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GEORGE POPSKYJ v. KEYSTONE INSURANCE COMPANY (10/30/89)

filed : October 30, 1989.

GEORGE POPSKYJ, APPELLANT,
v.
KEYSTONE INSURANCE COMPANY



Appeal from the Order of the Court of Common Pleas, Philadelphia County, Civil Division, at No. 5264 March Term 1987.

COUNSEL

Henry J. Lotto, Philadelphia, for appellant.

Dennis Veneziale, Philadelphia, for appellee.

Cirillo, President Judge, and Brosky, McEwen, Del Sole, Montemuro, Beck, Tamilia, Popovich and Johnson, JJ. Montemuro, J., files a concurring opinion in which McEwen, Tamilia and Johnson, JJ., join. McEwen and Tamilia, JJ., concur in the result of the majority and join Montemuro, J., concurring opinion. Del Sole, J., files a dissenting opinion.

Author: Brosky

[ 388 Pa. Super. Page 431]

This is an appeal from the order of July 21, 1987, docketed August 11, 1987, which denied appellant's petition to modify or vacate an arbitration award.

On May 24, 1985, appellant, George Popskyj was struck, while a pedestrian, by an automobile driven by Steven R. Alexy. Alexy was insured by Prudential Property and Casualty Insurance Company ("Prudential"). In April of 1987, Prudential tendered the full amount of Alexy's policy in settlement of appellant's claim. In return, appellant signed a release in favor of Alexy.

Appellant then demanded from his own insurer, Keystone Insurance Company, appellee herein, the payment of underinsured motorist benefits. Appellee denied coverage, based upon the issue of liability, as well as the amount of damages.

Pursuant to the insurance contract, the parties submitted their dispute to statutory arbitration. At arbitration, appellees

[ 388 Pa. Super. Page 432]

    raised defenses pertaining to liability and damages, but also argued that appellant had settled with Alexy without appellee's prior consent, thereby extinguishing appellee's right of subrogation in violation of various provisions in the insurance contract. The arbitrators held in appellee's favor.

Appellant then filed a petition to vacate or modify the award of the arbitrators. The Court of Common Pleas of Philadelphia County denied appellant's petition. This appeal followed.*fn1

Appellant raises the following issues, in his original brief, for our determination: (1) whether the arbitrators' decision misinterpreted the insurance contract, and was thus an error of law; (2) whether appellee waived the contract's consent to settle clause by its conduct; (3) whether appellee improperly introduced new evidence on appeal to the trial court; (4) whether appellee must demonstrate prejudice to itself in order to deny coverage; (5) whether the consent to settle clause was so vague and ambiguous as to be unenforceable; (6) whether the terms of the contract were contradictory so as to create a "catch-22" situation whereby an insured could not recover; and (7) whether appellee's conduct in dealing with appellant amounted to bad faith.

Appellant also raises, by way of his supplemental brief to the en banc court, whether this Court may review the

[ 388 Pa. Super. Page 433]

    arbitrators' award for an error of law.*fn2

Upon review of the record, and the arguments of counsel, we find no error, and now affirm.

Our discussion must begin with Issue 1 as raised in appellant's supplemental brief, as its resolution determines whether we may reach the other issues raised, which all concern the legal correctness of the result reached by the arbitrators: may an arbitration award such as this be reviewed for an error of law?

In support of his position, i.e., that we may review for an error of law, appellant cites the following provision, in relevant part, from the Pennsylvania Uniform Arbitration Act of 1980,*fn3 42 Pa.C.S. § 7301, et seq:

§ 7302. Scope of subchapter

(d) Special application. --

(1) Paragraph (2) shall be applicable where:

(i) The Commonwealth government submits a controversy to arbitration.

(ii) A political subdivision submits a controversy with an employee or a representative of employees to arbitration.

(iii) Any person has been required by law to submit or to agree to submit a controversy to arbitration pursuant to this subchapter.

[ 388 Pa. Super. Page 434]

(2) Where this paragraph is applicable a court in reviewing an arbitration award pursuant to this subchapter shall, notwithstanding any other provision of this subchapter, modify or correct the award where the award is contrary to law and is such that had it been a Page 434} verdict of a jury the court would have entered a different judgment or a judgment notwithstanding the verdict.

(Emphasis supplied).

While the boundaries of appellant's arguments on this point are not well delineated, but rather, are overlapping, he appears to be making three arguments as to why the broad scope of review under § 7302(d)(2) should apply here: (1) 42 Pa.C.S. §§ 7303 and 7304 provide that agreements to arbitrate are valid, enforceable, and irrevocable, and thus the insurance contract's arbitration provision brings the parties within § 7302(d)(1)(iii) as persons "required by law to submit . . . a controversy to arbitration"; (2) the repealed No-Fault Act, which, pursuant to 40 P.S. § 2000 and the regulations promulgated thereunder, required the carriage of uninsured motorist coverage, and arbitration of uninsured coverage disputes, has been replaced by the Motor Vehicle Financial Responsibility Law, which requires both uninsured and underinsured coverage, and thus the applicable regulations should be construed as requiring arbitration of underinsured claims as well, which would make these parties persons "required by law . . . to agree to submit a controversy to arbitration" under § 7302(d)(1)(iii); and (3) lastly, case law to date involving such coverage disputes has routinely applied the broad scope of judicial review.

Appellee, by contrast, takes the position that this matter does not fall within any of the special circumstances where the § 7302(d)(2) broad scope of review is applicable. If appellee is correct, the "other provision(s)" referred to in § 7302(d)(2) would define our scope of review, and control whether this Court has the authority to vacate, modify, or correct the award in any fashion. The "other provision(s)" are found at 42 Pa.C.S. §§ 7314 and 7315, which, in relevant part, narrowly circumscribe the circumstances in which we may alter an award:

§ 7314. Vacating award by court

(a) General rule. --

[ 388 Pa. Super. Page 435]

(1) On application of a party, the court shall vacate an award where:

(i) the court would vacate the award under section 7314 (relating to common law arbitration) if this subchapter were not applicable;

(ii) there was evident partiality by an arbitrator appointed as a neutral or corruption or misconduct in any of the arbitrators prejudicing the rights of any party;

(iii) the arbitrators exceeded their powers;

(iv) the arbitrators refused to postpone the hearing upon good cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of section 7307 (relating to hearing before arbitrators), as to prejudice substantially the rights of a party; or

(v) there was no agreement to arbitrate and the issue of the existence of an agreement to arbitrate was not adversely determined in proceedings to compel or stay arbitration) and the applicant-party raised the issue of the existence of an agreement to arbitrate at the hearing.

(2) The fact that the relief awarded by the arbitrators was such that it could not or would not be granted by a court of law or equity is not a ground for vacating or refusing to confirm the award.

§ 7315. Modification or correction of award by court

(a) General rule. -- On application to the court made within 30 days after delivery of a copy of the award to the applicant, the court shall modify or correct the award where:

(1) there was an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award;

(2) the arbitrators awarded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted; or

[ 388 Pa. Super. Page 436]

(3) the award is deficient in a matter of form, not affecting the merits of the controversy.

(Emphasis supplied.)

As none of the above circumstances are applicable, and appellant has proffered no argument to the contrary, clearly we would not have the authority to disturb this award for an error of law if appellee is correct in its position.

Upon review of the record and the arguments of counsel, we conclude that the broad scope of review under § 7302(d)(2) is not appropriate under the facts presented, and, as the parties are in agreement that none of the circumstances contemplated in §§ 7314 and 7315 are involved, we hold that this Court does not have the power to alter the arbitrators' award. Accordingly, we affirm.

Appellant's first argument is that the parties' contract, which provides for arbitration of disputed underinsured motorist claims, brings §§ 7303 and 7304 into play. Those sections provide as follows, in relevant part:

§ 7303. Validity of agreement to arbitrate

A written agreement to subject any existing controversy to arbitration or a provision in a written agreement to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity relating to the validity, enforceability or revocation of any contract.

§ 7304. Court proceedings to compel or stay arbitration

(a) Compelling arbitration. -- On application to a court to compel arbitration made by a party showing an agreement described in section 7303 (relating to validity of agreement to arbitrate) and a showing that an opposing party refused to arbitrate, the court shall order the parties to proceed with arbitration. If the opposing party denies the existence of an agreement to arbitrate, the court shall proceed summarily to determine the issue so raised and shall order the parties to proceed with

[ 388 Pa. Super. Page 437]

    arbitration if it finds for the moving party. Otherwise, the application shall be denied.

(Emphasis supplied.)

As § 7303 makes such provisions as the one sub judice "valid, enforceable, and irrevocable", with § 7304 providing the mechanism for court enforcement, appellant reasons that the parties are persons "required by law . . . to submit a controversy to arbitration" for purposes of § 7302(d)(1)(iii), thereby entitling him to a review of this award under the broad "judgment n.o.v." standard.

One need only consult the language of § 7302(a) to see the flaw in appellant's argument:

§ 7302. Scope of subchapter

(a) General rule. -- An agreement to arbitrate a controversy on a non-judicial basis shall be conclusively presumed to be an agreement to arbitrate pursuant to Subchapter B (relating to common law arbitration) unless the agreement to arbitrate is in writing and expressly provides for arbitration pursuant to this subchapter or any other similar statute, in which case the arbitration shall be governed by this subchapter.

(Emphasis supplied).

Taking appellant's argument as true, it would be impossible for contracting parties to have a written agreement to arbitrate, and not fall within the exceptional circumstances of § 7302(d)(1)(iii), entitling the loser at arbitration to review of the award for errors of law. As the above-emphasized language of § 7302(a) makes clear, however, it is entirely possible for parties to agree in writing to arbitrate, and in the absence of an express provision that statutory arbitration is involved, it shall be "conclusively presumed" that the parties intend for the rules of common law arbitration to apply. The scope of review applicable to a common law arbitration award is even narrower than that encompassed in §§ 7314 and 7315:

[ 388 Pa. Super. Page 438]

SUBCHAPTER B

COMMON LAW ARBITRATION

§ 7341. Common Law ...


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