY INSURANCE COMPANY, Defendant–Appellant.
CourtUnited States State Supreme Court of Wisconsin

OPINION TEXT STARTS HERE

For the plaintiffs-respondents-petitioners, there were briefs by Ralph J. Tease Jr. and Rhonda L. Lanford, and Habush, Habush & Rottier, S.C., Green Bay, and oral argument by Mr. Tease.

For the defendant-appellant, there were briefs by Michael P. Konz and Erik L. Fuehrer, and Gabert, Williams, Konz & Lawrynk, LLP, Appleton, and oral argument by Mr. Konz.

An amicus curiae brief was filed by James Friedman and Dustin B. Brown, and Godfrey & Kahn, S.C., Madison, on behalf of the Wisconsin Insurance Alliance, and oral argument by Mr. Brown.

MICHAEL J. GABLEMAN, J.

[346 Wis.2d 455]¶ 1 We review a published decision of the court of appeals 1 reversing the Brown County Circuit Court's declaratory judgment 2 limiting discovery in an arbitration proceeding to that allowed by Wis. Stat. § 788.07 (2009–10).3 Mary E. Marlowe and Leslie R. Marlowe (the Marlowes) filed a claim with their insurer, IDS Property Casualty Insurance Company (IDS), for underinsured motorist benefits after a car accident. The parties were unable to agree on a settlement and, pursuant to a provision of the insurance policy, submitted the dispute to an arbitration panel. Prior to the anticipated arbitration hearing a conflict over discovery arose,4 in which IDS sought broad discovery under Wis. Stat. ch. 804, the general civil procedure chapter, while the Marlowes refused to comply with such discovery on the grounds that § 788.07, the discovery provision designed specifically for arbitration, controlled, and permitted only the taking of certain depositions.5 Interpreting the policy'sarbitration provision in light of our decision in Borst v. Allstate Ins. Co., 2006 WI 70, 291 Wis.2d 361, 717 N.W.2d 42, the arbitration panel decided that IDS was entitled to ch. 804 discovery. Unsatisfied, the Marlowes successfully filed for declaratory judgment in the circuit court, obtaining an order reversing the arbitration panel's determination and directing that arbitration discovery would proceed within the narrow parameters set by § 788.07. The court of appeals reversed, concluding that the Marlowes were not permitted to pursue relief from the circuit court before the panel rendered a final decision on the award, and that full ch. 804 discovery was available to IDS.

¶ 2 We consider two issues: 1) whether the Marlowes were permitted to seek a declaratory judgment concerning the discovery dispute before the arbitration panel ruled on whether an award was appropriate and, if so, its amount; and 2) whether the panel properly established discovery procedures outside those outlined in Wis. Stat. § 788.07. Because no unusual circumstances justified an interlocutory appeal, we hold that the Marlowes' action in circuit court was premature. As to the second question, the legislature has set forth, in the form of § 788.07, a narrow scope of discovery for arbitration proceedings in the absence of an explicit, specific, and clearly drafted arbitration clause to the contrary. IDS failed to include any such language in its policy and we therefore instruct the panel to limit discovery to that provided for in § 788.07. Accordingly, we affirm the court of appeals insofar as it declined to allow the Marlowes an interlocutory appeal. However, insofar as the court of appeals granted IDS the benefit of full Wis. Stat. ch. 804 discovery, we modify its decision and instead direct the panel to cabin discovery to the depositions contemplated in § 788.07, i.e., “depositions to be used as evidence before the arbitrators.” Thus, the decision of the court of appeals is modified, and as modified, affirmed, and the cause is remanded to the arbitration panel with instructions.

I. BACKGROUND

¶ 3 The relevant facts are few and straightforward. In 2007, Mary Marlowe was involved in a car accident with an underinsured driver. At the time of the accident, she was insured by IDS, under a policy that contained a section providing underinsured motorist coverage. Within that section, under the heading, “Arbitration,” the policy provided that [u]nless both parties agree otherwise, arbitration will take place in the county in which the insured lives. Local rules of law as to procedure and evidence will apply.” (Bold in original.) The Marlowes submitted a claim to IDS and, after fruitless settlement discussions, the parties agreed, in accordance with the policy, that an arbitration panel would determine whether an award was appropriate and, if so, its amount.

¶ 4 To prepare for the arbitration hearing, IDS requested various types of discovery materials, including interrogatories, the production of documents, the procurement of medical, employment, and income tax records, several depositions, and an independent medical examination. As IDS read the policy, it was entitled to such materials because the “local rules” referred to in the arbitration provision were located in Wis. Stat. ch. 804, which authorizes each of the aforementioned discovery tools. The Marlowes refused to comply with the request, explaining that they believed the “local rules” provision was ambiguous, and consequently understood Borst to limit discovery to the far narrower boundaries drawn in Wis. Stat. § 788.07, a provision allowing only for “the taking of depositions to be used as evidence before the arbitrators.” 6

¶ 5 After considering the parties' arguments on the issue, the arbitration panel ruled in IDS's favor, giving it the benefit of the broad arsenal of discovery devices described in Wis. Stat. ch. 804. In the unanimous view of the three arbitrators, [t]he term ‘local rules of procedure[,’] as the policy employs it, is both clear and informative. It denotes the civil rules of procedure that govern court proceedings daily in local courtrooms.” After the panel denied a motion to reconsider, the Marlowes filed an action in circuit court seeking a declaration under Wisconsin's Uniform Declaratory Judgment Act, Wis. Stat. § 806.04, that they had a legal right not to be subjected to the expansive discovery of ch. 804. The circuit court agreed and issued the requested order. At the hearing where it reached its determination, the circuit court explained that IDS should have included a more specific reference to the discovery it desired in its policy if it wanted to later take advantage of the breadth of ch. 804.

¶ 6 When the case reached the court of appeals, the tide returned to IDS's favor. In its decision, the court of appeals prohibited the Marlowes from turning to the courts before the arbitration proceedings were complete. Marlowe v. IDS Property Cas. Ins. Co., 2012 WI App 51, ¶¶ 8–18, 340 Wis.2d 594, 811 N.W.2d 894. Despite that prohibition, however, the court of appeals decided to reach the merits of the discovery dispute and affirmed both the panel's reading of the policy as well as its understanding of the panel's authority to shape the scope of discovery as it saw fit. Id., ¶¶ 19–27. On the first point—that of the interlocutory appeal—the court of appeals looked for guidance to federal cases addressing similar issues. Id., ¶¶ 10–17. The court of appeals discerned in those cases a rule that “interlocutory review of arbitration panels' intermediate decisions” is available only “under limited and unusual circumstances.” Id., ¶ 14. Seeing no such circumstances in the Marlowes' case, the court held that the circuit court should have waited until the panel rendered its final decision before weighing in on the discovery dispute. Id., ¶ 18.

¶ 7 The court of appeals framed the second issue as the scope of the arbitration panel's authority. According to the court, the panel had the “exclusive authority” to interpret the “local rules” provision because it “arguably refer[red] to the scope of discovery,” a procedural matter within the sole province of the panel under our opinion in Borst and that of the court of appeals in Employers Ins. of Wausau v. Certain Underwriters at Lloyd's London, 202 Wis.2d 673, 552 N.W.2d 420 (Ct.App.1996). Id., ¶ 27.

¶ 8 The Marlowes petitioned this court for review. In order to clarify several important features of the arbitration system and its relationship to the courts, we granted that petition.

II. STANDARD OF REVIEW

¶ 9 The first issue before us is whether the Marlowes' action for a declaratoryjudgment constituted an interlocutory appeal and, if so, whether it was permissible. Such an issue presents a purely legal question, and we thus consider it independently of the opinions by the circuit court and court of appeals, though benefitting from their analyses. See generally State ex rel. Hass v. Wis. Court of Appeals, 2001 WI 128, 248 Wis.2d 634, 636 N.W.2d 707.

¶ 10 With respect to the second issue—whether the arbitration panel was entitled to establish discovery procedures outside those outlined in Wis. Stat. § 788.07[t]he scope of judicial review of an arbitration decision is,” generally speaking, “very limited.” Orlowski v. State Farm Mut. Auto. Ins. Co., 2012 WI 21, ¶ 13, 339 Wis.2d 1, 810 N.W.2d 775 (citation omitted). As such, [t]here is a strong presumption of arbitrability where the contract in question contains an arbitration clause,” and [a]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Cirilli v. Country Ins. & Fin. Servs., 2009 WI App 167, ¶ 14, 322 Wis.2d 238, 776 N.W.2d 272 (citation omitted). Pursuant to the same deferential standards, an arbitrator's decision concerning an award will not be overturned unless “perverse misconstruction or positive misconduct is plainly established, or if there is a manifest disregard of the law, or if the award itself is illegal or violates strong public policy.” City of Madison v. Madison Prof'l Police Officers Ass'n, ...

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