ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil No. 80-1202)
Before Hunter, Weis and Higginbotham, Circuit Judges.
This is a personal injury action brought by plaintiffs Paul Sauter and Ruthann Mongan in the Eastern District of Pennsylvania against appellant Ross Restaurants, Inc. Ross had purchased from appellee Merit Insurance Company a "Comprehensive General Liability Insurance Policy" which was in effect at the time one of Ross's employees allegedly assaulted both of the plaintiffs. Merit declined to defend or indemnify, and Ross filed a third-party complaint against Merit.
The District Court for the Eastern District of Pennsylvania has established an innovative program for compulsory arbitration of most of the civil cases filed in which the amount at issue is less than $50,000.00. After a complaint is filed the matter is referred to a panel of three arbitrators who, after hearing, decide all issues of fact and law. If no party appeals the arbitrators' decision to the district court within twenty days the court enters judgment on the award. Local Rule 8(6), E.D.Pa.
This case was referred to arbitration on January 19, 1981, and on April 30, 1981 the arbitration panel awarded plaintiff Sauter $25,000.00 and plaintiff Mongan $8,000.00 against defendant Ross. The panel also awarded Ross recovery over against Merit. Merit then timely appealed to the district court.
Local Rule 8(7), E.D.Pa., which governs appeals from arbitration, provides in part as follows (emphasis supplied):
(a) Within twenty days after the filing of the arbitration award with the court, any party may demand a trial de novo in the district court. Written notification of such a demand shall be served by the moving party upon all counsel of record or other parties.
(b) Upon a demand for a trial de novo, the action shall be placed on the calendar of the court and treated for all purposes as if it had not been referred to arbitration, and any right of trial by jury that a party would otherwise have shall be preserved inviolate.
(c) At the trial de novo the court shall not admit evidence that there has been an arbitration proceeding, the nature or amount of the award, or any other matter concerning the conduct of the arbitration proceeding, except that testimony given at an arbitration hearing may be used for impeachment at a trial de novo.
On May 19, 1981, after the case had been returned to the district court docket, the court granted a motion for summary judgment filed by Merit.*fn1 The court held that, under the unambiguous terms of the policy issued by Merit, the plaintiffs' claims against Ross were not covered. The district ...