Ohio Cas. Ins. Co. v. Benson
Citation | 432 A.2d 905,87 N.J. 191 |
Parties | OHIO CASUALTY INSURANCE COMPANY, Plaintiff-Respondent, v. Cornell J. BENSON, Defendant-Appellant. |
Decision Date | 23 July 1981 |
Court | United States State Supreme Court (New Jersey) |
Steven K. Kudatzky, Haddonfield, for defendant-appellant (Tomar, Parks, Seliger, Simonoff & Adourian, Haddonfield, attorneys; Steven K. Kudatzky and Michael A. Kaplan, Haddonfield, on the brief).
James A. Mullen, Jr., Cherry Hill, for plaintiff-respondent (Montano, Summers, Mullen & Manuel, Cherry Hill, attorneys).
The opinion of the Court was delivered by
The sole issue is whether, under the arbitration clause of an uninsured motorist endorsement, the question of the existence of a "phantom" hit and run driver should be decided by a court, as a preliminary matter, or by an arbitrator.
We hold that, under the policy in this case, the issue is not a question for the court, but one, together with issues of negligence and damages, for the arbitrator.
On December 7, 1977, a car driven by defendant, Cornell Benson, went off the road and crashed into a tree. Benson filed a claim for benefits under the uninsured motorist endorsement of an automobile insurance policy issued to him by plaintiff Ohio Casualty Insurance Company (Ohio Casualty). Benson claims his damages were caused by a "phantom" hit and run driver who had forced him off the road without hitting his vehicle. Ohio Casualty and Benson could not agree on the damages payable under the uninsured motorist endorsement, so Benson sought arbitration under the policy.
The arbitration clause of the policy provided:
If any person making claim hereunder and the company do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured highway vehicle ... or do not agree as to the amount of payment which may be owing under this insurance, then ... the matter or matters upon which such person and the company do not agree shall be settled by arbitration ....
In addition, the coverage clause of the endorsement states that "(t)he company will pay all sums which the insured ... shall be legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle ..., provided ... determination as to whether the insured ... is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured ... and the company or, if they fail to agree, by arbitration." With respect to compensation for bodily injury, the policy includes hit and run drivers within its definition of "uninsured highway vehicle."
After Benson requested arbitration, Ohio Casualty instituted a civil action seeking a declaratory judgment that the endorsement did not cover the accident. Ohio Casualty also sought an injunction against arbitration. Benson moved to dismiss the complaint, but the trial court denied the motion. The Appellate Division denied, but we granted leave to appeal. 85 N.J. 491, 427 A.2d 581 (1980). We now reverse the trial court and grant the motion to dismiss the complaint.
This Court has never expressly considered whether the liability of a hit and run driver to the insured subsumes the issue of the existence of a hit and run driver. Cf. Perez v. American Bankers Ins. Co., 81 N.J. 415, 417, 409 A.2d 269 (1979) ( ); In re Grover, 80 N.J. 221, 228-229, 403 A.2d 448 (1979) ( ). The Appellate Division, however, has concluded "that questions of coverage, even when depending for their resolution upon pure questions of fact, equally related to the concededly arbitrable questions of the insured's liability and fault, must be determined in a court of law, before the arbitration (if there is to be any) is commenced." Government Employees Ins. Co. v. Bovit, 142 N.J.Super. 268, 273, 361 A.2d 100 (1976), certif. den. 71 N.J. 502, 366 A.2d 658 (1976). See New Jersey Mfrs. Ins. Co. v. Franklin, 160 N.J.Super. 292, 297, 389 A.2d 980 (App.Div.1978) ( ); Satzinger v. Satzinger, 156 N.J.Super. 215, 220, 383 A.2d 753 (App.Div.1978) ( ); Keystone Ins. Co. v. Bowman, 138 N.J.Super. 544, 548, 351 A.2d 767 (App.Div.1976) ( ). Cf. Korshalla v. Liberty Mut. Ins. Co., 154 N.J.Super. 235, 239, 381 A.2d 88 (Law Div.1977) ( ). In Bovit, supra, the Appellate Division held that the existence of a "phantom" hit and run driver was an issue of coverage and thus "must ... be resolved by a court of law before any arbitration proceedings can commence." 142 N.J.Super. at 274, 361 A.2d 100.
Many courts in other states have construed the arbitration clause as reposing in the arbitrator primary jurisdiction over some or all issues of coverage. See Van Tassel v. Superior Court of Fresno Cty., 12 Cal.3d 624, 526 P.2d 969, 116 Cal.Rptr. 505 (1974) ( ); Orpustan v. State Farm Mut. Auto. Ins. Co., 7 Cal.3d 988, 500 P.2d 1119, 103 Cal.Rptr. 919 (1972) ( ); McGovern v. Middlesex Mut. Ins. Co., 359 Mass. 443, 269 N.E.2d 445 (1971) ( ); Employers' Fire Ins. Co. v. Garney, 348 Mass. 627, 205 N.E.2d 8 (1965) ( ); Detroit Auto. Inter-Ins. Exch. v. Spafford, 62 Mich.App. 365, 233 N.W.2d 283 (1975) ( ); Maryland Cas. Co. v. McGee, 32 Mich.App. 539, 189 N.W.2d 44 (1971) ( ); Dunshee v. State Farm Mut. Auto. Ins. Co., 303 Minn. 473, 228 N.W.2d 567 (1975) ( ); Northwestern Security Ins. Co. v. Clark, 84 Nev. 716, 448 P.2d 39 (1968) ( ); Firemen's Ins. v. Petrie, 10 Ohio Misc. 188, 39 Ohio Op.2d 286, 226 N.E.2d 808 (1966) ( ); Fawyer v. Allstate Ins. Co., 267 Or. 292, 516 P.2d 743 (1973) ( ); Allstate Ins. Co. v. McMonagle, 449 Pa. 362, 296 A.2d 738 (1972) ( ); National Grange Mut Ins. Co. v. Kuhn, 428 Pa. 179, 236 A.2d 758 (1968) ( ). The rationale of these cases follows from the impracticality of bifurcating the decision making process in uninsured motorist claims. In justifying expanded construction of the arbitration clause, these courts have sometimes found that the clause is ambiguous and thus should be construed as allowing arbitration. An expansive approach is supported by the public policy favoring arbitration 1 and by the construction of ambiguous insurance contracts most favorable to the insured. 2 In addition, these courts have asserted that a limited arbitrability approach conflicts with the strong public policy against clogging the courts with piecemeal litigation.
A leading commentator has criticized the limited arbitrability construction of the arbitration clause presented in this case:
Allowing the insurance company to stay the arbitration pending the determination of whether coverage exists means that a claimant may be forced through a multiple adjudicative process often including three stages: first, a judicial hearing to determine whether the arbitration should be stayed, then a judicial resolution of whether coverage exists, and finally an arbitration to ascertain the liability of the uninsured motorist for purposes of the uninsured motorist coverage .... (A)n adjudicative process which subjects claimants to a series of two or three separate hearings is certainly suspect, and probably undesirable.
The system also negates what is generally urged as one of the principal advantages of arbitration: the avoidance of delay inherent in the use of the court system. (A. Widiss, A Guide to Uninsured Motorist Coverage § 6.23 at 208-209 (1969)).
In addition, Professor Widiss states that the limited arbitrability approach "conflicts with the generally accepted proposition that once a controversy is brought before a tribunal, it is desirable to litigate and dispose of all the related issues between the parties ...." Id. § 6.18 at 203.
Many other courts, however, have concluded that resolution of coverage questions under an uninsured motorist endorsement is for the courts and that only the issues of the uninsured's liability and damages should be submitted to an arbitrator. See State Farm Fire & Cas. Co. v. Rossini, 14 Ariz.App. 235, 241, 482 P.2d 484, 490 (1971) (, )rev'd and remanded on other grounds, 107 Ariz. 561, 490 P.2d 567 (1971); International Serv. Ins. Co. v. Ross, 169 Colo. 451, 464, 457 P.2d 917, 924 (1969) (...
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