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New Jersey Manufacturers Insurance Co. v. Franklin

Decided: June 27, 1978.

NEW JERSEY MANUFACTURERS INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
WILLIAM H. FRANKLIN, DEFENDANT-RESPONDENT



On appeal from Superior Court, Law Division, Passaic County.

Halpern, Larner and King. The opinion of the court was delivered by Larner, J.A.D.

Larner

Defendant William H. Franklin sustained serious injuries as a result of an automobile accident with a vehicle owned by Carmine V. Capalbo. As a result of a settlement agreement Capalbo's liability insurance carrier paid Franklin the sum of $25,000 representing the total coverage of Capalbo's policy. Thereafter Franklin made a claim against his own carrier, New Jersey Manufacturers Insurance Co., for the additional sum of $15,000 based on the uninsured motorist endorsement on his policy. He claimed that his injuries and losses were not fully compensated by the payment from Capalbo's carrier, and that Capalbo was therefore -- "uninsured" to the extent that his policy was insufficient to pay for the injuries and losses.

Pursuant to the provision contained in the uninsured motorist endorsement, Franklin filed a demand for arbitration with the American Arbitration Association which sought $15,000 from New Jersey Manufacturers Insurance Co. for personal injuries based on the uninsured motorist provision of his policy. The demand contained no special request for arbitration of any particular issues and was simply a printed form demanding arbitration under the uninsured motorist provision of the policy. The record does not reflect an answer or statement by New Jersey Manufacturers. In any event, an arbitrator was selected. However, pursuant to an agreement that the matter would be submitted on written memoranda, neither party appeared before the arbitrator.

Accordingly, counsel for the insurance company submitted to the arbitrator a "Memorandum of Law in Support of Motion for Dismissal" and a supplemental memorandum as well. In these memoranda he argued that the matter was not appropriately the subject of arbitration, citing Selected Risks Ins. Co. v. Schulz , 136 N.J. Super. 185

(App. Div. 1975), as authority for his position that the question of coverage is not arbitrable. He noted that since the scope of arbitration is limited to "questions of fault and damage" which are not in dispute, nothing remains for the arbitrator to decide.

In addition to the foregoing jurisdictional contention relevant to the application to dismiss, the memoranda also ventured into a discussion of the merits of the coverage question involved in the uninsured motorist claim. On July 20, 1976 the arbitrator filed what is entitled "Interim Award of Arbitrator" with the following provisions:

1. NEW JERSEY MANUFACTURERS INSURANCE CO. is liable to WILLIAM FRANKLIN for injuries received from the accident which occurred on January 19, 1973, under Policy No. FA 548825-9.

2. Jurisdiction is retained until August 29, 1976 for a determination as to damages should the parties be unable to agree on a mutually acceptable amount.

On November 29, 1976 New Jersey Manufacturers filed a complaint in the Law Division for a declaratory judgment to determine that the arbitrator's interim ruling was beyond his jurisdiction, that the arbitration proceeding be dismissed, and that coverage does not exist for Franklin's claim under the New Jersey Manufacturers policy. Defendant took no steps to confirm the interim award and no final arbitrator's award was ever filed.

However, defendant moved to dismiss the complaint. The trial judge converted the motion into a summary judgment motion, which he granted on the ground that New Jersey Manufacturers had waived its right to a judicial determination of the coverage question by its participation in the arbitration proceeding. He also added his opinion that the arbitrator not only had jurisdiction to decide the issue of coverage but had decided that issue on its merits in accord with controlling law, citing Motor Club of America Ins. Co. v. Phillips , 66 N.J. 277 (1974).

Plaintiff's appeal from this determination presents the following questions for resolution: ...


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