On appeal from the Superior Court, Chancery Division.
For reversal -- Chief Justice Wilentz, and Justices Sullivan, Pashman, Handler and Pollock. For affirmance -- Justices Clifford and Schreiber. The opinion of the Court was delivered by Pollock, J. Schreiber, J., dissenting. Justice Clifford joins in this opinion.
The sole issue is whether, under the arbitration clause of an uninsured motorist endorsement, the question of the existence of a "phantom" hit and run driver should be decided by a court, as a preliminary matter, or by an arbitrator.
We hold that, under the policy in this case, the issue is not a question for the court, but one, together with issues of negligence and damages, for the arbitrator.
On December 7, 1977, a car driven by defendant, Cornell Benson, went off the road and crashed into a tree. Benson filed a claim for benefits under the uninsured motorist endorsement of an automobile insurance policy issued to him by plaintiff Ohio Casualty Insurance Company (Ohio Casualty). Benson claims his damages were caused by a "phantom" hit and run driver who had forced him off the road without hitting his vehicle. Ohio Casualty and Benson could not agree on the damages payable under the uninsured motorist endorsement, so Benson sought arbitration under the policy.
The arbitration clause of the policy provided:
If any person making claim hereunder and the company do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured highway vehicle . . . or do not agree as to the amount of payment which may be owing under this insurance, then . . . the matter or matters upon which such person and the company do not agree shall be settled by arbitration . . . .
In addition, the coverage clause of the endorsement states that "[t]he company will pay all sums which the insured . . . shall be legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle . . ., provided . . . determination as to whether the insured . . . is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured . . . and the company or, if they fail to agree, by arbitration." With respect to compensation for bodily injury, the policy includes hit and run drivers within its definition of "uninsured highway vehicle."
After Benson requested arbitration, Ohio Casualty instituted a civil action seeking a declaratory judgment that the endorsement did not cover the accident. Ohio Casualty also sought an injunction against arbitration. Benson moved to dismiss the complaint, but the trial court denied the motion. The Appellate Division denied, but we granted leave to appeal. 85 N.J. 491 (1980). We now reverse the trial court and grant the motion to dismiss the complaint.
This Court has never expressly considered whether the liability of a hit and run driver to the insured subsumes the issue of the existence of a hit and run driver. Cf. Perez v. American Bankers Ins. Co., 81 N.J. 415, 417 (1979) (parties agreed to submit coverage issue to arbitration); In re Grover, 80 N.J. 221, 228-229 (1979) (parties did not object to arbitration of coverage issue although Court suggests that coverage normally would not be arbitrable). The Appellate Division, however, has concluded "that questions of coverage, even when depending for their resolution upon pure questions of fact, equally related to the concededly arbitrable questions of the insured's liability and fault, must be determined in a court of law, before the arbitration (if there is to be any) is commenced." Government Employees Ins. Co. v. Bovit, 142 N.J. Super. 268, 273 (1976), certif. den. 71 N.J. 502 (1976). See New Jersey Mfrs. Ins. Co. v. Franklin, 160 N.J. Super. 292, 297 (App.Div.1978) (question whether other driver is uninsured is question of coverage to be determined by court); Satzinger v. Satzinger, 156 N.J. Super. 215, 220 (App.Div.1978) (only issues of uninsured's negligence and amount of damages are to be determined by arbitration); Keystone Ins. Co. v. Bowman, 138 N.J. Super. 544, 548 ...