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WILLIAM OBDYKE v. HARLEYSVILLE MUTUAL INSURANCE COMPANY (05/14/82)

filed: May 14, 1982.

WILLIAM OBDYKE, APPELLANT,
v.
HARLEYSVILLE MUTUAL INSURANCE COMPANY



No. 1429 Oct. Term, 1979, Appeal from the Order of the Court of Common Pleas, Civil Action - Law of Delaware County at No. 79-3755.

COUNSEL

Albert Ominsky, Philadelphia, for appellant.

William D. March, Media, for appellee.

Spaeth, Cavanaugh and O'Kicki,*fn* JJ. O'Kicki, J., files a concurring and dissenting opinion.

Author: Spaeth

[ 299 Pa. Super. Page 300]

This is an appeal from an order vacating an arbitration award in an automobile accident case on the ground that there was no "uninsured motorist." We affirm.

On November 2, 1977, William Obdyke, while driving his automobile, was involved in a collision with an automobile driven by one Jose Antonio Mejias. Obdyke's right ankle was broken. Mejias was driving under the influence of alcohol. Obdyke's claim against Mejias was settled by Mejias's insurance carrier, Motor Club of America Insurance Company, for $15,000. Obdyke also filed a claim with his own carrier, Harleysville Mutual Insurance Company, for benefits under his "uninsured motorist" coverage. When Harleysville refused to pay the claim, an arbitration was held. On February 26, 1979, the arbitrators by a 2-to-1 vote awarded Obdyke $15,000. On March 8, 1979, Harleysville petitioned the lower court "to modify, vacate or correct" the arbitrators' award, on the ground that Mejias was not an "uninsured motorist" at the time of the accident. On June 27, 1979, the lower court granted the petition and vacated the award. Obdyke now appeals from that order.

As appellant, Obdyke argues that Harleysville waived any right to object to the arbitration award (and that the lower court therefore erred in vacating the award) by virtue of a provision in the arbitration clause of the policy that "[a] decision agreed to by two of the arbitrators will be binding." This argument was not raised in appellant's answer to Harleysville's petition in the lower court. However, since it could be construed as going to our jurisdiction, we shall consider it.

The arbitration clause provided that arbitration "shall be conducted in accordance with the Pennsylvania Arbitration Act of 1927."*fn1 Arbitration under the Act of 1927 is

[ 299 Pa. Super. Page 301]

    subject to much broader judicial review than is common law arbitration. Wingate Construction Company v. Schweizer Dipple, Inc., 419 Pa. 74, 213 A.2d 275 (1965). Section 11(d) of the Act, 5 P.S. ยง 171(d), provides that on the application of any party the court shall make an order modifying or correcting the award "[w]here the award is against the law, and is such that had it been a verdict of the jury the court would have entered different or other judgment notwithstanding the verdict." See Pennsylvania Turnpike Commission v. Smith, 350 Pa. 355, 39 A.2d 139 (1944).

This provision for broad judicial review is a critical feature of the Act of 1927. It follows that where an agreement provides for arbitration "in accordance with" the Act, to construe the agreement as precluding broad judicial review would be to construe it in a manner inconsistent with the Act. See Wingate Construction Company v. Schweizer Dipple, Inc., supra; Emporium Area Joint School Authority v. Anundson Construction and Building Supply Co., 191 Pa. Superior Ct. 372, 156 A.2d 554 (1959), rev'd on other grounds, 402 Pa. 81, 166 A.2d 269 (1960).

Here, a construction consistent with the Act of 1927 is obvious. The provision that "[a] decision agreed to by two of the arbitrators will be binding" simply means that a decision agreed to by two of the three arbitrators is as binding -- has the same effect -- as a decision agreed to by all three arbitrators. Whether by a majority or unanimous, the decision is subject to the same broad judicial review provided by the Act.

Since it is therefore apparent that Harleysville did not waive its right to petition the lower court to vacate, modify, or correct the award, we may turn to considering whether in vacating the award the lower court erred. In undertaking this consideration, we must draw every inference of fact in favor of appellant as the award winner, but it is also our duty to correct errors of law. Pennsylvania Turnpike Commission v. Smith, supra.

[ 299 Pa. Super. Page 302]

Here, the arbitrators made no findings of fact or conclusions of law. In vacating the award, the lower court said that "[i]t is not unreasonable to assume that the Arbitrators concluded that "underinsured" is to be equated with "uninsured." On this assumption the court held the award "patently improper." Slip op. at 3.

It seems likely that the lower court was correct in assuming that two of the three arbitrators concluded that "underinsured" is to be equated with "uninsured," for counsel for appellant argued vigorously to the arbitrators that Mejias was "uninsured" because he was "underinsured." N.T. 34, 47-48, 9/29/78 hearing; N.T. 5-9, 24-30, 1/27/79 hearing. If in fact two of the three arbitrators did equate "underinsured" with "uninsured," the lower court was justified in characterizing their award as "patently improper." This court sitting en banc has very recently held that there is no basis in law or policy for that equation. Davis v. Government Employees Ins. Co., 296 Pa. Superior Ct. 198, 442 A.2d 727 (1982); see also White v. Concord Mutual Ins. Co., 296 Pa. Superior Ct. 171, 442 A.2d 713 (1982).*fn2

In Davis the claimant had received $24,467 from the tortfeasor's insurance carrier in partial settlement of a claim alleged to be in excess of $100,000. He then sought payment under the uninsured motorist coverage of his own policy; when his carrier declined to pay, he sought arbitration. By a vote of 2 to 1 the arbitrators held that they lacked jurisdiction because under the policy definition -- which was the same in all material respects as the definition in appellant's policy -- there had been no "uninsured motorist" involved in the accident. The claimant sought judicial review of this holding, arguing among other things that the policy definition of "uninsured" was "contrary to constitutional, legislative or administrative mandate or against public policy or unconscionable." See Davis v. Government Employees Ins. Co., supra, 296 Pa. Super. at 203, 442 A.2d at 729-30. Both the lower court and this court en banc rejected this

[ 299 Pa. Super. Page 303]

    argument. We noted that the argument that "an automobile covered by a policy in the minimum amount required by the financial responsibility law should nevertheless be held 'uninsured' in the event that the claimant's damages exceed the face of the policy has been uniformly rejected [in other jurisdictions]." Id., 296 Pa. Super. at 203, 442 A.2d at 730 (Citations omitted).

In his brief to us appellant has abandoned the argument that Mejias was "uninsured" because he was "underinsured." Instead, he argues that Mejias was "uninsured" because the limit of his policy was less than the minimum limit required by law.

Appellant's policy with Harleysville defined an "uninsured motor vehicle" as one:

1. to which no bodily injury bond or policy applies at the time of the accident.

2. to which a bodily injury bond or policy applies at the time of the accident but its limits for bodily injury liability is [sic] less than the minimum limit for bodily injury liability specified by the Financial Responsibility Law of the State in which your covered auto is principally garaged.

3. which is a hit-and-run vehicle . . .

4. to which a bodily injury liability bond or policy applies at the time of the accident, but the bonding or insurance company denies ...


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