Court Opinion

ID: 9647340
Source: CourtListenerOpinion
Date Created: 2023-08-23 13:33:35.422189+00
Date Added: 2024-06-11T18:11:48.273208
License: Public Domain

SCHREIBER, J.,
concurring in part and dissenting in part.
Should an insurance carrier that has denied coverage in good faith be bound by an award of damages determined in arbitration proceedings to which it was not party or privy because the insurance carrier subsequently lost the coverage action? The majority’s answer is yes. I would hold to the contrary. I believe it is unfair to bind the company when it has not had an opportunity to be heard. Furthermore, the procedure that now must be followed may impede the settlement of cases and conflict with the policy of encouraging the expeditious and just disposition of litigation.
*52The salient facts are as follows. Plaintiff David Parks was the owner of an automobile insured by Colonial Penn Insurance Company. He was injured while a passenger in an automobile owned by defendant Richard Skelton and operated by defendant Robert Ajamian. This vehicle was insured by the Insurance Company of North America (INA). INA denied coverage for Ajamian, asserting that he did not have Skelton’s permission to drive the car. Ajamian had no other insurance.
The trial of Parks’ action against Ajamian and Skelton was bifurcated. On the liability issue, the trial court resolved that Ajamian was responsible and that Skelton was not because of the absence of agency.
Two separate proceedings followed. First, Parks commenced an arbitration action against Colonial Penn, his own insurance company, in accordance with the uninsured motorist coverage terms of his insurance policy. Colonial Penn refused to arbitrate, alleging that the INA coverage issue had not been adjudicated. Parks then instituted this action against Colonial Penn seeking a declaratory judgment and an order compelling Colonial Penn to proceed with the arbitration. Colonial Penn, in turn, joined INA in a third-party complaint.
I agree with the majority that the liability trial did not preclude Colonial Penn from litigating the issue of whether INA’s policy covered the defendant Ajamian. Colonial Penn was not a party to that proceeding and could not be said to be in privy with its insured Parks for that purpose. As the majority has said, “it remains essential that the party to be bound by the former adjudication have fair notice and be fairly represented in the prior proceeding.” Ante at 47.
Unlike the majority, however, I maintain that the same sense of fairness should apply to INA; it should not be bound by a determination made in a proceeding to which it was not party or privy. The majority has ordered that Parks’ arbitration on the damage issue should go forward without INA’s representation and that the damages should be fixed and paid. The civil suit *53between Colonial Penn and INA would be stayed until “the arbitration has been completed.” Ante at 51. Then, if Colonial Penn prevails, INA would be bound by the damages theretofore determined in the Colonial Penn arbitration proceeding. There is no statutory, legal, or equitable basis justifying the preclusion of a party from being heard on the issue of damages for which it is to be held responsible — at least where, as here, INA clearly acted in good faith in denying coverage. Indeed, the jury’s decision that Ajamian operated the automobile without the owner’s permission indicates that INA was justified in declining coverage.
The procedure advocated by the majority may also be administratively unwise. I would judge that disposition of automobile accident litigation would be expedited if the insurance coverage question were resolved initially. That is most assuredly so in the absence of an agreement among the insurance companies and the plaintiff on a reasonable settlement figure.
For reversal and remandment — Chief Justice WILENTZ, and Justices CLIFFORD, HANDLER, POLLOCK, O’HERN and CARIBALDI — 6.
Concurring in part, dissenting in part — Justice SCHREIBER — 1.