Pepin v. American Universal Ins. Co., s. 87-230-A

• Decision Date: 20 April 1988
• Docket Number: Nos. 87-230-A,s. 87-230-A
• Citation: 540 A.2d 21
• Parties: Leon PEPIN v. AMERICAN UNIVERSAL INSURANCE CO. Lena RICCI et al. v. INSURANCE COMPANY OF NORTH AMERICA. ppeal, 87-386-Appeal.
• Court: Rhode Island Supreme Court

Page 21

540 A.2d 21

Leon PEPIN v. AMERICAN UNIVERSAL INSURANCE CO.

Lena RICCI et al. v. INSURANCE COMPANY OF NORTH AMERICA.

Nos. 87-230-Appeal, 87-386-Appeal.

Supreme Court of Rhode Island.

April 20, 1988.

William G. Savastanto, North Smithfield, for Pepin.

Ronald J. Resmini, Providence, for Ricci.

James Marusak, Providence, for American Universal.

David P. Whitman, Providence, for Ins. Co. of North America.

OPINION

SHEA, Justice.

These cases are consolidated for appeal. The plaintiffs appeal from Superior Court orders denying their motions to confirm arbitration awards. Both of these arbitration awards were in excess of $25,000. In both cases the trial justice ¹ ruled that a clause in the uninsured-motorist-coverage section of the plaintiffs' insurance contracts that allows either party to demand trial de novo when an arbitration award exceeds $25,000 was enforceable. We reverse.

The material facts of both cases are virtually identical. Both plaintiffs suffered injuries resulting from automobile collisions with uninsured motorists. They each made claims under the uninsured-motorist-coverage sections of their insurance contracts. After plaintiffs and their insurers failed to agree on settlement of their claims, plaintiffs exercised their contractual right to demand arbitration. The contracts provided in relevant part:

"If [the insurer] and a covered person do not agree:

1. Whether that person is legally entitled to recover damages under this Part; or

2. As to the amount of damages;

either party may make a written demand for arbitration."

In each case three-member arbitration panels were formed and heard arguments from the parties. On October 6, 1986, plaintiff Ricci was awarded $26,485.75. On December 17, 1986, plaintiff Pepin was awarded $40,000. Each plaintiff then moved to have the awards confirmed by the Superior Court.

Both defendant insurance companies opposed plaintiffs' motions. They also exercised what they believed to be contractual rights to demand trials de novo. They relied on the provisions in the insurance policies that state in relevant part:

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

* * *

* * *

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."

The defendants argued that because the awards were above the $25,000-minimum limit for bodily injury under G.L. 1956 (1982 Reenactment) § 31-31-7, they were entitled to demand trials de novo. The plaintiffs responded that the trial de novo provisions in the contracts run in direct contradiction to the Arbitration Act by allowing a party to escape enforcement of a valid arbitration decision.

We have repeatedly stated that the purpose of arbitration is to provide a quick and inexpensive means finally to resolve a dispute. For example, in Dutson v. Nationwide Mutual Insurance Co., 119 R.I. 801, 805, 383 A.2d 597, 599 (1978), we stated, "The whole purpose of arbitration is to provide an alternative procedure whereby two or more parties can finally resolve their differences in an expeditious and economical proceeding." Similarly, in Soprano v. American Hardware Mutual Insurance Co., 491 A.2d 1008, 1011 (R.I. 1985), we stated, "One of the most significant advantages of arbitration * * * is that it is a relatively prompt means of concluding a dispute."

"Arbitration is a desirable method of dispute resolution that long has been favored by the courts." Soprano, 491 A.2d at 1011. The Legislature has also endorsed and encompassed this "favored status" in the ...