Superior Court of New Jersey,
ALLSTATE INSURANCE COMPANY, Plaintiff-Appellant,
GREAT AMERICAN INSURANCE COMPANY, Defendant-Respondent.
Argued May 9, 2006.
Decided June 15, 2006.
A car insured by plaintiff, Allstate Insurance Company, collided with a truck. Plaintiff paid $2,218.44 to its insured in personal insurance protection benefits (PIP). Plaintiff believed that defendant, Great American Insurance Company, insured the truck. An arbitration award in the above amount was obtained by plaintiff against defendant in an uncontested inter-company arbitration proceeding.
Judge Donald Merkelbach entered an order vacating the arbitration award. He concluded that plaintiff had not provided defendant with appropriate notice of the arbitration proceedings, and, therefore, defendant’s due process rights were violated. He also found that plaintiff had obtained the award through “corruption, fraud or undue means.”
Plaintiff appeals the order vacating the award. Plaintiff contends that defendant had been properly served with notice of the arbitration proceeding, that the inter-company arbitration rules precluded any appeal from the award, and that the award had not been obtained by corruption, fraud or undue means. Plaintiff maintains that the order should be vacated and the matter “remanded for a hearing to determine the relationship between Great American Insurance Company and Ohio Casualty and whether their actions in this matter result in a binding arbitration award for which they are responsible.” We disagree and affirm.
The accident occurred on May 6, 2002. The truck owner had an insurance policy which provided that insurance was “afforded by GREAT AMERICAN ASSURANCE COMPANY a member of the Great American Insurance Companies.” The policy was a “Non-Trucking” policy which expressly excluded liability arising out of any accident while the truck was being used to transport cargo. The truck was transporting cargo at the time of the accident, and, consequently, the policy did not cover the accident. The truck owner had a separate liability policy issued by another insurance company for claims arising out of the transportation of cargo.
According to the records of the New Jersey Division of Motor Vehicles (DMV), the insurer of the truck was “Great American Insurance Companies.” The insurance policy number in the records was incorrect.
Plaintiff obtained the above information from the DMV, and mailed a letter dated February 20, 2003 to “Great American Insurance Company c/o Ohio Casualty Company POB 1951, Voorhees, NJ 08043.”
Plaintiff stated in the letter that the accident was caused by defendant’s insured. Plaintiff asked defendant in the letter to “voluntarily reimburse” plaintiff for the PIP payment and “agree to establish a commitment for reimbursement of future payments.” The letter contained the incorrect policy number in DMV’S records.
Plaintiff did not receive a response to its letter. Plaintiff then applied for arbitration pursuant to an inter-company arbitration agreement. Plaintiff and defendant were both signatories to the agreement.
Arbitration hearing notices were sent to defendant at the Ohio Casualty New Jersey address. Defendant did not appear at the hearing, and an award against defendant was entered on August 3, 2003. The award was forwarded to defendant at the Ohio Casualty New Jersey address.
Defendant asserts in a certification filed in support of its motion to vacate, that it did not learn of the accident and the arbitration award until some four months after the award had been entered, when plaintiff’s counsel contacted its office in Ohio by phone.
On April 21, 2006, nearly twenty-two months after the arbitration award had been entered, plaintiff instituted this action by a complaint and order to show cause. Defendant moved to dismiss the action with prejudice and vacate the arbitration award. Judge Merkelbach granted defendant’s motion.
We disagree with plaintiff’s position that the case should be remanded for a hearing on the relationship between defendant and Ohio Casualty. Plaintiff did not request such a hearing when the matter was before Judge Merkelbach. The parties submitted briefs and certifications to Judge Merkelbach on the merits of the controversy. They were given an opportunity to be heard in oral argument prior to the judge’s decision. Under these circumstances, plaintiff has waived any right to a further hearing. See West Jersey Title v. Industrial Trust Co., 27 N.J. 144, 152 (1958) (waiver is the intentional relinquishment of a known right).
Further, a remand of this dispute between two insurance companies over a relatively small amount of money would be a waste of the litigants’ time and money and an undue encroachment on scarce judicial resources.
Plaintiff contends that defendant received proper notice of plaintiff’s claim and the arbitration proceedings. Plaintiff states that it obtained defendant’s address from the New Jersey Lawyer’s Diary and Manual. Plaintiff asserts that it had sent notices of other claims against defendant to this address and the claims had been paid.
After it learned of plaintiff’s claim, defendant investigated the matter and discovered that Lincoln General Insurance Company was the liability carrier for the truck. Defendant advised plaintiff accordingly. Plaintiff contacted Lincoln, but by that time the statute of limitations had barred any claim by plaintiff against Lincoln.
Defendant maintains that plaintiff misread defendant’s address in the Lawyers Diary and mailed the February 20 letter to the wrong address. Defendant states that its office is in Cincinnati, Ohio, and that an internet search under its name would have disclosed “a list of claims offices with mailing addresses, phone numbers, fax numbers and e-mail direct phone number contact information for the VP of claims of the division.”
Judge Merkelbach said in his oral opinion that defendant “never received notification of the pending claim or arbitration. There is nothing in the record to prove the plaintiff made any attempt beyond searching for defendant’s address when submitting the claim to verify the address of defendant or to confer with it regarding the conference or payment prior to filing this motion.” Judge Merkelbach held that plaintiff’s conduct violated defendant’s due process rights.
As to plaintiff’s assertion that other claims had been sent to the Voorhees New Jersey address and thereafter paid, Judge Merkelbach said that it was not stipulated whether those other claims were similar claims or whether they consisted of similar insurance coverage.
Judge Merkelbach also pointed out that the inter-company arbitration agreement provided that a coverage dispute cannot be arbitrated without specific consent. No such consent had been obtained. Under these circumstances, Judge Merkelbach said, the arbitrator did not have jurisdiction to render any award against defendant.
We are satisfied that Judge Merkelbach’s above factual and legal determinations have substantial support in the evidence and should be upheld. See Rova Farms Resort v. Investor Ins. Co., 65 N.J . 474, 484 (1974)(factual findings and legal conclusions of a trial judge are binding on appeal when supported by adequate, substantial and credible evidence).
Proper notice and an opportunity to be heard are the essential components of due process. Mettinger v. Globe Slicing Mach. Co., 153 N.J. 388, 389 (1998). Defendant received neither. The arbitration award is, therefore, invalid on due process grounds.
The award is also invalid because plaintiff obtained the arbitration award by “undue means.” Plaintiff made misleading statements and omitted critical information on the application form for the arbitration.
The form has a place for the applicant to put the name of defendant’s “representative.” The inter-company arbitration rules require that the applicant provide the names and addresses of “local representatives having supervision over the case in controversy.” Plaintiff did not comply. Instead of the names and addresses of the local representatives, plaintiff put only “Claims Department.”
The form has a place for defendant’s “File number.” Plaintiff did not comply, but instead put the incorrect insurance policy number from the DMV records. Plaintiff also put on the form the New Jersey address as defendant’s address.
Plaintiff made another serious misstatement in filling out the form. The inter-company arbitration rules require that as “a condition precedent to arbitration, local representatives of involved companies must make sincere efforts to settle controversies by direct negotiation.”
Plaintiff contends that its letter of February 20 was an attempt to settle the claim. Not so. Plaintiff states in the letter that it has a claim against defendant and asks whether plaintiff would “voluntarily” pay it and future claims. Nothing in the letter pertains to a settlement of the claim. Sending only this one letter and doing nothing more, not even a phone call, certainly does not amount to “sincere efforts” to settle the claim by “direct negotiations.”
Plaintiff, however, in completing the arbitration application erroneously stated that settlement had been attempted. The following question is on the form: “Has settlement been attempted?” Plaintiff checked the “Yes” box.
The following is immediately underneath the “Yes” box: “If affirmative, respondent representative’s name, address and respondent’s file number must be included in upper right section where marked by asterisk. If this information is not available attach explanatory memorandum to application in compliance with condition precedent.” Plaintiff did not furnish any of this information.
Plaintiff’s incorrect and inaccurate statements on the application and its failure to include the required “condition precedent” information were clearly sufficient for Judge Merkelbach to conclude that plaintiff obtained this award by undue means.
The record is not sufficient for a finding that plaintiff committed fraud or acted corruptly. See Fox v. Mercedes-Benz Credit Corp., 281 N.J.Super. 476, 484 (App.Div.1995) (fraud requires clear and convincing proof). However, an arbitration award procured by undue means “shall” be vacated. N.J.S.A. 2A:23B-23a(1). Judge Merkelbach properly vacated the award because it was procured by undue means.
Not Reported in A.2d, 2006 WL 1642767 (N.J.Super.A.D.)