21st Century Assurance Co. v. Liberty Mutual Insurance Co.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY

21ST CENTURY ASSURANCE ) CO., ) ) Plaintiff, ) ) v. ) C.A. No.: N13C-06-212 FWW ) LIBERTY MUTUAL ) INSURANCE CO., ) ) Defendant. )

Submitted: March 6, 2015 Decided: March 23, 2015

Upon Defendant’s Motion for Summary Judgment GRANTED.

ORDER

Amanda L. H. Brinton, Esquire, The Law Offices of Amanda L. H. Brinton, 521 North West Street, Wilmington, DE 19801, Attorney for Plaintiff 21st Century Assurance Company.

David L. Baumberger, Esquire, Law Offices of Chrissinger & Baumberger, 3 Mill Road, Suite 301, Wilmington, DE 19806, Attorney for Defendant Liberty Mutual Insurance Co.

WHARTON, J.

This 23rd day of March, 2015, upon consideration of Defendant’s Motion for Summary Judgment, Plaintiff’s Opposition, oral argument, the audio recording of the Court’s ruling on Defendant’s previous Motion for Summary Judgment 1 and the parties supplemental submissions, it appears to the Court that:

1. Plaintiff 21st Century Assurance Co. (“21st Century”) initiated this

action on June 20, 2013 by filing a Complaint, seeking, inter alia,

subrogation against Liberty Mutual Insurance Company (“Liberty

Mutual”).2 The claim arises out of a motor vehicle accident in which

a vehicle insured by 21st Century was involved in an accident with a

vehicle insured by Liberty Mutual.3 As a result of the accident

expenses in the form of personal injury protection (“PIP”) benefits

were paid to or on behalf of the occupant of the vehicle insured by 21st

Century. 4 21st Century is seeking judgment against Liberty Mutual

for those PIP benefits as well as future PIP payments. 5

2. On December 20, 2013, Liberty Mutual moved for summary

judgment on the basis that the matter was adjudicated in arbitration,

1 A now retired judge of this Court heard argument and ruled from the bench on Defendant’s previous Motion for Summary Judgment. 2 Compl., D.I. 1. 3 Id. at ¶ 4. 4 Id. at ¶ 8. 5 Id.

barring 21st Century’s claim by operation of law. 6 Liberty Mutual

argued that 21 Del. C. § 2118(g)(3) requires that disputes among

insurers as to liability or payments are required to be arbitrated and

that arbitrators’ decisions are not appealable. 7 In Liberty Mutual’s

view, it was entitled to summary judgment because the arbitrator

determined that 21st Century did not have a right of PIP subrogation

since 21st Century’s insured vehicle was insured and registered in

New Jersey and PIP subrogation is only applicable to vehicles

registered in Delaware and affording Delaware PIP benefits. 8 21st

Century opposed the motion, arguing that the matter was ejected from

arbitration without a determination on the merits and that it was

entitled to appeal the arbitrator’s decision under 21 Del. C. §

2118(j)(5).9

3. On April 29, 2014 the Court held oral argument on Liberty Mutual’s

motion. At the conclusion of argument, the Court denied the motion

for summary judgment, but directed that 21st Century amend its

complaint to reflect the case as an appeal, holding that an appeal from

the arbitrator’s decision was permissible.10 A form of order was

6 Def.’s Mot. Summ. J., D.I. 5, ¶¶ 8-9. 7 Id. 8 Id. at ¶ 3. 9 Pl.’s Resp. in Opp’n to Def.’s Mot. Summ. J., D.I. 7. 10 There was some confusion at oral argument on the present motion as to whether or not the judge ruled, in fact, that 21st Century could appeal the arbitrator’s decision. The Court has

submitted and signed by another judge because the initial judge had

retired in the interim. 11

4. On September 3, 2014, 21st Century filed an amended complaint

captioned “Amended Complaint/Appeal From Arbitration Forums,

Inc. Decision Dated June 3, 2013.”12 With the exception of the

caption, the new filing was identical to the original Complaint.

Liberty Mutual again moved for summary judgment “pursuant to 21

Del. C. § 2118(g)(3) and Rules 12 and 56 for lack of subject matter

jurisdiction.” 13 21st Century opposed the motion for the same reasons

it opposed Liberty Mutual’s first Motion for Summary Judgment as

well as asserting a common law right of subrogation. 14

5. The Court heard argument on Liberty Mutual’s Motion for Summary

Judgment on January 27, 2015. Because the Court subsequently

determined that the previously assigned judge had ruled that 21st

Century was entitled to an appeal, the Court requested the parties to

submit memoranda on the applicability of any exceptions to the law of

listened to the audio recording of the argument and it is clear that the judge ruled that 21st Century was entitled to an appeal. 11 D.I. 12. 12 Am. Compl., D.I. 13. 13 Def.’s Mot. Summ. J., D.I. 15. 14 Pl.’s Resp. in Opp’n to Def.’s Mot. Summ. J., D.I. 16.

the case doctrine.15 The parties have submitted the requested

memoranda.16

6. Three issues are presented for the Court’s determination: 1) whether

the ruling on Liberty Mutual’s initial motion for summary judgment

was correct; 2) if not, whether an exception to the law of the case

doctrine allows for a different result; and 3) whether a common law

right of subrogation exists so as to allow 21st Century to bring a

complaint for subrogation directly in this Court.

7. Two courts of this state have addressed the issue of whether an insurer

has a right to appeal from an adverse arbitration ruling. In New

Hampshire Ins. Co. v. State Farm Ins. Co.17 New Hampshire

Insurance Company sought to appeal an adverse arbitration ruling to

this Court. 18 The dispute in that case, as in this case, was between

insurance companies, and, hence, subject to the mandatory arbitration

provision of 21 Del. C. § 2118(g)(3). 19 The Court held that the silence

of § 2118 as to the right of an insurer to appeal the decision of an

arbitrator was fatal to the claim that an appeal lies with the Superior

Court.20

15 D.I. 19. 16 D.I. 20-22. 17 643 A.2d 328 (Del. Super. 1993). 18 Id. at 329. 19 Id. 20 Id.

8. In Zurich American Ins. Co. v. St. Paul Surplus Lines, Inc. 21 the Court

of Chancery was called upon to determine whether the court could

review an arbitrator’s dismissal of a PIP insurance case for lack of

jurisdiction based on the internal rules of the arbitration forum and the

governing arbitral agreement.22 The matter was before the Vice-

Chancellor on a petition to correct and confirm the arbitration award,

filed after the arbitrator had dismissed the claim on jurisdictional

grounds despite finding that Zurich’s damages had been proven, and

after Zurich’s subsequent Superior Court action had been dismissed.23

The Court of Chancery reviewed the applicable statutes, including 21

Del. C. § 2118, and determined that the legislature had not provided

for appellate review where the statutorily mandated arbitration was

foreclosed on jurisdictional grounds by the arbitrator’s internal rules.24

9. In State Farm Mut. Auto. Ins. Co. v. United Parcel Service of America,

Inc.25 the Superior Court addressed the issue of whether the Superior

Court had jurisdiction in a PIP insurance subrogation case in light of 21

Del. C. § 2118.26 State Farm had paid PIP benefits to its insureds and

was seeking judgment in Superior Court against United Parcel Service,

21 2009 WL 4895120 (Del. Ch. Dec. 10, 2009). 22 Id. at *1. 23 Id. at *2-3. 24 Id. at *9. 25 2012 WL 1495338 (Del. Super. Jan. 31, 2012). 26 Id. at *1.

a self insurer under § 2118, claiming that it was entitled to

subrogation.27 The claim originally was dismissed in arbitration for

lack of jurisdiction.28 State Farm then sued in Superior Court. 29 The

Court recognized that the ability of the arbitrator to decline jurisdiction

seemed at odds with the statute’s mandatory arbitration provision,

nevertheless it held that the Superior Court lacked jurisdiction over the

matter.30

10. The Court must consider two subsections of 21 Del. C. § 2118. Section

2118(g)(3) requires that insurers arbitrate their disputes as to liability

amounts paid. 31 Section 2118(g)(3) does not contain any provision for

appeal. 32 Section 2118(j) requires an insurer to submit to arbitration

upon request of a party 33 claiming to have suffered a loss.34 The right

of the party to request arbitration is optional. 35 Section 2118(j)(5) does

provide for the right of an appeal de novo to the Superior Court. 36 It is

clear to the Court that the mandatory arbitration provision of §

2118(g)(3) required 21st Century and Liberty Mutual to submit this

27 Id. 28 Id. 29 Id. 30 Id. at *3-4. 31 21 Del. C. § 2118(g)(3). 32 Id. 33 In this context, “party” refers to the claimant and not the claimant’s insurer. See, State Farm, supra, at *2. 34 21 Del. C. § 2118(j). 35 21 Del. C. § 2118(j)(5). 36 Id.

matter to arbitration. The parties apparently believed they were

required to submit the matter to arbitration as well, because that is

exactly what they did. After being ejected from arbitration, 21st

Century seeks to appeal to this Court, but, “Without specific statutory

authority to do so, the Superior Court has no jurisdiction to hear an

appeal. (citations omitted.) Thus, § 2118(g)(3) does not grant the

Superior Court jurisdiction to hear an appeal from mandatory

arbitration between insurers.”37 21st Century cannot avail itself of the

appeal provisions of § 2118(j)(5) because the matter was not eligible to

be arbitrated under that section. Whether the matter was arbitrated on

the merits or not (as 21st Century claims) is of no significance. The

matter was required to go before an arbitration forum from which there

is no appeal. Accordingly, the Court finds that it has no jurisdiction to

entertain this case as an appeal.

11. Next, the Court turns to the fact that a judge previously assigned to this

case permitted an appeal under 21 Del. C. § 2118(j)(5) that this Court

has determined to be impermissible. Normally, matters previously

litigated are not subject to re-litigation. However, where the previous

ruling was clearly in error, it makes no sense to defer correction of the

37 New Hampshire Ins. Co., supra, at 329-330.

error until appeal. 38 If error can be corrected now, before the case

reaches appeal, it manifestly should be. The Court finds that the

previous ruling permitting an appeal under § 2118(j)(5) was clearly in

error and will not be protected by the law of the case doctrine.

12. Finally, 21st Century argues that it can maintain this claim under a

common law right of subrogation. However, to the extent that common

law subrogation exists, it does not exist with respect to disputes

between insurers. A common law right of subrogation, operating in

parallel with 21 Del. C. § 2118(g)(3), would effectively vitiate the

mandatory arbitration provision of that statute. Further, a system

countenancing both mandatory arbitration and independent common

law subrogation claims is a system ripe for confusion in the event of

differing or inconsistent awards.

13. The authorities cited by 21st Century do not warrant a different result,

inasmuch as none of those cases addressed the issue present here -

whether an insurer has a common law right to bring a subrogation

claim in Superior Court against another insurer. In fact, in Waters v.

United States 39 the Delaware Supreme Court specifically declined to

address that issue, holding that the question of whether Waters could

assert a common law right of subrogation against the United States,

38 Hamilton v. State, 831 A.2d 881 (Del. 2003); Weedon v. State, 750 A.2d 521 (Del. 2000). 39 787 A.2d 71 (Del. 2001).

which was treated as a self insurer for purposes of 21 Del. C. § 2118

analysis, was not before it. 40 In Nationwide Mut. Ins. Co. v. Wooters41

the Court held that an insurer could sue an individual tortfeasor directly

where the tortfeasor’s insurer was not subject to Delaware’s no-fault

law because it was not licensed to do business in Delaware and not

statutorily required to submit to arbitration.42 In International

Underwriters, Inc. v. Blue Cross and Blue Shield of Del., Inc. 43 the

issue was whether § 2118 may reasonably be construed as barring a

subrogation claim by a health care carrier against a no-fault carrier for

reimbursement of covered medical expenses of both carriers’ insured

resulting from a motor vehicle accident.44 In construing a different

statute applicable to that case – 21 Del. C. § 2118(f) - the Court held

that Blue Cross was not a no-fault carrier and its subrogation rights

were not governed by § 2118. 45 Similarly, Givens v. Street, 46 the

holding of which was cited with approval and adopted in International

Underwriters,47 held that “The no-fault statute cannot properly be

construed as governing subrogation rights arising under insurance

40 Id. at 73-74. 41 1996 WL 280778 (Del. Super. Jan. 31, 1996), aff’d 682 A.2d 71 (Del. 2001). 42 Id. at *1. 43 449 A.2d 197 (Del. 1982). 44 Id. at 197. 45 Id. at 199. 46 405 A.2d 704 (Del. Super. Jun. 27, 1979). 47 International Underwriters, supra, at 199.

contracts not governed by the no-fault statute…”48 Here there is no

dispute that both parties are subject to the no-fault statute. Since all of

the foregoing cases deal with issues different than the one presented

here, none of them controls the outcome in this case.

14. Summary judgment is appropriate where there are no issues of material

fact and the moving party is entitled to judgment as a matter of law. 49

The Court finds that there are no issues of material fact relating to the

question of the Court’s subject matter jurisdiction. The Court further

finds that Liberty Mutual is entitled to judgment as a matter of law.

Specifically, the Court finds that 21st Century has no right of appeal

under 21 Del. C. §2118(j)(5); that the Court’s previous ruling to the

contrary was clearly in error; and that, under these facts, 21st Century

has no right to bring a common law subrogation claim.

Therefore, because this Court lacks subject matter jurisdiction, Defendant’s Motion for Summary Judgment is hereby GRANTED.

IT IS SO ORDERED.

______________________ /s/ Ferris W. Wharton, J.

48 Givens, supra, at 706. 49 Super. Ct. Civ. R. 56(c).