FAWVER ET ux, Aрpellants, v. ALLSTATE INSURANCE COMPANY, Respondent.
In the Supreme Court of the State of Oregon
Argued September 13, affirmed December 13, 1973
267 Or 292 | 516 P2d 743
Stanley C. Jones, Jr., Klamath Falls, argued the cause for respondent. With him on the brief was J. Anthony Giacomini, Klamath Falls.
DENECKE, J.
The plaintiffs made a claim against the defendant, Allstate Insurance Company, their insurer, under the uninsured motorist provision of their policy. A dispute arose and the plaintiffs sought and received arbitration of the dispute. The arbitrator found for Allstate, plaintiffs filed exceptions to thе award, the trial court affirmed the award and plaintiffs appeal.
The first exception was: “[T]here was evident partiality on the part of the arbitrator[s] ***”
The plaintiffs claim their injuries were caused by a “phantom vehicle,” which is within the insurance contract definition of an uninsured vehicle.1 The policy providеs insurance coverage in this situation. How-
Plaintiffs contend the arbitrator was not authorized to decide whether the other car involved, if there was another car, was a “phantom vehicle.” The policy provided:
“SECTION II
PROTECTION AGAINST BODILY INJURY BY UNINSURED AUTOMOBILES
“The determination as to whether the insured shall be legally entitled to recover damages, and if so entitled the amount thereof, shall be made by agreement betwеen the insured and Allstate.
“In the event of disagreement and upon written demand of the insured, the matter or matters upon which the insured and Allstate do not agree shall be settled by arbitrаtion in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction therеof. The insured and Allstate each agrees to consider itself bound and to be bound by any award made by the arbitrator pursuant to this Section II.”
The policy is not in the record; howеver, the parties agree that these are the only provisions which pertain to arbitration.2
A bare majority in Rosenbaum v. American Surety Company of New York, 11 NY2d 310, 229 NYS2d 375, 183 NE2d 667 (1962), decided the policy limited arbitration “to fault (‘legally entitled‘) and as to damages if fault should be established. No languаge in the endorsement can be read as an agreement to send to arbitrators a disagreement as to whether there was or was not liability insurance covering a cаr which should injure the insured.” 11 NY2d at 314. The policy provisions were similar to those in the present policy and what differences there were would tend to limit arbitration.
Connecticut and Illinois, сonstruing similar policies, held in accord with the majority of the New York court. Frager v. Pennsylvania General Ins. Co., 155 Conn 270, 231 A2d 531, 29 ALR3d 321 (1967). Flood v. Country Mutual Insurance Company, 41 Ill 2d 91, 242 NE2d 149 (1968).
The minority of the New York court in Rosenbaum v. American Surety Company of New York, supra (11 NY2d at 315), were of the opinion that the phrase in the policy provision that in the event of disagreemеnt “the matter or matters upon which the
Massachusetts and Pennsylvania followed the reasoning of the dissent in Rosenbaum and held that whether the tortfeasor‘s vehicle was an insured vehicle was a matter of arbitrаtion. Employers’ Fire Insurance Company v. Garney, 348 Mass 627, 205 NE2d 8 (1965); National Grange Mutual Insurance Co. v. Kuhn, 428 Pa 179, 236 A2d 758 (1968).
We have decided the most reasonable interpretation is that whether the tortfeasor‘s vehicle is an uninsured vehicle is an issue that the policy provides can be submitted to arbitration. The language of the policy is reasonably susceptible of that interpretation. Whether the tortfeasors’ vehicle was uninsured is “a matter *. ** upon which the insured and Allstate do not agree.” We are of the opinion that public policy should favor the settlement of all disagreements between the insured and the insurer in one prоceeding. The policy provides that the insured, alone, has the option of proceeding to arbitration. If the insured is of the opinion that arbitration is not the most favorable method of determining the issues, the insured can have them decided in a court proceeding. We are also influenced by the fact that Oregon has no antipathy toward аrbitration as a method of settling disputes. This is contrary to the policy of some other jurisdictions.
For these reasons we hold that the trial court did not err in overruling plaintiffs’ exceрtions to the award of the arbitrator.
Affirmed.
I concur in the opinion by DENECKE, J. I would, however, expressly disapprove of the practices of the American Arbitration Association whiсh resulted in its arbitration “panel” for use in the selection of arbitrators for uninsured motorist cases in Klamath Falls, Oregon, and which included only attorneys engaged primarily in the representation of insurance companies in the defense of personal injury cases.
The trial court was correct in finding that “[t]he claimants, by proceeding to arbitration having knowledge that the arbitrator‘s practice consisted of representing defendants, waived claimant‘s right to subsequently challenge the award on the ground of partiality.” Nevertheless, the practices which resulted in plaintiffs being presented with the problem of selecting an impartial arbitrator from such a panel should be disapproved by this cоurt.
It may be that no attorneys in Klamath Falls other than insurance defense attorneys were willing to serve upon the arbitration panel. If so, this may very likely be the result of the practice of the American Arbitration Association and of the insurance companies which use its services in the arbitration of uninsured motorist cases to the effect that attorneys who serve as arbitrators in such cases are expected to do so as a public service and without compensation.
The duties to be performed by an arbitrаtor in such cases require complete impartiality, integrity and ability based upon experience. In addition, an arbitrator in such a case may be required to devote considerable time not only in the arbitration hearing, but in a subsequent review of the evidence offered at the
Although the American Arbitration Association may be a non-profit association, when an insurance company uses the servicеs of the Association in uninsured motorist cases and when, for that purpose, attorneys are engaged to serve as arbitrators, it is unreasonable to expect experienced, competent and busy lawyers to donate the substantial amounts of time required in such cases without compensation. The custom and practice in labor and сommercial arbitration proceedings, in which attorneys are not infrequently requested to act as arbitrators, is that such arbitrators are paid reasonable compensation for their services.
When attorneys are asked to permit their names to be placed upon an arbitration panel for use in the selection of arbitratоrs in uninsured motorist cases, but with the knowledge that they will receive no compensation for their services, it is not surprising that the resulting arbitration panel in a community the size of Klamath Falls consists solely of attorneys engaged primarily by insurance companies in the defense of personal injury cases.