Court Opinion

ID: 9634570
Source: CourtListenerOpinion
Date Created: 2023-08-22 13:17:20.03036+00
Date Added: 2024-06-11T18:09:05.725362
License: Public Domain

SCHREIBER, J.,
dissenting.
It has long been settled that the source of an arbitrator’s jurisdiction and authority is the agreement of the parties. See, e. g., Kearny PBA Local 21 v. Town of Kearny, 81 N.J. 208, 217 (1979); In re Arbitration Between Grover, 80 N.J. 221, 230-31 (1979). The majority has not only maligned that basic principle of arbitration law, but it has also effectively overruled a decision of this Court rendered only two years ago interpreting this identical insurance policy language. See Grover, 80 N.J. at 231-33.
It is axiomatic that in the absence of any statutory or constitutional requirement compelling arbitration the parties need arbitrate only those issues that they have agreed to arbitrate. *200This proposition is self-evident. It is based upon the fundamental notion that the arbitration’s existence depends on the parties’ agreement. Ridgefield Park Ed. Assn. v. Ridgefield Park Bd. of Ed., 78 N.J. 144, 155 (1978); Goerke Kirch Co. v. Goerke Kirch Holding Co., 118 N.J.Eq. 1 (E. & A. 1935); Wm. J. Burns, Inc. v. N.J. Guards Union, Inc., 64 N.J.Super. 301, 308 (App.Div.1960), certif. den., 34 N.J. 464 (1961); Carpenter v. Bloomer, 54 N.J.Super. 157, 162 (App.Div.1959); Leslie v. Leslie, 50 N.J.Eq. 103, 107-08 (Ch.1892), aff’d 52 N.J.Eq. 332 (E. & A. 1894); 5 Am.Jur.2d, Arbitration and Award, § 11 at 527-28. Justice Héher wrote in Goerke Kirch:
The authority of the arbitrators is derived from the mutual assent of the parties to the terms of submission; the parties are bound only to the extent, and in the manner, and under the circumstances pointed out in their agreement, supplemented by the pertinent provisions of the Arbitration act, and no further. They have a right to stand upon the precise terms of their contract. [118 N.J.Eq. at 4]
The efficacy of our arbitration statute depends upon that contract, N.J.S.A. 2A:24r-l through -5,1 and an award must be vacated where the arbitrator exceeds his powers, N.J.S.A. 2A:24-8. The Supreme Court has put it this way:
[The] award is legitimate only so long as it draws its essence from the collective bargaining agreement. [United Steelworkers v. Enterprise Corp., 363 U.S. 593, 597, 80 S.Ct 1358, 1361, 4 L.Ed.2d 1424, 1428 (1960)]
The automobile policy in question contained the identical language that we discussed in Grover, 80 N.J. at 231-33. There, as here, the policy contained an uninsured motorist provision that required the insurance carrier to pay all sums that the insured was legally entitled to recover as damages from the owner of an “uninsured highway vehicle.” Id. at 225. As we stated in Grover the coverage issue centers about the definition of an “uninsured highway vehicle.” An uninsured highway vehicle is defined as a highway vehicle that does not have coverage or is a “hit-and-run” vehicle. A hit-and-run vehicle in turn is defined in the policy, insofar as pertinent to this case, as one that causes an accident without physical contact with the *201vehicle in which the insured was riding, provided (1) the identity of the operator or owner is unknown, (2) the accident was reported to the police within forty-eight hours and a verified statement filed with the insurance company within thirty days thereafter, and (3) at the company’s request, the insured makes available for inspection the vehicle occupied by the insured at the time of the accident. In Perez v. American Bankers Insurance Co. of Florida, 81 N.J. 415 (1979), we struck down a fourth requirement in the policy that required corroboration of the accident by competent evidence other than the testimony of the claimant. We did not pass upon the validity of the three remaining provisions.2
The policy provides for arbitration of two issues: (1) whether the accident was due to the fault of the other party involved in the accident, and (2) if so, the dollar amount of damages. The difference between the coverage and arbitrable issues was expressly recognized in Grover, supra. In that case when both parties submitted the coverage as well as the other issues to the arbitrator, we held that the arbitrator’s authority to decide the coverage issue had been extended by the mutual agreement of the parties. 80 N.J. at 229. However, we set aside the award because the arbitrator had not complied with the terms and conditions of the policy.
Contrary to the implicit suggestion of the majority, sending the controversy to the arbitrator before deciding coverage will not necessarily resolve the entire controversy. Of course, if the arbitrator finds that the hit-and-run vehicle was not legally responsible for the accident, that would end the matter. That decision could be based on the conduct of the driver of the other vehicle or perhaps the claimant’s failure to satisfy the arbitrator of the existence of that vehicle. However, if the arbitrator reaches the opposite conclusion and finds that the hit-and-run *202vehicle caused and was legally responsible for both the accident and the claimant’s damages, the coverage issue may not be concluded. A determination that the alleged tortfeasor was responsible for a “no contact” accident does not decide whether the hit-and-run vehicle satisfies the policy definition. For example, coverage requires that the accident be reported to the authorities within forty-eight hours and that a report be made to the insurance company within thirty days thereafter. Evidence as to these issues may not even be presented to the arbitrator, who could find liability without considering those factors or, even if he found noncompliance, might conclude there was legal responsibility for the accident.
Here the plaintiff insurance carrier sought a declaratory judgment of no coverage and a restraint against arbitration. The trial court then had a choice. It could have stayed the arbitration and decided the coverage issue or it could have permitted the arbitration, to proceed and awaited the outcome of that proceeding. If it selected the latter course, then its next move would depend on the arbitrator’s decision. If the arbitrator found no legal liability, the action would terminate (assuming the award was valid). If the arbitrator found responsibility, then the court might still have before it (assuming again the validity of the award) the question whether the accident involved a hit-and-run vehicle, as defined in the policy.3
*203When the plaintiff insurance company filed its complaint and moved to stay the arbitration, the trial court in exercising its discretion could have denied the motion and permitted the arbitration to proceed first. In taking such an action the court could have reasonably believed under the circumstances that such a procedure might expedite the matter. On the other hand, it might have reached an opposite conclusion. On the basis of the facts presented on this record, I cannot conclude that the trial court mistakenly exercised and abused its discretion. Therefore, I would affirm.
Justice CLIFFORD joins in this opinion.
For reversal — Chief Justice WILENTZ, and Justices SULLIVAN, PASHMAN, HANDLER and POLLOCK — 5.
For affirmance — Justices CLIFFORD and SCHREIBER — 2.

Each of these sections refers to the written contract and governs enforceability, who may submit to arbitration, order for arbitration, stay of proceedings, and selecting the arbitrators.

The parties have not raised, briefed or discussed the validity of these provisions.

The majority misstates my position when it asserts that the dissent “would not permit arbitration of the issue of the existence of a hit and run driver.” Ante at-. As I pointed out in the text, this issue may in fact be decided in the arbitration when the arbitrator determines the liability of the driver of the other car involved. It is also possible that coverage may not be decided even if the arbitrator finds the hit-and-run no-contact vehicle responsible.
The majority misconceives the import of Perez. In Perez the parties had agreed to submit the issue of coverage to the arbitrator. When the hearing was held the policy requirement of corroboration in a hit-and-run no-contact accident was believed valid. The arbitrator found that the accident was a no-contact hit-and-run accident and that the claimant had not corroborated the happening of the accident. Since upon appeal the award was to be set *203aside (the corroboration requirement in the insurance policy having been held invalid), the argument was made that the arbitrator’s findings of fact that it was a no-contact accident without corroboration should stand in subsequent proceedings. In rejecting that contention Justice Sullivan stated in was difficult to see how the arbitrator could decide whether the accident was a contact accident without resolving whether a hit-and-run vehicle was involved. We vacated the award and suggested a new arbitration could be held to adjudicate liability of the third party (including the possibility that the third party was a phantom). No issue of coverage dependent on the insurance policy requirement of corroboration remained and coverage predicated on the existence of a hit-and-run vehicle was properly arbitrable because the parties had agreed in the first instance to arbitrate the coverage question. Perez, which was decided less than five months after Grover, cites Grover approvingly, and in no way modified its holding that the insurance policy did not provide that the issue of coverage was arbitrable.