Runewicz v. Keystone Insurance

POMEROY, Justice,

dissenting.

The Court’s approval of the award in this case allows the claimant to recover from her own insurance carrier under a standard uninsured motorist provision because payment of the maximum sum under the responsible party’s policy does not satisfy her claim in full. Unlike the Court, I cannot sanction this drastic rewriting of the policy because it has been done by arbitrators. Hence this dissent.

*465 Part IV of the insurance policy in issue in this case contains the uninsured motorist coverage. By the terms of this part of the policy, the insurer promises to pay the insured for all bodily injury caused by an “uninsured automobile.” “Uninsured automobile” is a defined term. In pertinent part, the definition is an automobile “with respect to which the ownership, maintenance or use of which there is ... no insurance policy applicable at the time of the accident . . .” (my emphasis). Disputed claims under this part of the policy are to be resolved by arbitration.

Our scope of review in common law arbitration cases is, as the majority notes, quite narrow. To upset an arbitrator’s award, it must be shown “that there was fraud, misconduct, corruption or some other irregularity 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.” Harwitz v. Selas Corp. of America, 406 Pa. 539, 542 , 178 A.2d 617, 619 (1962). Acting on this concept, we have in a long line of cases given arbitration clauses in uninsured motorist portions of automobile insurance policies a very broad reading, and have almost uniformly upheld the power of the arbitrator to decide the issue before him. See, e. g., Harleysville Mut. Ins. Co. v. Medycki, 431 Pa. 67 , 244 A.2d 655 (1968); Preferred Risk Mut. Ins. Co. v. Martin, 436 Pa. 374 , 260 A.2d 804 (1970). See also Flightways Corp. v. Keystone Helicopter Corp., 459 Pa. 660 , 331 A.2d 184 (1975). This approach, I am convinced, is not only required by our case law, but is also wise and salutory for a number of reasons which need not be elucidated here.

Nevertheless, this Court has never said that an arbitrator has carte blanche to render any award no matter how irresponsible it is or how flagrantly it may flout the terms of the contract. Thus in Allstate Ins. Co. v. Fioravanti, 451 Pa. 108 , 299 A.2d 585 (1973), in an opinion by Mr. Justice (now Chief Justice) Eagen, we said:

*466 “It is possible to hypothecate an arbitration award which imports such bad faith, ignorance of the law and indifference to the justice of the result as to cause us to give content to the phrase ‘other irregularity’ since it is the most definitionally elastic of the grounds for vacatur. . [W]e are not without power to act should such a case arise.”

Id. at 116 , 299 A.2d at 589 (footnote omitted) (my emphasis). See also 6A A. Corbin, Contracts § 1439, at 417 (1962) (“An award can be set aside for fraud or collusion, or for ‘manifest disregard’ of the law.”). Fortunately, however, the situations are rare indeed when a court is justified in intervening to upset an arbitration award. In my view, this is such a case.

It is undisputed that the driver of the vehicle involved in the crash in which Mrs. Runewicz was injured was insured. Indeed, the parties to the accident settled Mrs. Runewicz’s claim against the other motorist for the full amount of the other driver’s policy, $25,000, and the sum was paid by the other driver’s insurer. It simply cannot be said that the other driver was “uninsured” within the meaning of Mrs. Runewicz’s policy, for the uninsured motorist coverage of that policy rests totally on the condition that the offending motorist will in fact be uninsured. Grange Mut. Cas. Co. v. Pennsylvania Mfgrs’ Ins. Co., 438 Pa. 95 , 263 A.2d 732 (1970), cited by the majority, lends no support to its position, for in that case the issue was whether the person operating an insured automobile had permission to do so and hence was not an uninsured motorist. This was a question of fact for the arbitrator to resolve. Here, however, there is no such question; what the arbitrators have done here is to create a coverage where, by the plain words of the contract, none existed.

I do not share the majority’s apparent fear that a reversal of the award in this case will encourage needless litigation over arbitrators’ decisions in insurance cases. For this is not a case in which an award ought to be set aside because of a seeming “mistake,” Harwitz, supra, of law or fact. Nor is *467 this a case where a court reaches to find “constructive fraud” in an interpretation it disagrees with. See Fioravanti, supra, 451 Pa. at 115 , 299 A.2d 585 . Instead, this is a case in which, despite the full hearing accorded, the arbitrators’ decision could only have been actuated by “prejudice rather than principle.” Runewicz v. Keystone Ins. Co., 234 Pa.Super. 355, 361 , 338 A.2d 602 (1975) (opinion of Spaeth, J., in support of reversal).

Just as the courts should be steadfast in upholding the validity of arbitration awards against unwarranted appeals for judicial intervention, so should they be diligent to strike down an award which palpably is made “in bad faith, ignorance of the law [or] indifference to the justice of the result.” Fioravanti, supra. For an arbitrator to say that an insured vehicle is one which is uninsured is such a flagrant case. Judicial approval of an award so irresponsible will, I fear, serve to erode the public confidence on which the arbitration system in the field of casualty insurance depends; such approval can only increase the resort to the courts that the majority apparently believes its decision will help avert.

I would affirm the order of the Superior Court.

EAGEN, C. J., joins in this opinion.