On appeal from the Superior Court, Appellate Division, whose opinion is reported at 151 N.J. Super. 403 (1977).
For reversal -- Chief Justice Hughes and Justices Mountain, Clifford, Schreiber and Handler. For affirmance -- Justice Pashman. The opinion of the court was delivered by Schreiber, J. Pashman, J., dissenting.
An arbitration was held before the American Arbitration Association to resolve a dispute between plaintiff, Wilmer Grover, Jr., and defendant, Universal Underwriters Insurance Company, pursuant to provisions in an insurance policy issued by defendant covering Grover's motorcycle. Subsequent to an award of $15,000, Grover sought to confirm and the Insurance Company to vacate that award in the Superior Court, Chancery Division. The Superior Court remanded the matter to the arbitrator for further hearings. After the rehearing the arbitrator reaffirmed his earlier determination and the Superior Court confirmed the award. The Appellate Division, one judge dissenting, affirmed. 151 N.J. Super. 403 (1977). Thereupon defendant appealed as of right. R. 2:2-1(a).
The two ultimate questions in this appeal are whether a policy coverage issue was properly before the arbitrator, and, if so, whether his award should be upheld.
The proceedings and facts are detailed in the Appellate Division opinion and need only be summarized here. Defendant had issued a liability policy to plaintiff covering his Kawasaki motorcycle. The policy was in effect on August 4, 1973 when plaintiff had a serious motorcycle accident. According
to the plaintiff, he had been riding his motorcycle in an easterly direction on West New Road, South Brunswick, at 30 to 35 miles per hour when, as he began to negotiate a curve, a vehicle traveling in a westerly direction on the wrong side of the road threatened his passage and safety. Plaintiff veered to his right off the road onto the dirt shoulder and lost control of his motorcycle. He was apparently thrown into some split rail fencing and rendered unconscious. Within two minutes Police Officer Fenske came on the scene. Grover, still unconscious, was taken to Princeton Medical Center by the Monmouth Junction First Aid Squad.
When Fenske arrived, there was no one in the immediate area where Grover was lying, although there were people in the yard at a house nearby. The police officer's observations and measurements taken at the accident scene gave no indication that another vehicle was involved. He questioned Grover about one week later at the Medical Center. He obtained Grover's version of what occurred and inserted that information in the police report. Grover meanwhile had been issued a summons for not driving on the improved part of the roadway. On October 15, 1973 he pled guilty and was fined $10.
Grover's insurance policy contained an uninsured motorist provision under which the insurance carrier agreed to pay all the sums which the insured was legally entitled to recover as damages from the owner or operator of an "uninsured highway vehicle" because of bodily injury caused by accident and arising out of the use of such "uninsured highway vehicle." The coverage issue centers about the definition of an "uninsured highway vehicle." Within that category is a hit and run vehicle, which in turn is defined to include a vehicle which had no physical contact with the insured provided certain enumerated conditions were satisfied -- the crucial condition pertinent here being that the "facts" of the accident "can be corroborated by competent evidence other than the testimony of any person having a claim under this * * * insurance as a result of such accident." Defendant
has contended throughout these proceedings that plaintiff never met this requirement.
The policy also provided that if the parties could not agree (1) that the insured was legally entitled to recover damages from the other party allegedly involved in the accident, and (2) if so, the dollar amount of those damages, then those issues were to be determined by arbitration. When Grover and defendant could not agree on these issues, Grover demanded arbitration and sought $15,000, the policy limit. The demand was made on an American Arbitration Association form which referred to disputes arising under the insurance policy provision involving uninsured or hit and run motorists. Defendant acknowledged the demand.
An arbitrator was designated and the hearings proceeded. It is clear that the insurance policy required arbitration on only two issues -- liability of the "hit and run" motorist for the collision and damages which were stipulated at $15,000. Although no reporter was present so that a transcript is not available, we are satisfied that the parties submitted to the arbitrator not only those two questions, but also the basic issue of coverage under the policy.
There are several indicia which lead us to this conclusion. Plaintiff's formal demand for arbitration sought damages of $15,000, and either at the beginning or during the arbitration, defendant stipulated that plaintiff's damages were $15,000. Thus, both parties expected that if plaintiff prevailed, the arbitrator's award would be $15,000. But such an award had to be predicated on the underlying foundation that coverage existed. It is significant that neither party has asserted or claimed that the award was to be contingent upon a judicial finding of coverage. Further, the arbitrator certainly harbored the same understanding. Not only did his award contain no limitation, but on the subsequent rehearing, the arbitrator stated that "[t]he sole issue for determination [had been] the liability of the Respondent [defendant]."
When the award came before the Superior Court for confirmation, defendant's brief and argument centered about the contention that the arbitrator's determination was erroneous, not because the arbitrator lacked authority or jurisdiction to decide the issue, but rather because plaintiff had not adduced the factual proof necessary to support a finding of coverage. In his oral argument before us defendant's counsel conceded that the testimony and argument before the arbitrator concerned the underlying dispute of coverage.
It was because of defendant's contention that plaintiff had not furnished the arbitrator with sufficient competent corroborative evidence of the existence of the other vehicle that the trial court held the award would have to be vacated if the only corroborative evidence before the arbitrator was the police report. However, it believed that if plaintiff's recital of events to the police officer was admissible as an exception to the hearsay rule, such as a spontaneous and contemporaneous statement under Evid. R. 63(4), then the necessary competent corroboration would have been produced. Since it was not apparent on the face of the award or otherwise what other evidence the arbitrator had considered, the trial court ordered that the matter be resubmitted to the arbitrator for a rehearing to establish the admissibility of plaintiff's statement to the police officer. The trial court also observed that the contract required the award be based on a factual finding "corroborated by competent evidence other than the testimony of" the plaintiff and that the arbitrator had to comply with the terms of the agreement.
At the rehearing Officer Fenske and Grover testified. Fenske described what he saw when he arrived at the scene, most of which had been substantially set forth in the police report. He testified that his investigation at the scene had not disclosed that another motor vehicle was involved. His only reference to other motor vehicles was that West New Road was well traveled and that he had passed cars before arriving at the scene.
The officer interviewed plaintiff within a week at the Princeton Hospital. There he obtained the description of how the accident occurred which he incorporated in the police report. Although plaintiff was under some pain, he was calm and related in a coherent fashion that an automobile had forced him off the road. Plaintiff testified that he was under sedation and in severe pain when he spoke with the police officer.
The arbitrator again awarded plaintiff $15,000. He conceded the inadmissibility of plaintiffs narrative statement in the police report, but held he was not bound by the rules of evidence. Accordingly, he admitted the report, and concluded it constituted sufficient corroboration.
The trial court then entered an order confirming the award, despite finding that the policy coverage question was not properly before the arbitrator. Relying upon the record made before the arbitrator, it reasoned that a plaintiff could never satisfy a requirement of corroboration other than his own statement. It went on to find sufficient corroboration in the fact that when the policeman arrived at the scene, he found that an accident had occurred.
The Appellate Division affirmed. It held that the arbitrator's determination was unassailable under N.J.S.A. 2A:24-8(a). Judge Larner in his dissenting opinion found that the arbitrator had no jurisdiction to determine the coverage issue, that the award was procured by "undue means," N.J.S.A. 2A:24-8(a), and that the arbitrator exceeded his "powers," N.J.S.A. 2A:24-8(d). We find that although the arbitrator did have jurisdiction, he "imperfectly executed" his power and the award was produced by "undue means."
We return to the first question of whether the arbitrator's jurisdiction included the authority to decide if defendant's policy provided coverage. The answer is found simply by analyzing what the parties have agreed should be submitted to arbitration. In the absence of a consensual understanding, neither party is entitled to ...