State Farm Mut. Auto. Ins. Co. v. Cabs, Inc., 86SA124

• Decision Date: 22 February 1988
• Docket Number: No. 86SA124,86SA124
• Citation: 751 P.2d 61
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Petitioner-Appellee, Cross-Appellant, v. CABS, INC., a Colorado corporation, d/b/a Zone Cab Company, Respondent- Appellant, Cross-Appellee.
• Court: Colorado Supreme Court

Page 61

751 P.2d 61

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Petitioner-Appellee, Cross-Appellant, v. CABS, INC., a Colorado corporation, d/b/a Zone Cab Company Respondent- Appellant, Cross-Appellee.

No. 86SA124.

Supreme Court of Colorado En Banc.

Feb. 22, 1988.

Creamer, Seaman & Levy, P.C., Marc R. Levy, Donald R. Brockus, Thomas J. Marrese, Englewood, for petitioner-appellee, cross-appellant.

Madden and Strate, P.C., Robert J. Carlson, Wheat Ridge, for respondent-appellant, cross-appellee.

ROVIRA, Justice.

Cabs, Inc., d/b/a Zone Cab Company (Zone), appeals an order of the district court confirming an arbitration award entered against it, claiming that the statute authorizing the arbitration is unconstitutional. State Farm Mutual Automobile Insurance Company (State Farm) cross-appeals, alleging that the district court erred in allowing Zone to present substantive defenses to confirmation of the arbitration award. Although under the Uniform Arbitration Act (U.A.A. or Act), §§ 13-22-201 to -223, 6A C.R.S. (1987), Zone's objections regarding the authority of the arbitrators to address a given dispute may be raised before the district court in a proceeding for vacating an award, Zone is time-barred by the statute from raising its substantive defenses. Therefore, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I.

This case arose from an automobile accident in November 1981, between a private automobile driven by Thomas Doddato and a taxicab owned by Zone. State Farm was Doddato's no-fault insurer. As a result of the accident, the Gonzales family, passengers in Doddato's vehicle, suffered injuries. The Gonzaleses received medical treatment and other benefits pursuant to Doddato's personal injury protection (P.I.P.) coverage with State Farm.

Zone, a taxicab company regulated and licensed by the Colorado Public Utilities Commission, operates non-private passenger motor vehicles on a for-hire basis. Zone is self-insured for no-fault benefits up to a $25,000 limit of coverage, and thereafter has umbrella coverage with a liability insurer. At the time of the accident, Zone maintained a certificate of self-insurance as provided for under section 10-4-716, 4A C.R.S. (1987).

In 1981 the Colorado No-Fault Statute, §§ 10-4-701 to -723, 4 C.R.S. (1973), provided a cause of action, enforceable by arbitration proceedings, under which State Farm could recover P.I.P. benefits paid the Gonzaleses "against the owner, user, or operator of the non-private passenger motor vehicle, or against any such person or organization legally responsible for the acts or omissions of such owner, user, or operator...." See § 10-4-713(2), 4 C.R.S. (1980 Supp.). No similar right of subrogation was available against owners or users of private passenger motor vehicles. ¹ Thus, at the time of the accident, Zone was responsible for maintaining insurance or self-insurance adequate to provide no-fault benefits to its passengers, but was also potentially liable for P.I.P. benefits paid the Gonzales family by State Farm.

State Farm demanded arbitration against Zone, through the Denver Arbitration Committee (Committee), seeking an award of its subrogated interest for payment on its policy for those injured in an accident in a private passenger vehicle, pursuant to section 10-4-713(2), 4 C.R.S. (1980 Supp.), and section 10-4-717(1)(a) and (b), 4 C.R.S. (1973 & 1980 Supp.). ² Zone did not participate in the arbitration proceeding, other than to request a continuance and file a statement with the Committee in which it took the position that the Committee did not have jurisdiction over it because section 10-4-713(2) was unconstitutional.

On March 27, 1985, the Committee entered an award against Zone in the amount of $24,686.78. On that same date, notice of the award was sent to Zone. State Farm filed a petition in Denver District Court on September 27, 1985, requesting an order confirming the arbitration award, pursuant to section 13-22-213, 6A C.R.S. (1987). Zone moved to dismiss under C.R.C.P. 12(b)(1) and (5) alleging that the Committee lacked subject matter jurisdiction and that the petition failed to state a claim upon which relief can be granted. Zone argued that the statute under which the Committee asserted its jurisdiction is unconstitutional and therefore, any resulting award is void. ³

In response, State Farm alleged: (1) that the U.A.A. does not permit the filing of a C.R.C.P. 12(b) motion in response to a petition to confirm an arbitration award; (2) Zone cannot assert its substantive defenses to confirmation of the award because it failed to request a stay of arbitration, or to move to vacate or amend the award within the time limits provided in the U.A.A.; and (3) the challenged statute is constitutionally valid.

Following a hearing the district court confirmed the arbitration award and ruled against State Farm on its procedural objections. In the words of the court: "[I]t just seems that the court could not confirm the order of arbitration if the statute upon which the claim arose is unconstitutional."

As to Zone's constitutional argument the court agreed with the parties that the rational basis test is the appropriate standard by which to judge the statute's unconstitutionality. Next, it found that the distinction between vehicles for hire and private passenger vehicles is a valid and reasonable one. Finally, the court found that there is clearly a rational relationship between the classification and a legitimate state interest in putting "some kind of ceiling on the cost that would be borne by the voters of this state ..." and that a way to do that would be to "delete from the no-fault bill those kinds of vehicles which are generally regulated anyway and which rely upon fares to make money," thereby "limiting some of the expenses to the insurance companies." The court denied Zone's motion to dismiss, granted State Farm's petition to confirm, and entered judgment against Zone in the amount of $24,686.78 plus costs.

Zone now appeals to this court claiming that the trial court erred in holding section 10-4-713(2), 4 C.R.S. (1980 Supp.), constitutional. ⁴ State Farm cross-appeals contending that the court erred in considering Zone's substantive arguments relating to the statute's constitutionality, because Zone failed, as required by the U.A.A., § 13-22-214(2), 6A C.R.S. (1987), to raise an objection to the arbitration award within ninety days after receiving notice of the award.

II.

The parties present differing starting points for the analysis. Zone suggests that the constitutionality of the no-fault statute at issue, § 10-4-713(2), is the logical starting point. In the absence of a contractual agreement to arbitrate, jurisdiction to arbitrate between the parties can only be conferred by statute, specifically, section 10-4-717. Zone argues that if the statute giving rise to the claim for legal liability, § 10-4-713(2), is unconstitutional, then the arbitrators would not be empowered to hear this dispute, any award granted would be void, and the trial court would be deprived of subject matter jurisdiction.

But arbitration in the instant case was based not on any agreement, but on statutory provisions which make fully applicable provisions of the U.A.A. for the resolution of certain disputes. Zone did maintain a certificate of self-insurance, and qualifies as a self-insurer under section 10-4-716. Zone is, therefore, an insurer under the provisions of the no-fault act. See § 10-1-102(8), 4A C.R.S. (1987). According to section 10-4-717(1)(a) and (b), 4 C.R.S. (1973 & 1980 Supp.), where the insured is or would be held legally liable under the provisions of section 10-4-713(2), "the issue of liability for such reimbursement and the amount thereof shall be decided by mandatory, binding inter-company arbitration procedures approved by the commissioner." Thus, the statute specifies that once a claim for legal liability under section 10-4-713(2) becomes established, issues of reimbursement and the amount thereof shall be addressed by arbitration, making fully applicable the provisions of the U.A.A.

Once its provisions come into play, the U.A.A. imposes a self-contained procedural apparatus, with provisions for challenging an arbitrator's exercise of power. If properly taken advantage of, the statutory scheme outlined in the U.A.A. would have enabled Zone to place its substantive concerns before the district court. But by failing to move for an order vacating the award within the statutory time limits, Zone, in effect, waived its right to object to confirmation of the arbitration award.

C.R.C.P. 1(a), which deals with the scope of the civil rules of procedure in various judicial proceedings, states in relevant part: These rules govern the procedure in the supreme court, court of appeals, district court and superior courts and in the juvenile and probate courts of the City and County of Denver, in all actions, suits and proceedings of a civil nature, whether cognizable as cases at law or in equity, and in all special statutory proceedings, with the exceptions stated in Rule 81 [C.R.C.P.].

C.R.C.P. 81(a) goes on to state that "[t]hese rules do not govern procedure and practice in any special statutory proceeding insofar as they are inconsistent or in conflict with the procedure and practice provided by the applicable statute."

In interpreting C.R.C.P. 81(a), we have held that the rules of civil procedure do not apply where there is a special statutory proceeding which sets forth remedies (and the rules of civil procedure are inconsistent or in conflict therewith). Brown v. Hansen, 177 Colo. 39, 493 P.2d 1086 (1972); City of Westminster v. District Court, 167 Colo. 236, 447 P.2d 537 (1968); Wright v. Tinsley, 148 Colo. 258, 365 P.2d 691 (1961). Arbitration is a special statutory proceeding, and the U.A.A. sets out in precise detail the rules...