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State Farm Mutual Automobile Insurance Co. v. Dowdy4/22/2005
s claims for wrongful death, and one $50,000 liability policy limit, plus add ons, to the Dowdys to settle their claims for NIED, loss of society, and punitive damages.
The Dowdys had three State Farm policies, each of which included underinsured motorist (UIM) policy limits of $100,000 per person/$300,000 per accident. State Farm paid the Estate of Heather Dowdy three $100,000 UIM per person policy limits plus add ons. The Dowdys claim that there are separate limits available for NIED, loss of consortium, and punitive damages. They assert that State Farm should pay each of them a separate $100,000 UIM per person policy limit, for a total of $200,000 plus add ons. The Dowdys also maintain that their claims must be adjudicated by arbitration pursuant to the following arbitration agreement in their State Farm policy:
Deciding Fault and Amount - Coverages U and U1
Two questions must be decided by agreement between the insured and us:
1. Is the insured legally entitled to collect damages from the owner or driver of the uninsured motor vehicle or underinsured motor vehicle; and
2. If so, in what amount?
If there is no agreement, these questions shall be decided by arbitration . . . .
State Farm filed a declaratory judgment on July 12, 2002 to establish the rights of the parties under the State Farm policy. On January 2, 2003, Superior Court Judge Niesje J. Steinkruger granted the Dowdys' motion to stay judicial proceedings and referred the matter "to arbitrators to resolve all factual and legal issues arising from this dispute." State Farm filed this petition for review.
III. DISCUSSION
State Farm argues that the disputed coverage issues in this case should not be arbitrated because the public policy in favor of developing precedent and maintaining uniformity in decision making requires judicial determination of coverage issues. State Farm also contends that its insurance policy's arbitration clause does not submit the disputed coverage issues to arbitration. The Dowdys respond that all issues should be arbitrated because the central coverage question, whether they suffered "bodily injury " in the "same accident" as their daughter, is inextricably intertwined with issues of liability and amount of damages that the policy commits to arbitration. The Dowdys also argue that they will endure excessive delay if they are forced to wait for adjudication of coverage issues before they can present their testimony to arbitrators. We will proceed to consider the parties' arguments following our statement of the standard of review.
A. Standard of Review
Whether a dispute is arbitrable is a question of law that we will review de novo. On questions of law, we will adopt the rule of law that is most persuasive in light of precedent, reason, and policy.
B. The Coverage Matters at Issue in this Case
We first consider our previous decisions on the issue of separate "per person" limits for NIED and loss of society claims to provide a context for understanding the matters of coverage particular to this case. Although we have not yet defined conclusively the parameters for these claims, we addressed the question whether NIED claims qualify for separate policy limits in State Farm Mutual Automobile Insurance Co. v. Lawrence. In Lawrence, the phrasing of the coverage provided by the UIM policy for bodily injurywas identical to that in the Dowdys' policy. We determined that under such a policy two requirements must be met in order for the victim's parents to be eligible for separate policy limits: The parents must demonstrate that (1) they suffered "bodily injury"; and
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