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GEORGE HADE v. NATIONWIDE INSURANCE CO. (08/26/88)

decided: August 26, 1988.

GEORGE HADE, APPELLEE,
v.
NATIONWIDE INSURANCE CO., APPELLANT



Appeal from the Order of the Superior Court entered January 28, 1986 at No. 1138 Philadelphia 1985, affirming the Order of the Court of Common Pleas of Philadelphia County entered March 29, 1985, at No. 3328, September Term, 1984. Nix, C.j., and Larsen, Flaherty, McDermott, Zappala and Papadakos, JJ. Zappala, J., files a dissenting opinion.

Author: Mcdermott

[ 519 Pa. Page 228]

OPINION

Appellant, Nationwide Insurance Company, appeals from the order of the Superior Court, 349 Pa. Super. 541, 503 A.2d 980 which affirmed the order of the Court of Common Pleas of Philadelphia County denying appellant's petition to vacate or modify an arbitration panel's award of $300,000.00 entered against Nationwide and in favor of its insured, George Hade. This Court granted appellant's petition for allowance of appeal on the limited issue of whether the arbitrators exceeded the scope of their authority in entering this award.

The relevant facts of this case are as follows. Shortly after midnight on June 10, 1984, George Hade, while riding his motorcycle, was struck by a van driven by an uninsured motorist. At the time of the accident Hade was employed

[ 519 Pa. Page 229]

    as a tractor trailer operator. As a result of the accident Hade suffered multiple fractures and injuries, including a severe ankle fracture, which, in the opinion of his physician, rendered him substantially impaired and totally unable to work as a tractor trailer operator.

At the time of the accident Hade's motorcycle, along with his three automobiles, were covered by four motor vehicle liability insurance policies issued by Nationwide. These policies provided that Hade had uninsured motorist coverage in the amount of $15,000.00 per policy. In April of 1984, two months prior to the accident, Hade requested his agent to increase his liability coverage to $100,000.00 per policy. The crux of this appeal pivots on the determination of whether Hade also instructed his agent to increase his uninsured motorist coverage to the same amount.

Neither party could agree on the amount of damages to be recovered under the uninsured motorist clause of the policies. Therefore, as provided by the arbitration provision contained in the policies, a hearing was held on January 30, 1985, pursuant to 42 Pa.C.S. ยง 7341,*fn1 relating to common law arbitration. This provision provides as follows:

The award of an arbitrator in a non-judicial arbitration which is not subject to Subchapter A (relating to statutory arbitration) or a similar statute regulating non-judicial arbitration proceedings is binding and may not be vacated or modified unless it is clearly shown that a party was denied a hearing or that fraud, misconduct, corruption or other irregularity caused the rendition of an unjust, inequitable or unconscionable award.

At the conclusion of testimony taken by the three member panel, a majority of the panel awarded appellee the sum of $300,000.00.*fn2

[ 519 Pa. Page 230]

At the arbitration hearing counsel for appellee proffered two alternate theories of recovery for the panel's consideration: (1) that the agent simply failed to increase Hade's uninsured motorist coverage to the $100,000.00 per policy level concomitant with the increase in the liability coverage; or (2) the agent intentionally misled appellee regarding the extent of his uninsured motorist coverage. Appellant, on the other hand, argued that the arbitrators must confine themselves to the stated terms of the insurance policies and restrict recovery to $60,000.00 which represented the limit of the stacked policies. Since, as customary, no written opinion accompanied the award, it is difficult to determine the exact basis of the arbitrators' decision.

On appeal the Superior Court rejected the contention that $300,000.00 was excessive and affirmed the amount of the award. The court found that the award in large part was compensation for the agent's misleading conduct which resulted in appellee's misunderstanding as to the extent of his coverage. Additionally, the court stated that any issue related to coverage is within the scope of the arbitration clause, and that a dispute is only outside the clause if it can be said with "positive assurance" that the clause never intended to encompass such an issue. Moreover, the court held that under the facts of the case it could not say with "positive assurance" that the agreement to arbitrate disputes over coverage did not include the misleading acts of appellant's agent; and since the agent's conduct went directly to the issue of coverage, the court found a rational relationship between the two and upheld the award.

Appellant then filed a petition for allowance of appeal, which we granted. We now affirm the order of the Superior Court, but disavow the rationale applied by that court.

Judicial review of common law arbitration is very narrow. As noted above, the award of an arbitrator in a common law arbitration is binding and may not be vacated or modified ...


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