Opinion ID: 2584681
Heading Depth: 2
Heading Rank: 3

Heading: The Trial Court Must Determine the Defense of Litigation-Based Waiver

Text: National Union asserts that, even if it is party to a valid arbitration agreement, the trial court erred in finding that National Union's defense of litigation-based waiver is properly determined by the arbitration panel. We agree with National Union on this issue. An arbitrator lacks jurisdiction to address an issue outside the scope of the arbitration agreement. City & County of Denver v. Dist. Ct., 939 P.2d 1353, 1363-64 (Colo.1997). Absent clear intent to the contrary expressed in the arbitration agreement, we presume that trial courts, not arbitrators, determine issues of scope; otherwise, unwilling parties might be forced to arbitrate a matter they reasonably thought a judge, not an arbitrator, would decide. Id. at 1363 (internal quotations and citation omitted). In determining whether a particular dispute falls within the scope of an arbitration agreement, we apply a presumption favoring arbitration unless we can say with positive assurance that the arbitration provision is not susceptible of any interpretation that encompasses the subject matter of the dispute. Id. at 1363-64 (internal quotations and citations omitted). The arbitration clause in Great American's UM/UIM endorsement is expressly of limited scope. By its plain terms, it applies only to disputes over entitlement to or recoverable amount of UM/UIM damages: If we and an `insured' disagree whether the `insured' is legally entitled to recover damages from the owner or driver of an `uninsured motor vehicle' or do not agree as to the amount of damages that are recoverable by that `insured,' then the matter may be arbitrated. However, disputes concerning coverage under this endorsement may not be arbitrated. (Emphasis added.) A defense of litigation-based waiver is outside the limited scope of the clause because litigation-based waiver is a procedural defense unrelated to the insured's entitlement to or amount of UM/UIM damages. Because the court of appeals already determined that Radil is entitled to UIM benefits under National Union's policy, Radil, 207 P.3d at 859, the only issue left to be arbitrated is the amount of UIM damages she is to receive. Therefore, we can say with positive assurance that the arbitration provision is not susceptible of any interpretation that encompasses a defense of litigation-based waiver. See City & County of Denver, 939 P.2d at 1363-64. Accordingly, the arbitration panel lacks jurisdiction to determine the issue, and the trial court erred in so deciding. See id. Our conclusion accords with the presumption that, absent clear intent to the contrary expressed in the arbitration agreement, the trial court determines issues of the scope of the arbitration clause. See id. at 1363. The Great American arbitration clause expresses no clear intent that disagreements over its scope be determined by an arbitrator. Our determination also comports with the decisions of other jurisdictions, which uniformly have found that litigation-based waiver is properly determined by the trial court, and with the sound policy rationales supporting those decisions. [3] E.g., JPD, Inc. v. Chronimed Holdings, Inc., 539 F.3d 388, 393-94 (6th Cir.2008); Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 217-19 (3d Cir. 2007); Marie v. Allied Home Mortgage Corp., 402 F.3d 1, 13-14 (1st Cir.2005); Price v. Random House, Inc., No. 07cv01347-RPM-MJW, 2009 WL 3415821, at  (D.Colo. Oct.16, 2009); Perry Homes v. Cull, 258 S.W.3d 580, 587-88 (Tex.2008). We find these decisions consistent with Colorado law, see City & County of Denver, 939 P.2d at 1363-64, and adopt the policy rationales expressed therein. First, trial courts are better-suited than arbitrators to decide claims of litigation-based waiver, given that such waiver depends upon the parties' conduct before that court and implicates trial court procedures with which arbitrators may have less familiarity. Ehleiter, 482 F.3d at 218; Marie, 402 F.3d at 13. In other words, trial courts are better positioned to determine whether the belated request for arbitration is a thinly veiled attempt to forum shop, Ehleiter, 482 F.3d at 218, and are mo[re] adept at policing procedure-abusing conduct, JPD, 539 F.3d at 394. Second, sending waiver claims to an arbitrator is inefficient, given that a determination by the arbitrator that a party waived its right to arbitrate sends the proceedings back to the trial court without having made any progress with respect to the merits of the dispute. Marie, 402 F.3d at 13. Finally, the procedural question of litigation-based waiver is unrelated to the merits of the dispute, which the parties intended to be decided by an arbitrator. JPD, 539 F.3d at 394; Marie, 402 F.3d at 13. Adopting these policy rationales, we presume that the trial court, not an arbitrator, properly decides a claim of litigation-based waiver. If the parties intend otherwise, they may exercise their right to contract freely, see City & County of Denver, 939 P.2d at 1361, and expressly include determinations of procedural defenses, such as litigation-based waiver, within the scope of their arbitration agreement. Absent such clear intent, we conclude that a trial court is better-suited to decide whether a party's conduct before it constitutes waiver of that party's right to compel arbitration. In this case, because the parties expressed no intent that the issue be determined by an arbitrator, we hold that the trial court must determine National Union's defense of litigation-based waiver.