Opinion ID: 2543734
Heading Depth: 3
Heading Rank: 2

Heading: Day in Court

Text: ¶ 41 The open courts provision guarantees, at the very least, that courts shall be open[, affording] a day in court to all parties. Jenkins, 962 P.2d at 799. Similarly, the due process clause, at the very least, requires that every claimant be afforded his `day in court.' Celebrity Club, 657 P.2d at 1296; see also Christiansen v. Harris, 109 Utah 1, 6-8, 163 P.2d 314, 316-17 (1945). When ensuring litigants have received due process of law, our policy is to `resolve doubts in favor of permitting parties to have their day in court on the merits of a controversy.' Celebrity Club, 657 P.2d at 1296 (quoting Carman v. Slavens, 546 P.2d 601, 603 (Utah 1976)). ¶ 42 At a minimum, a day in court means that each party shall be afforded the opportunity to present claims and defenses, and have them properly adjudicated on the merits [6] according to the facts and the law. Accordingly, we must determine whether the Millers ever received the opportunity to litigate the extra-contractual claims, i.e., whether the district court afforded the Millers their day in court on the merits of the extra-contractual claims. ¶ 43 After the appraisal panel issued its determination, in which the panel specifically declined to resolve the extra-contractual claims, the Millers moved the Miller II district court to confer on the forum and schedule for resolving the extra-contractual claims. On March 10, 2000, the Miller II district court denied that motion, reasoning that the extra-contractual claims were not properly before the court because they ha[d] previously been dismissed both in Miller I and again in Miller II as final judgments on the merits. ¶ 44 Nevertheless, the Millers contend that the district court erred in denying the Millers' motion for conference and in refusing to provide a forum for the resolution of the extra-contractual claims. Inasmuch as the district court's denial of the motion for conference was predicated upon the dismissals of Miller I and Miller II, our determination of whether the Millers were denied their day in court hinges on whether the Miller I and Miller II district courts deprived the Millers of their day in court on the extra-contractual claims when they dismissed those claims in the August 21, 1997, and November 25, 1998, orders, respectively.
¶ 45 Although the Miller II district court relied upon the dismissals of both Miller I and Miller II when it denied the motion for conference, we first concern ourselves with the dismissal of Miller I. The Miller II district court dismissed the Millers' extra-contractual claims on the basis that the doctrine of res judicata barred prosecution of those claims because they were the same claims that the Miller I district court had already dismissed. Accordingly, we first analyze whether the Miller I district court properly dismissed the extra-contractual claims in the August 21, 1997, order. ¶ 46 On March 21, 1997, USAA moved the district court in Miller I to dismiss the Millers' complaint in its entirety because, as it argued to the district court, [t]he dispute should be resolved via the appraisal process. In the August 21, 1997, order, the Miller I district court dismissed all of the Millers' claims, including the extra-contractual claims, because USAA invoked the appraisal clause of the insurance contract. The district court reasoned that the parties [were] bound by contract to settle the dispute in this case by appraisal. ¶ 47 Appraisal clauses, like other contractual clauses requiring alternative dispute resolution, are strictly enforceable. See Utah State Bar v. Summerhayes & Hayden, 905 P.2d 867, 868 (Utah 1995); see also Ice City, Inc. v. Ins. Co. of N. Am., 456 Pa. 210, 314 A.2d 236, 240 (1974) (stating that appraisal clauses are enforceable); Standard Fire Ins. Co. v. Fraiman, 514 S.W.2d 343, 345 (Tex.Civ.App.1974) (same). Therefore, a court must compel compliance with a valid appraisal clause if one party demands appraisal. Lundy v. Farmers Group, Inc., 322 Ill.App.3d 214, 255 Ill.Dec. 733, 750 N.E.2d 314, 318 (2001) (holding that court may compel compliance with appraisal clause); Aetna Cas. & Sur. Co. v. Ins. Comm'r, 293 Md. 409, 445 A.2d 14, 19 (1982) (same). ¶ 48 Nevertheless, a litigant's constitutional right to its day in court constrains a court to compel appraisal of a dispute only if the parties expressly and unequivocally agreed to resolve the particular disputed issue by appraisal, thereby waiving their constitutional right to judicial resolution of the dispute. See Jenkins, 962 P.2d at 799; see also Cade v. Zions First Nat'l Bank, 956 P.2d 1073, 1077 (Utah Ct.App.1998) (noting that party who has not agreed to arbitrate dispute has right to court's decision on merits). Generally, to decide whether a party clearly agreed to appraisal of a particular issue, a court must review the appraisal clause of the underlying insurance contract, see Summerhayes & Hayden, 905 P.2d at 868, determine the scope of that clause, and compel appraisal accordingly, Lundy, 255 Ill. Dec. 733, 750 N.E.2d at 318 (maintaining that court must determine whether appraisal clause exists and whether particular dispute is covered by clause); Riley v. Farmers Fire Ins. Co., 1999 Pa.Super. 179, 735 A.2d 124, 128 (1999) (stating that insurance policy's appraisal provision provides the scope of authority for the appraisers in fashioning the appraisal award.). We therefore turn to the appraisal clause of the insurance contract itself to decide whether the extra-contractual claims were amenable to appraisal. ¶ 49 An insurance policy is a contract between the insurer and the insured and, accordingly, is subject to the general rules of contract construction. S.W. Energy Corp. v. Cont'l Ins. Co., 1999 UT 23, ¶ 12, 974 P.2d 1239. Specifically, unless the language of an insurance contract is ambiguous or unclear, the court must construe it according to its plain and ordinary meaning. First Am. Title Ins. Co. v. J.B. Ranch, Inc., 966 P.2d 834, 836 (Utah 1998). Whether an insurance policy is ambiguous is a question of law. S.W. Energy, 1999 UT 23 at ¶ 14, 974 P.2d 1239. An insurance policy is ambiguous only if it is not `plain to a person of ordinary intelligence and understanding.' First Am. Title Ins. Co., 966 P.2d at 836 (quoting Nielsen v. O'Reilly, 848 P.2d 664, 666 (Utah 1992)). As we review the appraisal clause agreed to by the parties, moreover, we must interpret words ... according to their usually accepted meanings and in light of the insurance policy as a whole. Utah Farm Bureau Ins. Co. v. Crook, 1999 UT 47, ¶ 5, 980 P.2d 685. ¶ 50 In section one of the insurance contract, USAA agreed to insure the Millers' home against property damage. As a condition precedent to recovery for property damage, the insurance contract requires the parties to submit the amount of loss to appraisal if a dispute arises as to the amount of loss. The appraisal clause states: If [the Millers] and [USAA] do not agree on the amount of loss, either party can demand that the amount of the loss be determined by appraisal.... The appraisers will ... set the amount of loss. If they submit a written report of any agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree within a reasonable time, they will submit their differences to the umpire. Written agreement signed by any two of these three will set the amount of the loss. (Emphasis added.) The appraisal clause in this contract, especially in light of the contract as a whole, is plain and unambiguous. ¶ 51 According to the plain language of the appraisal clause, the appraisers were only to set the amount of loss of the property damage to the home. Inasmuch as the appraisal clause is a condition only in section one of the insurance contract, the clause necessarily applies only to property damage claims. ¶ 52 Further, relying on the usually accepted meaning of the term, amount of loss as used in the appraisal clause refers to the value of the injury or damage for which the Millers may seek indemnity. Massey v. Farmers Ins. Group, 837 P.2d 880, 882 (Okla. 1992) ([A]ppraisal provisions permit appraisers or umpires to determine one issue, to wit, the amount of damage to the property.); 46A C.J.S. Insurance § 1355 (1993) ([S]ubmissions to ascertain the `amount of loss or damage' are to be construed to signify a proceeding to appraise and estimate the damage to the property described, but not to embrace the question of ownership or any other matter [that] goes to the root of the cause of action.). The word `loss' in a clause in an indemnity insurance policy ... means the injury or damage caused by the accident for which the insurer may, under the provisions of the policy, be liable .... 44 Am.Jur.2d Insurance § 1327 (1982). ¶ 53 The only claim the Millers alleged in Miller I regarding the amount of damage or loss caused by the water heater's bursting was the contractual claim for property damage. None of the extra-contractual claims pertain to the amount of loss under the insurance contract. Because the clause is limited to appraisal of the amount of loss, only the contractual claim was covered by the clause. See Rastelli Bros. v. Netherlands Ins. Co., 68 F.Supp.2d 440, 442-43 (D.N.J. 1999) (The appraisal clause ... deals exclusively with the method of handling a dispute about `the amount of loss.'); J. Wise Smith & Assocs. v. Nationwide Mut. Ins. Co., 925 F.Supp. 528, 529 (W.D.Tenn.1995) (concluding that appraisal of amount of loss was appropriate where parties agreed to resolve amount of loss by appraisal); Atencio v. U.S. Sec. Ins. Co., 676 So.2d 489, 490 (Fla.Dist.Ct. App.1996) (ruling that lower court erred in granting order to compel appraisal because dispute was not concerning amount of loss); Lundy, 255 Ill.Dec. 733, 750 N.E.2d at 319 (Here, the appraisal process provided for in the policy was designed solely to resolve disputes over the amount of loss.); Guider v. LCI Communications Holdings Co., 87 Ohio App.3d 412, 622 N.E.2d 415, 419 (1993) ([A]n appraisal determines only the amount of loss, without resolving issues such as whether the insurer is liable under the policy.); Riley, 735 A.2d at 127 (`[A]ppraisal is limited to determining the amount of loss with all other issues reserved for settlement by either negotiation or litigation.' (quoting Ice City, Inc. v. Ins. Co. of N. Am., 456 Pa. 210, 314 A.2d 236, 240 n. 12 (1974))). Therefore, the Miller I district court should have compelled only appraisal of the contractual claim and erred by dismissing the extra-contractual claims under the appraisal clause. [7] ¶ 54 Because the Miller I district court improperly dismissed the extra-contractual claims, the district court never resolved those claims on their merits. The due process clause and the open courts provision mandate that the Millers have an opportunity to litigate the merits of all controversies between them and the USAA defendants. The district court unconstitutionally denied the Millers any opportunity to have their day in court on the extra-contractual claims by improperly dismissing those claims and ordering their appraisal when the Millers had not agreed to their appraisal.
¶ 55 We next turn our attention to whether the Miller II district court deprived the Millers of the opportunity to have their day in court on the extra-contractual claims. Whether the Miller II court denied the Millers the opportunity to have their day in court depends on whether that court properly dismissed their claims.
¶ 56 On July 15, 1998, the USAA defendants moved to dismiss the extra-contractual claims alleged in Miller II on claim preclusion grounds. The Miller II district court accepted this argument, and thus, dismissed the extra-contractual claims, ruling that the doctrine of res judicata precluded those claims. Specifically, the district court reasoned: The doctrine of res judicata is clearly applicable to [the Millers' extra-contractual claims brought here and] are effectively the same as [the Miller I extra-contractual claims]. Dismissal in that case constituted a final judgement on the merits. As such, the parties may not again raise those issues in this law suit.... Whether the Miller II district court unconstitutionally denied the Millers the opportunity to have their day in court on the extra-contractual claims depends on whether the district court properly dismissed those claims on res judicata grounds. ¶ 57 The doctrine of res judicata serves the important policy of preventing previously litigated issues from being relitigated. Salt Lake City v. Silver Fork Pipeline Corp., 913 P.2d 731, 733 (Utah 1995). Res judicata encompasses two distinct doctrines: claim preclusion and issue preclusion. Macris & Assocs., Inc. v. Neways, Inc., 2000 UT 93, ¶ 19, 16 P.3d 1214. In this case, the Miller II court dismissed based on the doctrine of claim preclusion. ¶ 58 Generally, claim preclusion bars a party from prosecuting in a subsequent action a claim that has been fully litigated previously. Culbertson v. Bd. of County Comm'rs, 2001 UT 108, ¶ 13, 44 P.3d 642; see also Macris & Assocs., 2000 UT 93 at ¶ 19, 16 P.3d 1214. The party moving a court to dismiss on claim preclusion grounds bears the burden of establishing three elements, Macris & Assocs., 2000 UT 93 at ¶ 20, 16 P.3d 1214 which are: First, both cases must involve the same parties or their privies. Second, the claim that is alleged to be barred must have been presented in the first suit or must be one that could and should have been raised in the first action. Third, the first suit must have resulted in a final judgment on the merits.  Id. (emphasis added) (quoting Madsen v. Borthick, 769 P.2d 245, 247 (Utah 1988)); see also Culbertson, 2001 UT 108 at ¶ 13, 44 P.3d 642. All three elements must be established for claim preclusion to apply. See Madsen, 769 P.2d at 247. ¶ 59 According to the third element, [a]n adjudication upon the merits is ... required [to establish] claim preclusion. Beaver County v. Qwest, Inc., 2001 UT 81, ¶ 20, 31 P.3d 1147. We find this element to be dispositive as to the applicability of res judicata in this case. The Miller II district court, applying the doctrine of res judicata, dismissed the extra-contractual claims because those same claims had been dismissed in the August 21, 1997, order of Miller I as a final judgment on the merits. However, we conclude that the trial court erred in ruling that res judicata barred the extra-contractual claims for the ensuing reasons. ¶ 60 First, the August 21, 1997, order was not final. Unless an order or judgment disposes of all the parties and all the claims on the merits, that order is not a final order or judgment because claims are left pending. Bradbury v. Valencia, 2000 UT 50, ¶¶ 9 & 11, 5 P.3d 649; Gen. Motors Acceptance Corp. v. Martinez, 712 P.2d 243, 244 (Utah 1985). Furthermore, as we stated above, an order compelling appraisal is not a final judgment. Although the August 21, 1997, order dismissed all of the Millers' claims, including the extra-contractual claims, it was not a final order because it merely ordered that all of the Millers' claims be submitted to appraisal. [8] The order left the claims pending, viable, and outstanding. ¶ 61 Next, the August 21, 1997, order was not [a]n adjudication upon the merits. Beaver County, 2001 UT 81 at ¶ 20, 31 P.3d 1147. Rule 41(b) of the Utah Rules of Civil Procedure comprehensively define[s] a dismissal on the merits. Madsen, 769 P.2d at 248; see also Beaver County, 2001 UT 81 at ¶¶ 19-20, 31 P.3d 1147. Rule 41(b) provides in pertinent part: [A] dismissal ..., other than a dismissal for lack of jurisdiction or for improper venue or for lack of an indispensable party, operates as an adjudication upon the merits. Utah R. Civ. P. 41(b) (emphasis added). Accordingly, we have held that under rule 41(b), a dismissal for lack of jurisdiction does not result in an adjudication on the merits. Beaver County, 2001 UT 81 at ¶ 19, 31 P.3d 1147. ¶ 62 In its August 21, 1997, order, the Miller I district court never addressed the merits of the allegations in the complaint, but simply dismissed the Millers' claims because the parties [were] bound by contract to settle the dispute in this case by appraisal. The district court dismissed Miller I on the assumption that it lacked jurisdiction to hear the Millers' claims, i.e., on the assumption that the insurance contract vested the appraisal panel with jurisdiction to hear the claims and that the contract reciprocally divested the district court of jurisdiction until the completion of the appraisal process. Accordingly, because the district court dismissed for lack of jurisdiction, we conclude that the extra-contractual claims were never dismissed on the merits. See, e.g., Beaver County, 2001 UT 81 at ¶ 19, 34 P.3d 1147. ¶ 63 Therefore, the USAA defendants never established the third element of claim preclusion. Inasmuch as the USAA defendants never established claim preclusion, the Miller II district court should not have dismissed the extra-contractual claims and, in doing so, denied the Millers the opportunity to have their day in court on the merits of those claims. [9]
¶ 64 The district court declined to address the scope of the appraisal clause, vesting the appraisal panel with authority to determine the scope of the clause in its discretion. The determination of the scope of the appraisal clause is a question of law for determination by the district court because it is a matter of contract interpretation. See Pac. Dev., L.C. v. Orton, 2001 UT 36, ¶ 13, 23 P.3d 1035; see also Caldwell v. Ford, Bacon & Davis Utah, Inc., 777 P.2d 483, 486 (Utah 1989). The district court erred in devolving the determination of the scope of appraisal to the panel. In doing so, the district court improperly abdicated its duty to interpret the appraisal clause and determine the scope of appraisal. See Portland Gen. Elec. Co. v. U.S. Bank Trust Nat'l Assoc., 218 F.3d 1085, 1090 (9th Cir.2000); Lundy v. Farmers Ins. Exch., 322 Ill.App.3d 214, 255 Ill.Dec. 733, 750 N.E.2d 314, 318 (2001).
¶ 65 Finally, the Miller II district court unconstitutionally denied the Millers the opportunity to have their day in court when it denied the Millers' motion for conference. After the appraisal panel appropriately declined to resolve the extra-contractual claims, the Millers requested the Miller II court to either set the extra-contractual claims for trial or provide them another forum for the resolution of those claims. On March 10, 2000, the Miller II court denied the motion, stating that both the Miller I and Miller II courts had already dismissed those claims. Because we have held herein that both the Miller I and Miller II courts improperly dismissed the extra-contractual claims and should have adjudicated those claims on the merits, we must now also conclude that the district court erred in relying on those decisions to determine that it would not address the extra-contractual claims. Therefore, the Millers were never afforded an opportunity to have their day in court on the extra-contractual claims, and those claims have never been adjudicated on the merits. ¶ 66 Because we conclude that the district court unconstitutionally denied the Millers the opportunity to have their day in court on the merits of the extra-contractual claims, we reverse the district court's dismissal and remand to the district court for further proceedings consistent with this opinion. [10]