Sullivan v. Great American Ins. Co.

• Decision Date: 01 May 1979
• Docket Number: No. 2564-III,2564-III
• Citation: 594 P.2d 454,23 Wn.App. 242
• Court: Washington Court of Appeals
• Parties: Nellie M. SULLIVAN and Jay Sullivan, Appellants, v. GREAT AMERICAN INSURANCE COMPANY, Respondent.

Page 242

23 Wn.App. 242

594 P.2d 454

Nellie M. SULLIVAN and Jay Sullivan, Appellants, v. GREAT AMERICAN INSURANCE COMPANY, Respondent.

No. 2564-III.

Court of Appeals of Washington, Division 3, Panel Three.

May 1, 1979.

Halverson, Applegate & McDonald, David H. Putney, Yakima, for appellants.

Nashem, Prediletto, Schussler & Halpin, Don W. Schussler, Yakima, for respondent.

McINTURFF, Judge.

This appeal concerns an arbitration proceeding entered into by the insureds and their insurer regarding uninsured motorist coverage and the modification of the arbitration award by the court in conformity with the policy limits.

On May 12, 1973, the insureds, Mr. and Mrs. Sullivan, were involved in an accident with an uninsured motorist, Edward Lopez. The Sullivans had uninsured motorist coverage under two insurance policies issued by the defendant Great American Insurance Co. (Great American). Each policy provided uninsured motorist coverage of $15,000 per person or $30,000 per accident plus $2,000 per person in medical payments, for a total coverage of $68,000. The parties negotiated a settlement under one policy but were unable to agree upon the amount to be paid under the second policy. The question of damages was submitted to arbitration as required by the terms of the policy.

Before initiation of the arbitration proceedings, Great American communicated to the Sullivans its belief that it would be improper to inform the arbitrator of the extent of insurance coverage. ¹ The Sullivans made no effort to advise the arbitrator of the policy limits. A formal arbitration hearing was held, testimony was taken, and evidence was adduced. Thereafter, the arbitrator informed the parties of his conclusion by letter:

Gentlemen:

Hearing a case of this type makes one appreciate the problems which a jury must consider in arriving at a fair verdict. In light of all the testimony and the medical evidence submitted, I find damages as follows: For Nellie Sullivan, the sum of $38,000; for Jay Sullivan, the sum of $68,000.

/s/ Lonnie R. Sukow

/s/ June 7, 1977

Following receipt of the June 7 letter, the arbitrator was advised by Great American that the insurance policy in question afforded coverage of only $34,000. The arbitrator then wrote a second letter to the parties on July 6, 1977, in which he entered a "final award" in favor of the plaintiffs for $34,000, to be divided between them "as their interests appear". This amount represented the balance of the uninsured motorist coverage which Great American had not previously paid to the Sullivans.

The Sullivans then commenced this action seeking confirmation of the arbitration award according to the terms of the arbitrator's letter on June 7 in the amount of $106,000. The Sullivans argued that Great American's conduct up to and during the course of the arbitration proceedings amounted to a waiver of the policy coverage limits. Thus, the insurer was alleged to be responsible for the entire amount of damages as determined by the arbitrator in the June 7 letter. The trial court found no waiver by Great American and held the arbitrator to be without power to enter an order in an amount greater than the policy limits, $34,000.

The Sullivans argue that Great American agreed to be bound by the terms of the arbitrator's decision; that it was incumbent upon Great American to limit its liability by establishing the policy limits in arbitration; that the arbitrator's letter of June 7 was a final decision; and thereafter, he was without jurisdiction to reduce the award.

The insurance policy contained the following provision respecting arbitration:

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 automobile because of bodily injury to the insured, or do not agree as to The amount of payment which may be owing under this part, then upon written demand of either, the matter or matters upon which such person and the company do not agree shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Such person and the company each agree to consider itself bound and to be bound by any award made by the arbitrators Pursuant to this part.

(Italics ours.)

An agreement for the submission of a dispute to arbitration defines and limits the issues to be decided. The authority of the arbitrator is wholly dependent upon the terms of the agreement of submission. The arbitration award must concern only those matters included within the agreement for submission and must not exceed the powers established by the submission. ²

The language employed in the agreement to arbitrate "making claim hereunder . . . the amount of payment owing under this part, . . . pursuant to this part" strongly indicates that the parties intended to be bound by the terms of the uninsured motorist provisions of the policy. Since the policy coverage limits for uninsured motorist protection were a part of the submission agreement, the arbitrator was without authority to make an award in...