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BOLE v. NATIONWIDE INSURANCE COMPANY (12/22/75)

decided: December 22, 1975.

BOLE, APPELLANT,
v.
NATIONWIDE INSURANCE COMPANY



Appeal from order of Court of Common Pleas, Civil Division, of Allegheny County, Oct. T., 1974, No. 570, in case of Edward Harry Bole v. Nationwide Insurance Company.

COUNSEL

Louis Kwall, with him Lebovitz, Lebovitz & Kwall, for appellant.

Charles J. Duffy, Jr., with him James E. Coyne, and Lancaster, Mentzer, Coyne and Duffy, for appellee.

Watkins, P. J., Jacobs, Hoffman, Cercone, Price, Van der Voort, and Spaeth, JJ. Opinion by Spaeth, J. Hoffman and Cercone, JJ., join in this opinion. Concurring and Dissenting Opinion by Van der Voort, J. Watkins, P.j., joins in this concurring and dissenting opinion. Dissenting Opinion by Price, J. Jacobs, J., joins in this dissenting opinion.

Author: Spaeth

[ 238 Pa. Super. Page 139]

Appellant was severely injured when an automobile in which he was a passenger was involved in an accident with another automobile in November, 1970. When his

[ 238 Pa. Super. Page 140]

    recovery by way of settlement with the insurance carrier of the other automobile's driver proved inadequate, appellant made a claim against appellee under the uninsured motorist coverage provisions of an insurance policy that appellant had purchased from appellee. The parties submitted the claim to common law arbitration pursuant to a clause in the policy that provided that each party should select a "competent and disinterested arbitrator," and that the two arbitrators so selected should select a third. When appellee selected Carl W. Brueck, Jr., Esquire, appellant objected, since Brueck had provided legal representation to appellee in the past. Brueck, however, refused to disqualify himself.

The arbitrators found against appellant and in favor of appellee; the arbitrator whom appellant had selected dissented. On appeal, the Court of Common Pleas of Allegheny County confirmed the award. This appeal ensued.

A majority of the court agree that remand is required. There is substantial disagreement, however, as to the scope of the remand. Judge Van der Voort, joined by the President Judge, would apply a per se rule disqualifying an arbitrator who has in the past represented one of the parties to the arbitration, without regard to whether the arbitrator is actually biased in that party's favor. They would therefore remand with directions that a new panel of arbitrators be selected, and another hearing be held. Judge Price, joined by Judge Jacobs, is of the view that arbitrators selected by the parties need not be neutral. They would therefore affirm the lower court's order confirming the award. Judge Hoffman and Judge Cercone have joined me in a middle position. I cannot join Judge Price, and Judge Jacobs, in what seems to me a limited view of our responsibility to ensure fairness; nor can I agree with them that the arbitration here was "bargained for." I do, however, agree with them that the record does not disclose actual bias. Therefore, while I concur with Judge Van der Voort, and the President

[ 238 Pa. Super. Page 141]

Judge, that relief should be granted, I would grant less relief, and therefore would order a more limited remand, than they would.

I

The difficulty in this case arises from a paradox inherent in the process of arbitration. Arbitration is "a system designed to provide an expeditious and inexpensive method of resolving disputes with the further winning attribute of helping to ease congested court calendars." Allstate Ins. Co. v. Fioravanti, 451 Pa. 108, 116, 299 A.2d 585, 589 (1973). Consequently, judicial review of a common law arbitration award is severely circumscribed:

". . . appellant, to succeed, must show by clear, precise and indubitable evidence that he was denied a hearing, or that there was fraud, misconduct, corruption or some other irregularity of this nature on the part of the arbitrator which caused him to render an unjust, inequitable, or unconscionable award, the arbitrator being the final judge of both law and fact, his award not being subject to disturbance for a mistake of either." Allstate Insurance Co. v. Fioravanti, supra at 114, 299 A.2d at 588.*fn1

The paradox is that this very circumscription, or insulation from judicial supervision, requires the courts to be particularly vigilant to ensure that the arbitration is impartial. As Mr. Justice Black has explained: ". . . we should, if anything, be even more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts and are not subject to appellate review." Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 149 (1968).*fn2

[ 238 Pa. Super. Page 142]

From this responsibility it follows, as Judge (later Chief Judge) Fuld of the Court of Appeals of New York has stated, that "in an appropriate case, the courts have inherent power to disqualify an arbitrator before an award has been rendered." Matter of Astoria Medical Group, 11 N.Y. 2d 128, 132, 227 N.Y.S. 2d 401, 403, 182 N.E. 2d 85, 86 (1962). The present case in my judgment presents circumstances eminently justifying the exercise of this inherent power.

It is true, as Judge Price observes, that the arbitration arose from a contract, but this is no reason to stay our hand.

In the first place, the arbitration provision was consigned to the fine print of a standard automobile insurance policy purchased by appellant. The provision was not the result of negotiation between parties of equal bargaining power dealing at arms' length. It is therefore unrealistic to say that it was "bargained for." Indeed, where one of the parties is in a superior bargaining position, as is typically true of the relationship between insurance company and policyholder, I question whether such a fine print provision can be said to be part of the "contract." See Slawson, Standard Form Contracts and Democratic Control of Lawmaking Power, 84 Harv. L. Rev. 529 (1971).

In the second place, assuming arguendo that the parties did bargain for and agree to the arbitration provision, the provision requires each party to appoint "a competent and distinterested arbitrator." (Record at Exhibit B; emphasis added.) This language distinguishes the present case from those holding that prior association with one of the parties does not ...


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