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Allstate Insurance Co. v. Wong8/19/2005
On Certiorari to the Utah Court of Appeals
In this case, we must determine whether the court of appeals properly modified an arbitration award to reflect the policy limits of an insurance contract that was not provided to the arbitrator. The court of appeals initially determined that the arbitrator based his award on a matter not submitted to arbitration, but went on to conclude that the arbitrator's resolution of the matter actually submitted to arbitration could be salvaged by modifying the award. As a result, the court of appeals modified the award to reflect the insurance policy's liability limit. We granted certiorari to review the court of appeals' decision and now affirm.
BACKGROUND
Dixon Wong sustained serious injuries as the result of an automobile accident in which the other driver was at fault.
Wong ultimately recovered $50,000 from the other driver's insurance policy as well as $10,690 from his own personal injury protection ("PIP") insurance. Both amounts represented the policy limits of the respective insurance coverage. Wong then filed a claim with his insurer, Allstate Insurance Company ("Allstate"), seeking recovery pursuant to the underinsured motorist ("UIM") coverage provided by his policy. Wong's UIM coverage limited any potential recovery for his injuries to $100,000.
Allstate and Wong were unable to reach an agreement as to the amount of money Wong was entitled to recover pursuant to his insurance contract. Having reached an impasse, both parties agreed to submit their dispute to binding arbitration. The parties memorialized their agreement in a document entitled "Arbitration Agreement," which expressed their intention to submit their dispute to arbitration and outlined the procedures that would be followed during the arbitration. The Arbitration Agreement was drafted by counsel for Allstate and initially contained a "high/low agreement," whereby the parties agreed to be bound by a damages ceiling of $100,000 and a floor of $0. The clause in question also stipulated that the parties would not disclose the high/low agreement to the arbitrator.
Before signing the Arbitration Agreement, counsel for Wong struck the reference to the high/low agreement, making the relevant clause provide only that " he terms of this agreement shall not be disclosed to the arbitrator." Counsel for Wong then initialed the strike out and signed the agreement. Counsel for Allstate received and signed the modified Arbitration Agreement.
After executing the Arbitration Agreement, the parties entered into another agreement, styled "Binding Arbitration Agreement," at the request of the selected arbitrator, Warren W. Driggs. The Binding Arbitration Agreement is a notably sparse document prepared by Driggs that merely states the parties' intention to submit their dispute to binding arbitration. The agreement identifies the nature of the parties' dispute as "Underinsured Motorist Claim---Damages."
Shortly before arbitration began, counsel for both Wong and Allstate exchanged correspondence addressing the scope of the upcoming arbitration and their perception of the original Arbitration Agreement. Counsel for Wong opined that " e have agreed that the arbitrator will not be made aware of either the terms of the Arbitration Agreement or the policy limits under the subject policy. In short, the arbitrator will be afforded the opportunity to award what he believes Mr. Wong's claim is worth, whatever that figure may be." Counsel for Allstate responded that he "agree with [Wong's counsel] that there is not a high/low agreement in place . . . . owever, it is [Allstate's] position . . . that Mr. Wong is still bound
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