St Bernard v. Detroit Automobile Inter-Insurance Exchange

Shepherd, J. Defendant appeals as of right from the circuit court order granting plaintiffs’ motion to confirm an arbitrators’ award and denying defendant’s motion to vacate the award. Defendant also appeals from that portion of the circuit court’s judgment which required defendant to pay 12 percent interest on the arbitration award. The appeals were consolidated by order of this Court. Plaintiff Delbert St. Bernard was a passenger in an automobile driven by Ray Powell which was negligently struck by an Ohio vehicle driven by Avengelina Stoner, an Ohio resident, on March 14, 1975. The parties have stipulated that Delbert St. Bernard sustained injuries above the no-fault tort threshold and in excess of $40,000. Susan St. Bernard’s claim is derivative from her husband’s injuries. The Stoner vehicle, in accordance with Ohio law, had bodily injury liability insurance coverage for up to $12,500. Plaintiffs settled with Stoner’s *182 insurer for her policy limit and with their own no-fault insurer for $7,500. This latter settlement was in lieu of contesting whether the uninsured motorist coverage under the St. Bernard’s own policy could be "stacked”. On December 12, 1978, plaintiffs sought recovery from Powell’s no-fault insurer, defendant Detroit Automobile Inter-Insurance Exchange (DAIIE), based on the uninsured motorist coverage provided for in that policy. On January 4, 1979, defendant denied the claim on the ground that the Stoner vehicle did not qualify as an uninsured motor vehicle. By demand dated April 29, 1980, the St. Bernards commenced arbitration proceedings pursuant to the uninsured motorist provisions and arbitration provisions of Powell’s DAIIE policy. An arbitration hearing ws held October 22, 1981. By order dated that same day, the arbitrators awarded the St. Bernards $20,000, presumably the policy limits. Proceedings were commenced in Monroe County Circuit Court by plaintiffs’ motion to confirm the arbitration award, filed October 23, 1981. In addition to the $20,000 principal sum, the motion requested an allowance for taxable costs and interest totaling $3,439.20. By its motion of November 9, 1981, defendant sought to vacate the arbitration award. Following a hearing, the circuit court entered an order on January 28, 1982, granting plaintiffs’ motion and denying defendant’s motion. The circuit court’s order was based on its finding that the parties had consented to arbitration of their disputes and that they had unconditionally agreed to be bound thereby. After a subsequent motion and hearing, the circuit court entered its judgment on March 23, 1982, ordering defendant to pay $27,290: the $20,- *183 000 arbitration award, $140 in costs and $7,150 in interest, calculated from March 6, 1979 (approximately 60 days from the date of defendant’s rejection of plaintiffs’ claim) at 12 percent per annum. On appeal, defendant argues that the arbitrators exceeded their powers by refusing to enforce a clear and unambiguous provision of the insurance contract and that, even if the arbitrators’ award was properly confirmed, any interest thereon was calculable at a 5 percent rather than a 12 percent rate. I Judicial review of arbitrators’ awards is limited. Detroit Automobile Inter-Ins Exchange v McMillan, 97 Mich App 687, 690; 296 NW2d 147 (1980). In general, relief from an arbitrators’ decision may be had only where: "(a) The award was procured by corruption, fraud or other undue means; "(b) There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party; "(c) The arbitrators exceeded their powers; or "(d) The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing as to prejudice substantially the rights of a party.” GCR 1963, 769.9(1). The standard for judicial review of arbitrators’ decisions was elaborated upon by the Supreme Court in Detroit Automobile Inter-Ins Exchange v Gavin, 416 Mich 407; 331 NW2d 418 (1982). In Gavin, as in the instant case, DAIIE based its claim for review on the ground that the arbitra *184 tors had exceeded their powers, GCR 1963, 769.9(l)(c), arguing that the award was contrary to express provisions contained in the insurance policy. The Gavin Court said, quoting Howe v Patrons’ Mutual Fire Ins Co of Michigan, 216 Mich 560, 570; 185 NW 864 (1921): " '[WJhere it clearly appears on the face of the award or the reasons for the decision as stated, being substantially a part of the award, that the arbitrators through an error in law have been led to a wrong conclusion, and that, but for such error, a substantially different award must have been made, the award and decision will be set aside.’ ” Gavin, supra, p 439. Application of that standard to arbitration cases involving principally or solely legal questions was also discussed by the Gavin Court: "The character or seriousness of an error of law which will invite judicial action to vacate an arbitration award under the formula we announce today must be error so material or so substantial as to have governed the award, and but for which the award would have been substantially otherwise. "Reviewing courts should focus upon the materiality of the legal error to test whether judicial disapproval is warranted, and not upon the question whether the rule of law was so well settled, widely known, or easily understood that the arbitrators should have known of it. Arbitrators are not necessarily trained in the law and are men and women of varying ability and expertise. In the cases before us, the validity of the express contract terms was essentially a legal question. Questions of law are not primarily or even ordinarily within the province of arbitration. For the most part, arbitrators are concerned with factfinding. Because a degree of efficiency can be attained by permitting arbitrators to decide legal questions, we do not expect them to refrain from making the attempt when required to do so by the *185 case. Nevertheless, just as a judge exceeds his power when he decides a case contrary to controlling principle of law, so does an arbitrator. Thus, whether or not the Gavin and Standfes [Detroit Automobile Inter-Ins Exchange v Standfest, 96 Mich App 71; 292 NW2d 164 (1980), rov’d 416 Mich 407; 331 NW2d 418 (1982)] arbitration panels should have had the prescience to anticipate our decision in Bradley [v Mid-Century Ins Co, 409 Mich 1; 294 NW2d 141 (1980)], that unambiguous 'other insurance’ clauses were valid to preclude stacking is entirely beside the point. We will modify the awards not because the rule ultimately announced in Bradley was obvious, inevitable, or 'clear’, but because it is evident from the face of the awards that the arbitrators in those cases erred in not enforcing the anti-stacking provisons of the insurance contract, the terms of which primarily governed the controversy, and that but for such error the awards would have been substantially different.” Gavin, supra, pp 443-444. In the instant case, both parties acknowledged in the arbitration proceedings that here a matter of purely legal interpretation was involved. Defendant DAIIE’s policy obligated it to pay when a passenger of its insured was injured because of an accident with an uninsured automobile. Defendant claims that its policy definition of "uninsured automobile” eliminated plaintiffs from coverage as a matter of law. This was because the alleged uninsured motor vehicle, the Stoner vehicle, had some "bodily injury liability insurance policy”, while to be "uninsured” under the DAIIE policy the automobile had to have no such policy coverage. Plaintiffs argued to the arbitrators that "uninsured” means the same as a matter of law as "underinsured” in this context. Santillanes v Banks, 86 Mich App 615; 273 NW2d 83 (1977). That case involved apparently identical policy language contained in a DAIIE policy. A passenger/ *186 victim sought payment after an accident with an Illinois driver who had only $10,000 of coverage available. This amount satisfied the Illinois statutory requirements but not the Michigan requirement of $20,000 of coverage. This Court affirmed a declaratory judgment which held that the Illinois vehicle was "uninsured” for purposes of the policy language and that the victims were entitled to recovery under the DAIIE policy. In the instant case, defendant argued to the arbitrators that Santillanes was no longer good law because the statutory requirements for inclusion of uninsured motorist coverage unless specifically rejected, MCL 500.3010; MSA 24.13010, had since been repealed and the no-fault act, with its various mandatory coverages, had since been enacted and had replaced the fault system. Arguments were also made regarding the coverage available from the Motor Vehicle Accident Claims Fund and the general former appellate rationale of stretching to find uninsured motorist coverage from any available insurer to protect the fund from too many claims. It is clear that nothing except the legal validity of defendant’s definition of an uninsured automobile was at issue at the arbitration proceedings. The determination of that issue meets and surpasses the "but for” test of Gavin, supra. Deciding the legal issue was deciding the case. If the contract provision allowing payment only where the other vehicle carried no bodily injury liability insurance is a valid contract provision, the arbitrators exceeded their powers in ignoring that provision and awarding plaintiffs the full $20,000 available under the insurance policy’s uninsured motorists coverage. Interpretation of this Court’s opinion in Santil *187 lanes is required to determine who should prevail here. At first blush, Santillanes might be interpreted as having continuing viability and as mandating the arbitration award which was made herein. The first issue addressed in Santillanes was whether the "underinsured” Illinois motor vehicle was an "uninsured automobile” under DAIIE’s uninsured motorist coverage. The reasoning of Woods v Progressive Mutual Ins Co, 15 Mich App 335; 166 NW2d 613 (1968), was determined to be applicable so as to defeat the defendant’s claim that an underinsured vehicle is not an uninsured vehicle. In Woods, the definition of "uninsured motor vehicle” contained in MCL 257.1102(d); MSA 9.2802(d) was utilized to establish that, unless a liability policy meeting the requirements of Michigan law was in force as to a motor vehicle, the motor vehicle was an uninsured motor vehicle. We are of the opinion, however, that the reasoning behind Woods, and therefore Santillanes, was valid only in the context of the then-existing fault system of automobile insurance and the strong policy in favor of mandatory uninsured motorist coverage, MCL 500.3010; MSA 24.13010. At that time, it was statutorily mandated that uninsured motorist coverage be automatically included in all motor vehicle insurance policies unless the named insured rejected such coverage in writing. The Motor Vehicle Accident Claims Fund was also part of the Woods legal environment. The fund paid up to $20,000 for damages for which there was no insurance policy which provided coverage; and there existed a strong policy of providing uninsured motorist coverage under insurance policies wherever possible in order to limit claims against the fund. Since the decision in Woods, both the fault *188 system and § 3010 have been replaced. The fund, however, covers the present accident since it occurred prior to January 2, 1976. Bradley v Mid-Century Ins Co, 409 Mich 1, 22-23; 294 NW2d 141 (1980). The question then is whether, given the statutory changes which have taken place, the broad, liberal interpretation geared toward finding coverage for uninsured motor vehicles and the public policy to that effect still exist. In an analogous situation, insurance provisions prohibiting the "stacking” of uninsured motor vehicle provisions are now permissible, although prior to the no-fault act they were held to be unenforceable. Bradley, supra; Gavin, supra. As this Court noted in Detroit Automobile Inter-Ins Exchange v Standfest, supra, p 73, in discussing case law which had interpreted MCL 500.3010; MSA 24.13010 as requiring "stacking” of uninsured motorist coverage: "The rationale underlying these decisions was eliminated by the repeal of the uninsured motorists statute and the passage of the Michigan no-fault act, MCL 500.3101 etseq.; MSA 24.13101 et seq.” We conclude, as did this Court in Standfest (and as the Supreme Court implicitly did by its disposition in Standfest), that the rationale upon which the Santillanes opinion (and the Woods opinion, insofar as it affected Santillanes) is based no longer exists with the repeal of the uninsured motorist statute, MCL 500.3010; MSA 24.13010. Under the no-fault legislation, all fundamental damages are provided for through first-party personal injury protection coverages or the assigned claims facility, MCL 500.3172; MSA 24.13172. Thus, the primary dilemma which one injured by an uninsured motorist previously faced no longer exists. *189 Moreover, the strong public policy for "universal” uninsured motorist coverage (as embodied in § 3010) may, very reasonably, be said to have vanished with the repeal of that statute. The provision in the policy issued by defendant which provided uninsured motorist coverage only in the event of an accident involving a motor vehicle which carried no bodily injury liability insurance coverage was, therefore, not unenforceable, either by statute or as a matter of public policy. Since the Stoner vehicle was insured by a $12,500 bodily injury liability insurance policy, it was not an uninsured vehicle under the terms of the DAIIE insurance policy issued to Powell. The arbitrators, therefore, committed an error of law by not giving effect to the policy provision and, but for the error, a substantially different award must have been made. Under Gavin, then, it follows that the arbitrators exceeded their powers and that the arbitration award should have been vacated, as was requested in defendant’s motion to the circuit court. We therefore reverse the circuit court’s order confirming the arbitrators’ decision, grant defendant’s motion to vacate the arbitrators’ award, and set aside the judgment of the circuit court which ordered defendant to pay $20,000, plus costs and interest, to plaintiffs. II Defendant next argues that the circuit court improperly awarded 12 percent interest on the arbitrators’ award. Since we decide that the award itself must be vacated, we do not decide the second issue raised by defendant at this time. Reversed. Costs to defendant.