State Farm Mut. Auto. Ins. Co. v. Guleserian

• Citation: 28 Cal.App.3d 397,104 Cal.Rptr. 683
• Court: California Court of Appeals
• Decision Date: 30 October 1972
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a corporation, Plaintiff and Respondent, v. Aghauni GULESERIAN, Defendant and Appellant. Civ. 39540.

Page 683

104 Cal.Rptr. 683

28 Cal.App.3d 397

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a corporation, Plaintiff and Respondent, v. Aghauni GULESERIAN, Defendant and Appellant.

Civ. 39540.

Court of Appeal, Second District, Division 1, California.

Oct. 30, 1972.

William T. Brandlin, Los Angeles, for defendant and appellant.

Spray, Gould & Bowers, and Daniel O. Howard, Los Angeles, for plaintiff and respondent.

THOMPSON, Associate Justice.

This is an appeal from an order vacating an arbitrator's award in an arbitration conducted pursuant to the provisions of the Uninsured Motorist Law. By reason of Orpustan v. State Farm Mut. Auto Ins. Co., 7 Cal.3d 988, 103 Cal.Rptr. 919, 500 P.2d 1119, decided while this appeal was pending, we reverse the order of the trial court.

Respondent, State Farm, issued its policy of automobile liability insurance to Vahan Guleserian. The policy includes uninsured motorist coverage and provisions for arbitration. 'Coverage U' of the policy provides in pertinent part that State Farm agrees 'To pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of (an) uninsured automobile. . . .' In a section of the policy entitled 'Definitions,' it reads: 'Uninsured Automobile--under coverage U means: (1) a land motor vehicle with respect to the ownership, maintenance or use of which . . . no bodily injury liability bond or insurance policy (was) applicable at the time of the accident . . .; or (2) a hit-and-run automobile as defined . . . Hit-and-Run Automobile--under coverage U means a land motor vehicle which causes bodily injury to an insured arising out of physical contact of such vehicle with the insured or with an automobile which the insured is occupying at the time of the accident, provided: . . .' the identity of the owner or operator of which cannot be ascertained.

The policy provides for arbitration in the following terms: 'for the purposes of this coverage (U), determination as to whether the insured or (his legal) representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured or such representative and the company or, if they fail to agree, by arbitration.' Paragraph 10 of 'Conditions' of the policy states: 'Arbitration. If any person making claim under coverage U and the company do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured automobile because of bodily injury to the insured, or do not agree as to the amount payable hereunder, then each party shall, upon written demand of either, select a competent and disinterested arbitrator. The two arbitrators so named shall select a third arbitrator . . . The two arbitrators shall then hear and determine . . . the questions so in dispute, and the decision in writing of any two arbitrators shall be binding upon the insured and the company. . . .'

The insured, Vahan Guleserian, was killed as the result of an accident involving his automobile and that of a hit-and-run driver. Appellant, his widow, filed a claim under the uninsured motorist provisions of the insurance policy issued by respondent. Apparently recognizing the provisions of Insurance Code section 11580.2 that the issues raised by an unresolved claim for uninsured motorist coverage should be determined in a proceeding 'conducted by a single neutral arbitrator,' the parties ignored the policy language providing for a board of three arbitrators and referred the matter to George O. West as the single neutral arbitrator.

Mr. West, after hearing the matter, found that Mr. Guleserian, the deceased insured, had been contributorily negligent. He, however, interpreted the Insurance Code as imposing absolute liability upon the uninsured motorist insurance carrier in 'the hit-and-run situation,' irrespective of contributory negligence of the insured or lack of negligence of the uninsured motorist. Accordingly, he awarded damages to appellant in the amount of $7,537.41. Respondent, State Farm, filed a petition to vacate award in the superior court. That court granted the petition. On this appeal from that order, appellant contends: (1) The award of the arbitrator must be upheld even if based upon an erroneoud legal concept; and (2) in any event, the award is correct as a matter of law. Compelled by the recent decision of our Supreme Court in Orpustan v. State Farm Mut. Auto Ins. Co., Supra, 7 Cal.3d 988, 103 Cal.Rptr. 919, 500 P.2d 1119, we conclude that issue, upon which the arbitrator based his decision, was properly before him. We conclude also that, although the arbitrator's decision may have been based upon an error in law, it may not be set aside.

Subparagraph (a) of Insurance Code section 11580.2 requires that a policy of automobile bodily injury liability insurance contain a provision 'insuring the insured . . . for all sums . . . which he . . . shall be legally entitled to recover as damages for bodily injury or wrongful death from the owner or operator of an uninsured motor vehicle' unless the provision is waived as provided in the section. An 'uninsured motor vehicle' is defined by the statute to include a motor vehicle whose 'owner or operator (is) unknown.' Subparagraph (f) of section 11580.2 requires that: 'The policy . . . shall provide that the determination as to whether the insured shall be legally entitled to recover damages, and if so entitled, the amount thereof, shall be made by agreement between the insured and the insurer or, in the event of disagreement, by arbitration.'

Insurance Code section 11580.2 thus differs from the provisions of the policy in its statement of the issue to be referred to the arbitrator. The policy defines the issue to be resolved by agreement, or failing that, by arbitration, as whether the insured '(is) legally entitled to recover damages from the owner or operator of an uninsured automobile because of bodily injury to the insured.' Subparagraph (f) of the statute defines it as 'the determination as to whether the insured shall be legally entitled to recover damages'. If section 11580.2 imposes a broader obligation to arbitrate then is provided in the policy, the statute controls. (Aetna Cas. & Surety Co. v. Superior Court, 233 Cal.App.2d 333, 336, 43 Cal.Rptr. 476.) We thus must decide whether the phrase 'the determination as to whether the insured shall be legally entitled to recover damages,' used in subparagraph (f) of section 11580.2, means damages 'for bodily injury or wrongful death from the owner or operator of an uninsured motor vehicle' as the phrase is used in subparagraph (a) of the statute, or means damages recoverable from the insurer upon the insured's claim under his uninsured motorist coverage. The former meaning is consistent with the policy and, if applied, validates the trial court's determination that the arbitrator decided the matter upon an issue (absolute liability of the insurer to the insured) that was not properly before him. The latter meaning, if applied, leads to the conclusion that the arbitrator did not exceed his power.

Court of Appeal opinions extant when the matter was before the trial court generally followed the principle that, in an arbitration limited in scope to that required by subparagraph (f) of section 11580.2 and not broadened by the terms of the submission itself, the 'issues relate to the liability of the uninsured motorist to the insured, not to the amount of money the insurance company must pay. . . .' (Commercial Ins. Co. of Newark, New Jersey v. Copeland, 248 Cal.App.2d 561, 564, 56 Cal.Rptr. 794, 797; Fisher v. State Farm Mut. Auto. Ins. Co., 243 Cal.App.2d 749, 751, 52 Cal.Rptr. 721.) The conflict between that principle and the policy underlying arbitration of uninsured motorist disputes and the disarray in decisional law resulting from its application were highlighted in scholarly detail in an opinion of the Court of Appeal in Felner v. Meritplan Ins. Co., 6 Cal.App.3d 540, 86 Cal.Rptr. 178. The Felner opinion concludes with the observation that 'it would be helpful for the Supreme Court to clarify the somewhat confusing body of procedural law which has grown up in uninsured motorist coverage and indicate the scope of future arbitration submissions.' (6 Cal.App.3d at p. 547, 86 Cal.Rptr. at p. 182.) No petition for hearing was filed in Felner, however.

The question of the scope of issues deemed submitted to arbitration by subparagraph (f) of section 11580.2 reached our Supreme Court in Orpustan v. State Farm Mut. Auto Ins. Co., Supra, 7 Cal.3d 988, 103 Cal.Rptr. 919, 500 P.2d 1119. There, a plaintiff sued to compel arbitration of a claim for uninsured motorist coverage contained in a policy identical with that in the case at bench. The insurer defended on the ground that the injuries were not...