ALLSTATE NEW JERSEY INSURANCE COMPANY VS. EMPIRE FIRE AND MARINE INSURANCE COMPANY (L-7922-17, ESSEX COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4294-17T2
ALLSTATE NEW JERSEY
INSURANCE COMPANY,
Plaintiff-Appellant,
v.
EMPIRE FIRE AND MARINE
INSURANCE COMPANY,
Defendant-Respondent.
_____________________________
Argued June 4, 2019 – Decided June 25, 2019
Before Judges Fasciale and Rose.
On appeal from the Superior Court of New Jersey, Law
Division, Essex County, Docket No. L-7922-17.
David James Dickinson argued the cause for appellant
(Tango, Dickinson, Lorenzo, McDermott & McGee
LLP, attorneys; David James Dickinson, on the brief).
Paul M. Schofield, Jr. argued the cause for respondent.
PER CURIAM
In this auto-insurance dispute, plaintiff Allstate Insurance Company
(Allstate), appeals from an April 16, 2018 order denying its motion to vacate an
arbitration award in favor of defendant, Empire Insurance Company (Empire) .
Following oral argument, Judge Jeffrey B. Beacham entered the order. On
appeal plaintiff argues that the arbitrator lacked jurisdiction to hear the case,
exceeded his powers, and miscalculated damages. We affirm.
I.
On May 1, 2015, Demetrio Ortiz rented a 2010 Lamborghini Gallardo
Spyder from Signature Car Collection (Signature). On May 9, 2015, the vehicle
was damaged in a car accident. At the time of the accident, Ortiz was insured
by Allstate, and Signature was insured by Empire. After the accident, Empire
paid Signature for the damage to the vehicle, pursuant to the auto collision
coverage of the Empire policy. Empire sought recovery of the payment from
Ortiz, citing the rental agreement, which stated,
I Demetrio Soler Ortiz agree to the above stated
description of the rental vehicle and acknowledge that
I am responsible and liable for all damages, and excess
mileage during my rental period, and agree to pay the
repair costs, extra mileage charges, and all loss-of-use
and fees associated with the condition of the vehicle
upon return.
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In September 2015, Allstate issued a letter to Signature denying coverage, on
behalf of Ortiz, stating that Empire's policy had the "primary obligation with
respect to collision coverage[.]"
At the time of the accident, Allstate and Empire were members of the
Arbitration Forums, Inc. (AF), Special Arbitration Forum. And in January 2017,
Empire filed for inter-company arbitration in the AF's Special Arbitration forum
seeking reimbursement from the auto collision coverage portion of the Allstate
policy. In March 2017, counsel for Allstate sent a letter to Empire stating that
Allstate was denying coverage because the Empire policy applied to the loss
from the accident evidenced by their payment of the claim. The letter explained,
"[p]ursuant to the auto collision insurance provision of the Allstate . . . policy,
when there is other insurance available to cover a collision loss the Allstate . . .
policy states 'when this insurance covers a substitute auto or non -owned auto,
we will pay only after all other collectible insurance has been exhausted.'" In
July 2017, an inter-company arbitration award was entered in favor of Empire
in the amount of $100,200. In August 2017, Allstate raised a post -decision
inquiry and appeal with AF. AF denied Allstate's request to vacate or modify
the award.
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In November 2017, Allstate filed a verified complaint and order to show
cause seeking to vacate or modify the arbitration award. On April 12, 2018, the
judge conducted oral argument, and issued an order denying Allstate's motion
to vacate the arbitration award. The judge found that there was not a "sufficient
basis to vacate the award of damages."
II.
"It . . . is well settled that 'there is a strong preference for judicial
confirmation of arbitration awards.'" Minkowitz v. Israeli, 433 N.J. Super. 111,
135 (App. Div. 2013) (quoting Linden Bd. of Educ. v. Linden Educ. Ass'n, 202
N.J. 268, 276 (2010)). Courts will grant arbitration awards "considerable
deference." Borough of E. Rutherford v. E. Rutherford PBA Local 275, 213
N.J. 190, 201 (2013). It is the party seeking to vacate an arbitration award that
"bears the burden of demonstrating 'fraud, corruption, or similar wrongdoing on
the part of the arbitrator[].'" Minkowitz, 433 N.J. Super. at 136 (alteration in
original) (quoting Tretina Printing, Inc. v. Fitzpatrick & Assocs., 135 N.J. 349,
357 (1994)). Therefore, "[j]udicial review of an arbitration award is very
limited." Bound Brook Bd. of Educ. v. Ciripompa, 228 N.J. 4, 11 (2017)
(quoting Linden Bd. of Educ., 202 N.J. at 276). Because the decision to vacate
an arbitration award is a matter of law, this court reviews a denial of a motion
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to vacate an arbitration award de novo. Manger v. Manger, 417 N.J. Super. 370,
376 (App. Div. 2010).
First, Allstate contends that the judge should have modified the arbitration
award because the arbitrator made a mathematical error when calculating the
award. N.J.S.A. 2A:23B-24(a)(1) provides that a court shall modify or correct
an award if "there was an evident mathematical miscalculation or an evident
mistake in the description of a person, thing, or property referred to in the
award[.]"
In the inter-company arbitration filing by Empire, it states that the
"contribution sought" is $100,200. However, in the "Itemized Damages
Claimed" section of the filing, it states that the total itemized damages is
$136,000. Under this section, it provides a break-down of the damages: "Actual
Cash Value $136,000.000 [Empire] paid $111,350.00 Insured Deductible =
$25,000.00 Salvage Proceeds = < $35,888.00 > Total Subro Balance Due =
$100,200.00 pro rata payment from Geico $21,616.56 balance due from
[A]llstate $78,581.44." In the "Disputed Damages" section of the arbitration
filing, Allstate wrote "[Empire] has failed to prove a basis for [its] damages."
Allstate argues that it was "implicit" in its answer that Empire's claim should
have been limited to $78,581.44. Thus, Allstate concludes that the arbitrator
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should have applied the credit from the Geico payment, and awarded Empire
recovery of $78,581.44, as was set forth in the Itemized Damages Claimed
section of the filing.
But, Allstate did not properly raise an objection to damages. The AF
Rules governed the arbitration between Allstate and Empire. Rule 2 -5 provides
that if a party is disputing damages, "it must present all damages arguments and
disputed dollar amounts, if known, in the Dispute[d] Damages section.
Arguments raised in any other section will not be considered by the arbitrator.
This includes, but is not limited to, issues such as repair and/or rental amounts,
causation, and partial exclusions." Moreover, Rule 3-5 provides that an
arbitrator may only consider "[d]isputed damages if specifically pled in the
Dispute[d] Damages section." Allstate's general assertion that Empire failed to
prove a basis for their damages does not satisfy AF's Rules that disputed
damages be "specifically pled."
III.
Next, Allstate contends that AF did not have jurisdiction to arbitrate the
dispute because Allstate denied coverage, and the dispute was not over
concurrent coverage. Allstate asserts that there was no agreement to arbitrate,
and therefore, the award should be vacated, pursuant to N.J.S.A. 2A:23B-
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23(a)(5) (stating that a court shall vacate an arbitration award if "there was no
agreement to arbitrate, unless the person participated in the arbitration
proceeding without raising the objection . . . not later than the beginning of the
arbitration hearing").
In AF's Special Arbitration Agreement, Article First provides compulsory
provisions, and outlines disputes that must be submitted to arbitration. In
pertinent part, Article First states:
[S]ignatory companies must submit any unresolved
disputes to [AF] where:
. . . (b) each has issued separate policies of property or
casualty insurance providing, or as a self-insured
provides, concurrent coverage to the same party or
parties asserted to cover an accident, occurrence or
event out of which a first or third party claim or suit for
bodily injury or property damage arises[.]
Article Second provides exclusions and outlines disputes that are not required
to be submitted to arbitration. In pertinent part, Article Second states:
No company shall be required, without its written
consent, to arbitrate any claim or suit if:
. . . (e) it has asserted a denial of coverage to the party
or parties seeking coverage under the policy for the
claim or suit otherwise subject to arbitration[.]
Pursuant to AF's Rule 2-4, a case will be "administratively closed as
lacking jurisdiction," if a denial/disclaimer of coverage is pled, and a copy of
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the denial/disclaimer of coverage letter to the parties seeking liability is
attached. The rule further provides, "[i]f no such letter is provided or where the
issue concerns concurrent coverage . . . , the case will be heard and the
arbitrator(s) will consider and rule on the coverage defense." The AF Rules also
set forth definitions of key terms. Concurrent coverage is defined as "[t]wo or
more policies of insurance and/or self-insureds providing coverage to the same
party or parties or the same risk or risks for the same accident, occurrence, or
event. Concurrent coverage includes primary/excess disputes."
Denial/Disclaimer of coverage is defined as
[a] company's assertion that: a. there was no liability
policy in effect at the time of the accident, occurrence,
or event, or b. a liability policy was in effect at the time
of the accident, occurrence, or event, but such coverage
has been denied/disclaimed to the party seeking
liability coverage for the claim in dispute.
Here, the Allstate policy issued to Ortiz contained first party collision
damage coverage for Ortiz's vehicle. However, the policy also contains a clause
for when there is other insurance, which provides "[w]hen this insurance covers
a substitute or non-owned auto, we will pay only after all other collectible
insurance has been exhausted." Relying on this clause, Allstate argues that
because the Empire policy provided first party collision coverage and paid the
damages to the vehicle, then there is no coverage under the Allstate policy
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because Signature was made whole from Empire. In its letter purporting to deny
coverage, Allstate concludes that "[b]ecause the Empire policy has the primary
obligation with respect to collision coverage, coverage is not afforded under the
Auto Collision Insurance of the Allstate policy."
In the affirmative defenses section of Allstate's responsive filing, Allstate
stated that it would not provide coverage. Allstate cites to the "other insurance"
clause of the policy, which provides that "[w]hen this insurance covers a
substitute or non-owned auto, we will pay only after all other collectible
insurance has been exhausted." Allstate further states,
clearly in this matter the insurance provided by
[Empire] for the damage to their insured's vehicle was
sufficient to repair the vehicle and there is no claim
being made in excess of the [Empire] policy. This is
not a situation with competing excess clauses but is a
situation where [Empire]'s coverage applies and
[Allstate] has no coverage. [Empire] has denied
coverage with regard to this claim.
The arbitrator considered and rejected Allstate's defense, finding: "This is a
concurrent coverage dispute which is compulsory under Article First of the
Special [A]rbitration [A]greement. As a signatory member of Special
[A]rbitration, Allstate agrees to have all compulsory cases heard by AF. Any
proven coverage defenses will be considered in the decision."
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Following oral argument, the judge concluded that the arbitrator did not
abuse his discretion in finding that the issue was concurrent coverage, and
therefore, within the jurisdiction of AF. Likewise, we also conclude that the
arbitrator did not abuse his discretion in finding that it was a matter of concurrent
coverage. Allstate argues that because Empire paid Signature's damages in full,
then Allstate does not have any coverage because Signature was made whole.
But Empire is seeking reimbursement for the payment, arguing that Allstate's
insured, Ortiz, was fully responsible.
Moreover, the issue was whether the dispute was over concurrent
coverage. If it was not, and Allstate outright denied coverage, then the parties
would not be required to arbitrate, but they still could, as set forth in AF's Special
Arbitration Agreement. The parties were voluntary members of AF. The
arbitrator considered Allstate's defense that it did not provide coverage because
Empire paid all the damages to Signature. The arbitrator rejected Allstate's
defense and determined that the issue was concurrent coverage, and thus, it was
required to be arbitrated, pursuant to Article First of the Special Arbitration
Agreement. Allstate did not raise the defense that AF lacked jurisdiction to
arbitrate the matter. Allstate has not alleged or argued that the AF decision was
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procured by fraud, corruption, or wrongdoing on the part of the arbitrator. See
Tretina, 135 N.J. at 357.
IV.
Lastly, Allstate contends that the arbitrator exceeded his powers by
misapplying New Jersey law, and thus, the award should be vacated, pursuant
to N.J.S.A. 2A:23B-23(a)(4). Both Allstate and Empire are voluntarily members
of AF, and voluntarily entered into the Special Arbitration Agreement.
According to AF's Rule 2-12(d), a party may appeal a decision, and that
"decision will be final and binding with no right to further review, appeal, or
inquiry." As noted above, the Article First of the Special Arbitration Agreement
requires that disputes over concurrent coverage must be submitted to arbitration.
Thus, AF's decision should be binding and not subject to our review.
Nevertheless, we have reviewed plaintiff's arguments and conclude that they do
not warrant reversal.
Moreover, Allstate fails to provide evidence that the arbitrator misapplied
New Jersey law. The arbitrator considered Allstate's and Empire's policies and
considered the signed car rental agreement. The arbitrator concluded:
While Empire paid for the damages to [its] auto, as
Allstate is not an insured and as there is no coverage for
Allstate under Empire's policy, Allstate's excess
language would not apply. This would make Allstate's
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coverage primary. Allstate disputed damages based on
[its] liability/coverage arguments. No other damage
arguments were raised. Damages awarded in the
amount sought. Allstate requested a personal
representation but did not call in on the scheduled day
and time. The case was heard without the personal rep.
There were no questions.
Primarily, Allstate again asserts that there was auto collision coverage
available under the Empire policy because it paid for the damage to Signature's
(its insured) vehicle. The Allstate policy provided that there is no collision
coverage when the insured is operating a non-owned vehicle, until any other
collision coverage is exhausted. But just because Empire paid the damages,
does not mean that it is not entitled to reimbursement. The Empire policy
provides that it is primary, except when it is in the care, custody or control of
another. Here, the vehicle was in the care, custody, and control of Ortiz. The
arbitrator considered the language of the two policies and concluded that
Allstate's coverage was primary. Accordingly, we conclude that the arbitrator
did not exceed his powers, and thus, we decline to disturb the arbitration award.
To the extent we have not addressed plaintiffs' remaining arguments, we
conclude that they lack sufficient merit to warrant discussion in a written
opinion. R. 2:11-3(e)(1)(E).
Affirmed.
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