Court Opinion

ID: 2999228
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:52:02.406051+00
Date Added: 2024-06-11T18:01:44.286096
License: Public Domain

UNPUBLISHED ORDER
                            Not to be cited per Circuit Rule 53

              United States Court of Appeals
                                 For the Seventh Circuit
                                 Chicago, Illinois 60604

                                     Argued May 31, 2006
                                     Decided June 19, 2006

                                             Before

                        Hon. Michael S. Kanne, Circuit Judge

                        Hon. Terence T. Evans, Circuit Judge

                        Hon. Diane S. Sykes, Circuit Judge

No. 05-4080

DONALD MULLANEY,                                      Appeal from the United States
              Plaintiff-Appellant,                    District Court for the
                                                      Northern District of Illinois,
       v.                                             Eastern Division

ST. PAUL FIRE & MARINE INSURANCE                      No. 04 C 7192
COMPANY, ST. PAUL INSURANCE
COMPANY OF ILLINOIS, ST. PAUL                         Joan B. Gottschall,
TRAVELERS, et al.,                                    Judge.
                  Defendants-Appellees.

                                          ORDER

       Donald Mullaney was injured in a car accident while working as a police officer in
Bridgeview, Illinois. The accident was covered by the underinsured-motorist provision of
Bridgeview’s insurance policy with St. Paul Fire and Marine Insurance Company. St. Paul paid
Mullaney the limit of the at-fault driver’s insurance policy--$250,000--in order to preserve its
subrogation rights. See 215 ILCS 5/143a-2(6). An arbitration panel was then convened to
determine the full extent of Mullaney’s damages. The panel returned a figure of $1,500,000,
broken down as follows:
No. 05-4080                                                                                          2

                 Past Medical                                    $64,714.00
                 Disfigurement                                   $50,000.00
                 Disability--Past                               $385,286.00
                 Disability--Future                             $100,000.00
                 Pain and suffering--Past                       $300,000.00
                 Pain and suffering--Future                     $100,000.00
                 Loss of Earning--Past/Future                   $500,000.00
                                                              $1,500,000.00

Subtracting the $250,000 it had already given Mullaney, St. Paul paid him an additional
$1,250,000 to satisfy the arbitration award. Mullaney then sued St. Paul, claiming it was obliged
to pay the entire $1,500,000 despite its earlier payment of $250,000. Invoking diversity of
citizenship to remove the case to federal court, St. Paul moved for and was granted summary
judgment.

         Appealing that decision, Mullaney argues that the arbitration panel had exclusive
authority to determine the amount to which he was entitled, and if St. Paul wished to apply the
$250,000 as a setoff, it should have made that request to the arbitration panel. He points to an
Illinois appellate case, Zimmerman v. Illinois Farmers Ins. Co., 739 N.E.2d 990 (Ill. App. Ct.
2000), in which an insurer tried to deduct from the arbitrator’s award an amount already paid to
the claimant by the at-fault driver’s insurer. The court held that by failing to ask the arbitrator to
apply the earlier payment as a setoff, the claimant’s insurer waived its opportunity to do so and
was required to pay the full amount of the award.

        The district court found Zimmerman inapplicable, and we agree. The outcome in that
case hinged on the particular language of the arbitration clause, which directed the arbitrator to
determine the “payment” owed the claimant. Distinguishing “payment” from “damages,” the
Zimmerman court broadly construed the former to include the determination of any applicable
setoff. See 739 N.E.2d at 995. Reasoning that “[t]he language of an arbitration agreement itself
governs the question of which issues are the subject of arbitration” id. at 994–95, the court
concluded that either the arbitrator already considered the earlier payment and included it in the
award, or the insurer dropped the ball by not presenting the issue at arbitration.

        The arbitration clause in this case makes no mention of payment, instead authorizing the
arbitration panel to determine “the amount of damages” sustained by the claimant--which is
precisely what it did, as seen in the itemization we just listed. Since the insurance contract
prohibits double payments (“In no event will a protected person be allowed to receive duplicate
No. 05-4080                                                                                     3

payments for the same loss.”), St. Paul was entitled to deduct the earlier payment from the
panel’s assessment of damages. The setoff issue was beyond the scope of the arbitration panel’s
authority. Cf. Johnson v. State Farm Mut. Auto Ins. Co., 752 N.E.2d 449, 454 (Ill. App. Ct.
2001) (“Nothing in the arbitration provision in the present case authorized the arbitrators to
consider any setoff or nonduplication provisions that may be contained in other provisions of the
policy.”).

       The judgment of the district court is AFFIRMED.