Heim, C. v. Merchants Ins. Group

J-A16038-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
CAROL HEIM, INDIVIDUALLY AND/OR IN IN THE SUPERIOR COURT OF
HER CAPACITY AS ADMINISTRATRIX OF PENNSYLVANIA
THE ESTATE OF JOSEPH HEIM,
DECEASED
Appellant
v.
MERCHANTS INSURANCE GROUP
Appellee No. 3101 EDA 2014
Appeal from the Order Entered October 8, 2014
In the Court of Common Pleas of Bucks County
Civil Division at No(s): 2014-01731
BEFORE: LAZARUS, J., OLSON, J., and PLATT, J.*
MEMORANDUM BY LAZARUS, J.: FILED NOVEMBER 09, 2015
Carol Heim appeals from the order, entered in the Court of Common
Pleas of Bucks County, which denied her petition to appoint defense and
neutral arbitrators and compel underinsured motorist arbitration.1 After
careful review, we reverse.
The trial court summarized the relevant facts and procedural history as
follows:
This matter stems from a motor vehicle accident that occurred
on March 9, 2005, in which [Appellant’s] husband, Joseph Heim
____________________________________________
*
Retired Senior Judge assigned to the Superior Court.
1
An order denying a petition to compel arbitration is an appealable order.
See Pa.R.A.P. 311(a)(8).
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(“[Mr.] Heim”), now deceased, was operating a motor vehicle
which was owned by his former employer, Bethayres
Reclamation Corporation, [which] was insured by [Appellee],
Merchants Insurance Group (“Merchants” or “[Appellee]”).
...
[Mr.] Heim had been laid off from his position at Bethayres
Reclamation Corporation in October of 2004 and had
subsequently started his own welding business, JH Mobile
Welding and Fabrication, in August of 2006.
On August 20, 2009, [Mr.] Heim notified Merchants of a potential
underinsured motorist (“UIM”) claim.
On April 1, 2011, [Mr.] Heim advised Merchants that Allstate
Insurance had agreed to tender $24,000.00 of its $25,000.00
policy limits in full settlement of [Mr.] Heim’s claims against its
insured, Katelyn Young, the other party involved in the March 9,
2005 motor vehicle accident. [Mr.] Heim therefore requested
Merchants’ permission to settle with Allstate Insurance. On April
15, 2011, Merchants authorized the settlement between [Mr.]
Heim and Allstate Insurance and waived its subrogation rights.
On May 27, 2011, [Mr.] Heim notified Merchants of his demand
for arbitration for his UIM claim and that he had selected an
attorney to serve as his (Plaintiff’s) UIM Arbitrator. [Mr.] Heim’s
claim was principally for lost wages as a result of the injuries he
sustained in the accident.
On November 19, 2012, Merchants denied [Mr.] Heim’s UIM
claim due to [Mr.] Heim’s lack of cooperation. According to
Merchants, over the period from June 21, 2011 to October 24,
2012, [Mr.] Heim failed to respond to, or comply with, nine
direct written requests for his wage and employment records
from “JH Mobile Welding, LLC, [a company] over which he, as
owner [] had control.” Merchants further averred that it “did not
receive any communication from [Mr. Heim] following the
November 19, 2012 denial of the claim until the filing of this
[p]etition,” and that “[d]uring that time period, it appears Mr.
Heim passed away.” Respondents’ Opposition to Petition,
3/28/14, at ¶ 10.
On March 12, 2014, due to the parties’ inability to resolve this
dispute, [Appellant] Carol Heim [(“Ms. Heim”)], administratrix of
the estate of her deceased husband, filed the instant
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“Petitioner’s Petition to Appoint Defense UIM Arbitrator, and
Neutral Arbitrator and to Compel UIM Arbitration,” seeking to
compel arbitration and the appointment of arbitrators.
On March 31, 2014, Merchants filed a reply to the [p]etition in
which it contended that a contractual clause in its policy
provided for the denial of coverage due to [Mr.] Heim’s failure to
“cooperate with us in the investigation or settlement of the claim
or defense against the ‘suit.’” Merchants further asserted that
another contractual clause in the insurance policy provided that
“disputes concerning coverage under this endorsement may not
be arbitrated,” and it therefore requested that the [p]etition be
denied. Respondents’ Opposition to Petition, 3/28/14, at ¶¶ 1,
5.
On May 1, 2014, a [r]ule was issued upon Merchants to show
cause why [p]etitioner was not entitled to the relief requested.
On May 9, 2014, Merchants filed a response to the [r]ule which
reiterated its position that [p]etitioner failed to cooperate with
Merchants by failing to provide the requested wage and tax
information from JH Mobile Welding.
After both parties filed [p]raecipes under Bucks County Rule of
Civil Procedure 208.3(b), the matter was forwarded to this
[c]ourt for disposition.
On September 12, 2014, oral argument was held, during which
this [c]ourt noted that although counsel for [Ms. Heim] argued
that she had provided a “vocational report” to Merchants in
response to its request for the JH Mobile Welding wage and tax
information, she nevertheless admitted that she had not
provided those specific documents because she did not have
them. In the response, Merchants’ counsel had argued that
those documents were necessary in order to evaluate the
vocational report, and that not only had Merchants not received
the requested wage documents, but it had not received any
response at all from [Ms. Heim] regarding its requests for that
documentation. As a result, this Court concluded that [Ms.
Heim] had not complied with the policy provisions and Merchants
could not be forced into arbitration[.]
On October 8, 2014, this [c]ourt entered an [o]rder denying the
[p]etition to appoint UIM arbitrators and compel arbitration.
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On October 29, 2014, [Ms. Heim] filed a [m]otion for
[r]econsideration of this [c]ourt’s [o]rder of October 8, 2014[.]
. . . Attached to [Ms. Heim’s motion] was a copy of a letter dated
October 24, 2012, purportedly demonstrating Merchants’
improper denial of [the] UIM claim, but which this [c]ourt noted
also advised [that Merchants denied coverage for lack of
cooperation.]
...
On November 12, 2014, Merchants filed a response in opposition
to [Ms. Heim’s] [m]otion for [r]econsideration, reiterating that
contractual clauses in its policy provided for the denial of
coverage due to [Mr.] Heim’s failure to cooperate in the
investigation or settlement of the claim and that disputes
concerning coverage may not be arbitrated.
Trial Court Opinion, 12/23/14, at 1-4 (some citations omitted).
Appellant timely filed a notice of appeal and court-ordered concise
statement of matters complained of on appeal pursuant to Pa.R.A.P.
1925(b). Appellant raises one issue for our review:
May an insurance carrier avoid its responsibility to arbitrate an
uninsured motorist claim merely by issuing a disclaimer of
coverage and alleging that the claimant violated the
“cooperation” clause of the policy by failing to produce various
documents?
Brief for Appellant, at 4.
Our standard of review is as follows:
We review a trial court’s denial of a motion to compel arbitration
for an abuse of discretion and to determine whether the trial
court’s findings are supported by substantial evidence. In doing
so, we employ a two-part test to determine whether the trial
court should have compelled arbitration. The first determination
is whether a valid agreement to arbitrate exists. The second
determination is whether the dispute is within the scope of the
agreement.
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Smay v. E.R. Stuebner, Inc., 864 A.2d 1266, 1270 (Pa. Super. 2004)
(citations omitted). If a valid arbitration agreement exists, determining
“[w]hether a claim is within the scope of [the agreement] is a matter of
contract, and as with all questions of law, our review of the trial court’s
conclusion is plenary.” Id. at 1272-73.
Whether an agreement to arbitrate a dispute exists is determined
using well-settled principles of contract interpretation. Neuhard v.
Travelers Ins. Co., 831 A.2d 602, 604 (Pa. Super. 2003). As such,
[t]he task of interpreting an insurance contract is generally
performed by a court rather than by a jury. The goal of that task
is, of course, to ascertain the intent of the parties as manifested
by the language of the written instrument. Where a provision of
a policy is ambiguous, the policy provision is to be construed in
favor of the insured and against the insurer, the drafter of the
agreement. Where, however, the language of the contract is
clear and unambiguous, a court is required to give effect to that
language. Contractual language is ambiguous if it is reasonably
susceptible of different constructions and capable of being
understood in more than one sense. . . . We will not, however,
distort the meaning of the language or resort to a strained
contrivance in order to find an ambiguity. The polestar of our
inquiry, therefore, is the language of the insurance policy.
Id. at 604-05.
Initially, we note that it is undisputed that a valid arbitration clause is
contained within the insurance policy issued by Merchants. Thus, we turn
our analysis to whether the instant dispute is within the scope of the
Merchants insurance policy arbitration provisions.
The language of the insurance policy addressing arbitration for UIM
claims is as follows:
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If we and an “insured” disagree whether the “insured” is legally
entitled to recover damages from the owner or driver of an
“underinsured motor vehicle” or do not agree as to the amount
of damages that are recoverable by that “insured[,”] then the
matter may be arbitrated. However, disputes concerning
coverage under this endorsement may not be arbitrated. Either
party may make a written demand for arbitration. If so agreed,
each party will select an arbitrator. The two arbitrators will
select a third. If they cannot agree within 30 days, either may
request that selection be made by a judge of a court having
jurisdiction. Each party will pay the expenses it incurs and bear
the expenses of the third arbitrator equally.
Merchants Insurance Group Pennsylvania Underinsured Motorists Coverage
Endorsement, at § E(5). Accordingly, arbitration is to be used for two
categories of disputes: 1) whether the insured is entitled to UIM coverage,
and 2) the amount of damages. However, “disputes concerning coverage”
are expressly excluded from arbitration.
Instantly, Merchants attempts to frame the dispute between the
parties as a coverage issue. The record reveals that Merchants sent a letter
to the Heims’ counsel indicating that since Merchants had not received
certain documents from Mr. Heim, the UIM claim “[was] being denied based
upon continued lack of cooperation.” Opposition to Petition to Compel UIM
Arbitration, 3/28/14, at Exhibit B. However, the letter also acknowledges
that “Mr. Heim’s claim is primarily related to his alleged wage loss and/or
loss of future earning capacity.” Id. Thus, the fundamental dispute
between the parties is the amount of damages, if any, that should be
awarded based upon Mr. Heim’s UIM claim. The inability of the parties to
determine the recoverable damages in this matter is a dispute that fits
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squarely within the plain language of the instant arbitration agreement as an
arbitrable claim.
We note that in deciding whether to grant the petition to arbitrate, the
trial court was not in a position to address the merits of the denial of
coverage, including whether Mr. Heim failed to cooperate according to the
insurance policy. Instead, the trial court properly engaged in an inquiry
limited to a threshold determination of whether the dispute between the
parties is one of coverage rather than an otherwise arbitrable claim. Smay,
supra. Though the trial court made the appropriate inquiry as set forth in
Smay, we disagree with the court’s analysis that the dispute is one of
coverage that is not arbitrable based on the insurance policy language.
First, the instant matter does not present a “dispute concerning
coverage” in the ordinary sense. Typical coverage disputes include whether
an individual is an insured or “covered person” under the relevant policy or
whether an individual has waived UIM coverage. See, e.g., Borgia v.
Prudential Ins. Co., 750 A.2d 843 (Pa. 2000) (dispute over whether driver,
who lived with his parents but was not named insured under their policy,
was covered under policy); Nationwide Mut. Ins. Co. v. Heintz, 804 A.2d
1209 (Pa. Super. 2002) (dispute over whether insureds knowingly and
intelligently waived UIM coverage). Significantly, the record reveals that
Merchants has not disputed that Mr. Heim was a covered person under the
insurance policy; likewise, nothing in the record indicates that Mr. Heim
waived UIM coverage.
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Next, it is clear that the parties disagree as to whether coverage
should be denied, based upon whether Mr. Heim cooperated in the
investigation of his UIM claim. However, this alleged failure to cooperate is
inextricably tied to the parties’ dispute over Mr. Heim’s UIM claim for
damages, since Merchants takes the position that the “lack of cooperation”
has prevented it from having enough information to evaluate the claim. Mr.
Heim’s alleged failure to cooperate is therefore directly relevant to a
determination of damages and thus is within the ambit of the arbitration
agreement.2 For these reasons, we find that the trial court improperly
denied Ms. Heim’s petition to appoint arbitrators and compel arbitration.
Order reversed. Case remanded for proceedings in accordance with
the dictates of this memorandum. Jurisdiction relinquished.
____________________________________________
2
We note that Merchants’ decision to find a way to deny coverage, where
the amount of damages is the real dispute, is an end-run around the
arbitration clause. As noted by Ms. Heim, were we to affirm the trial court
under these circumstances, an insurer would have carte blanche to simply
declare a denial of coverage for any remotely plausible reason and thereby
avoid arbitration. If an insurer has a colorable claim to deny coverage that
is not arbitrable pursuant to the relevant insurance policy, the insurance
company’s appropriate recourse is to initiate a declaratory judgment action
to determine the issue. See, e.g., Henning v. State Farm Mut. Auto.
Ins. Co., 795 A.2d 994 (Pa. Super. 2002) (declaratory judgment action to
determine whether driver precluded from uninsured motorist benefits due to
named driver exclusion endorsement appropriate, where arbitration limited
to disputes regarding fault and damages). Uninsured and underinsured
motorist arbitration clauses vary significantly, however, with some providing
that coverage disputes are arbitrable such that a declaratory judgment
action would not be appropriate. See, e.g., Borgia, supra.
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PLATT J., Joins the majority.
OLSON J., Concurs in the result.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/9/2015
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