Rizzo v. Allstate Ins. Co., 2016–0592

• Decision Date: 01 May 2018
• Docket Number: No. 2016–0592,2016–0592
• Parties: Joseph RIZZO v. ALLSTATE INSURANCE COMPANY
• Court: New Hampshire Supreme Court

170 N.H. 708

185 A.3d 836

Joseph RIZZO

v.ALLSTATE INSURANCE COMPANY

No. 2016–0592

Supreme Court of New Hampshire.

Argued: September 14, 2017

Opinion Issued: May 1, 2018

Boynton, Waldron, Doleac, Woodman & Scott, P.A., of Portsmouth (Francis X. Quinn, Jr. on the brief), and McDowell & Osburn, P.A., of Manchester (Gordon A. Rehnborg, Jr. on the brief and orally), for the plaintiff.

Primmer Piper Eggleston & Cramer PC, of Manchester (Gary M. Burt and Brendan D. O'Brien on the brief, and Mr. Burt orally), for the defendant.

BASSETT, J.

The defendant, Allstate Insurance Company, appeals an order of the Superior Court (Colburn, J.) granting the motion for partial summary judgment filed by the plaintiff, Joseph Rizzo, and denying the cross-motion for partial summary judgment filed by Allstate. Rizzo alleged he was injured in an automobile accident while a passenger in a car insured by Allstate. Rizzo sought uninsured motorist coverage under the Allstate policy, and, after Allstate denied his claim, the claim went to arbitration. The uninsured motorist provision in the Allstate policy provides that if the arbitration award exceeds $25,000, the financial responsibility limits in New Hampshire, see RSA 259:61, I (2014), the insured and Allstate have the right to elect a trial de novo following arbitration. Allstate rejected the arbitration award, which exceeded the financial responsibility limits, and requested a trial de novo. The trial court ruled that the trial de novo provision in the policy is not enforceable because it is unconscionable, ambiguous, and violates public policy, and confirmed the arbitration award. We reverse and remand.

The relevant facts are not in dispute. On September 9, 2009, Rizzo was a passenger in a car operated by Linda Matz. The car was struck from behind by a car that had been rear-ended by another vehicle driven by Genci Naum. Matz was insured by Allstate under a policy that provided $100,000 of uninsured/underinsured motorist coverage. Naum was insured by Liberty Mutual under a policy that had a $20,000 policy limit. The accident was Naum's fault. Rizzo alleged that he was injured in the collision.

Rizzo settled his personal injury claim against Naum for the $20,000 policy limit in Naum's Liberty Mutual policy. Because Rizzo claimed that his damages exceeded $20,000, he sought underinsured motorist coverage under Matz's Allstate policy. Allstate denied Rizzo's claim, asserting that his injuries were pre-existing, that any "related exacerbation of [his] alleged pre-existing condition would have been short lived," and that he had been fully compensated by the Liberty Mutual settlement. (Quotation omitted.) Rizzo demanded arbitration under the Allstate policy, which stated in part:

If the insured person or we don't agree on that person's right to receive any damages or the amount, then at the written request of either the disagreement will be settled by arbitration.

....

Regardless of the method of arbitration, any award not exceeding the limits of the Financial Responsibility law of New Hampshire will be binding and may be entered as a judgment in a proper court.

The arbitration panel awarded Rizzo $63,000, with a $20,000 offset for the Liberty Mutual settlement.

Shortly thereafter, Allstate informed Rizzo that it was rejecting the arbitration award, and that it was invoking its right to trial pursuant to a provision in the policy that provided:

Regardless of the method of arbitration, when any arbitration award exceeds the Financial Responsibility limits in the State of New Hampshire, either party has a right to trial on all issues in a court of competent jurisdiction.... Costs, including attorney fees, are to be paid by the party incurring them.

In response, Rizzo filed suit in superior court claiming breach of contract, and seeking to have the arbitration award confirmed, because the trial de novo provision in the Allstate policy was "unenforceable, ambiguous and void for violation of public policy." The parties filed cross-motions for partial summary judgment. The trial court granted Rizzo's motion for summary judgment, denied Allstate's motion, and confirmed the arbitration award. This appeal followed.

"A moving party is entitled to summary judgment if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits filed, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Jeffery v. City of Nashua, 163 N.H. 683, 685, 48 A.3d 931 (2012) (quotation omitted). "In reviewing the trial court's grant of summary judgment, we consider the affidavits and other evidence, and all inferences properly drawn from them, in the light most favorable to the non-moving party." Id. "If our review of that evidence discloses no genuine issue of material fact, and if the moving party is entitled to judgment as a matter of law, we will affirm the grant of summary judgment." Id. "We review the trial court's application of the law to the facts de novo." Id. at 686, 48 A.3d 931. The enforceability of a trial de novo provision in an automobile insurance contract is an issue of first impression for this court.

Allstate first argues that the trial court erred when it concluded that the trial de novo provision contravenes New Hampshire public policy that favors the use and finality of arbitration. It asserts that the "general policy favoring arbitration does not render a contractual provision making arbitration non-binding unenforceable." It further contends that, because neither state nor federal arbitration statutes prohibit parties from agreeing to non-binding arbitration, and Superior Court Civil Rule 30(b) specifically allows parties to elect non-binding arbitration as a means of solving disputes, the trial de novo provision is enforceable.

Rizzo counters that an " ‘arbitration’ that does not resolve a dispute with finality is not really an ‘arbitration.’ " He contends that New Hampshire public policy, as expressed by statute, favors the finality of arbitration awards by limiting a court's ability to vacate an arbitration award to situations involving "fraud, corruption, or misconduct by the parties or by the arbitrators," RSA 542:8 (2007), none of which are present in this instance. He further asserts that allowing trial de novo after arbitration "nullif[ies] the entire ‘arbitration,’ " and turns it into a "meaningless and unproductive waste of time and money." He also argues that the trial de novo provision is inconsistent with public policy that favors arbitration. We agree with Allstate that the trial de novo provision does not violate public policy regarding arbitration.

As a threshold matter, we note that under the trial de novo provision at issue, if an arbitration award does not exceed the financial responsibility limits, it is binding and can be modified or vacated only for the specific reasons set forth in RSA 542:8 (allowing a superior court to correct or modify an arbitration award for "plain mistake," or to vacate an award for "fraud, corruption, or misconduct"). However, if, as here, an arbitration award is greater than the financial responsibility limits, and a party exercises its contractual right to a trial de novo, there is no binding award for the trial court to confirm or vacate. Therefore, the trial de novo provision does not violate RSA 542:8.

Turning to the parties' public policy arguments, we recognize that, in general, parties to a contract "are bound by the terms of an agreement freely and openly entered into, and courts cannot make better agreements than the parties themselves have entered into or rewrite contracts merely because they might operate harshly or inequitably." Mills v. Nashua Fed. Sav's and Loan Assoc., 121 N.H. 722, 726, 433 A.2d 1312 (1981). However, "we will not enforce a contract or contract term that contravenes public policy." Harper v. Healthsource New Hampshire, 140 N.H. 770, 775, 674 A.2d 962 (1996).

An agreement is against public policy if it is injurious to the interests of the public, contravenes some established interest of society, violates some public statute, is against good morals, tends to interfere with the public welfare or safety, or, as it is sometimes put, if it is at war with the interests of society and is in conflict with the morals of the time.

Id. (quotation omitted). "Declaration of public policy with reference to a given subject is regarded as a matter primarily for legislative action." Welzenbach v. Powers, 139 N.H. 688, 690, 660 A.2d 1133 (1995) (quotation omitted).

It is notable that the New Hampshire Legislature has not made an explicit decision as to whether a trial de novo provision must—or cannot be—included in uninsured motorist policies. Other state legislatures have made an explicit policy choice. For example, California law requires that parties resolve uninsured motorist disputes by binding arbitration, and California courts have not enforced trial de novo provisions. See Chrisman v. Superior Court, 191 Cal.App.3d 1465, 236 Cal.Rptr. 703, 704–05 (1987) (holding that a trial de novo provision is unenforceable because Cal. Ins. Code § 11580.2(f) (2006) requires that uninsured motorist disputes be settled by binding arbitration). In contrast, Illinois law requires that uninsured motorist policies include trial de novo provisions. See Phoenix Ins. Co. v. Rosen, 242 Ill.2d 48, 350 Ill.Dec. 847, 949 N.E.2d 639, 652, 654 (2011) (holding that "if an insurance policy does not contain a trial de novo provision in its uninsured-motorist coverage, it is contrary to [ 215 Ill. Comp. Stat. Ann. 5/143a (1) (2006) ]").

In the absence of a clear legislative directive, courts in a number of states have concluded that trial de novo provisions are inconsistent with public policy favoring arbitration, and are, therefore, unenforceable. See, e.g., Worldwide Ins. Group v. Klopp, 603 A.2d 788, 791 (Del. 1992) ; Schmidt v. Midwest Family Mut....