Kutch v. State Farm Mutual Automobile Insurance Co.

Chief Justice VOLLACK,

dissenting.

The majority holds that State Farm Mutual Automobile, Insurance Company (State Farm) is barred.from raising a $100,000 contractual policy ‘limit in a confirmation proceeding because it failed to make a timely request to vacate or modify an arbitration *100award pursuant to provisions in the Uniform Arbitration Act, §§ 13-22-201 to -223, 5 C.R.S. (1997) (the UAA). I disagree. In my view, the thirty-day deadlines for vacating or modifying arbitration awards do not apply to issues contractually excluded from the arbitration process. Accordingly, I dissent.

I.

In 1991, Kay Kutch (Kutch) was injured in a ear accident involving an uninsured motorist. Kutch, who vyas a passenger in the car at the time of the accident, filed an uninsured motorist claim with State Farm under the driver’s automobile insurance policy. This policy expressly limited uninsured motorist coverage to $100,000 per person per accident and required arbitration in the event the parties could not agree on damages. Arbitration proceedings were contractually limit-, ed to the following two issues: “(1) Is the-insured legally entitled to collect damages from the owner or driver of the uninsured motor vehicle; and (2)[i]f so, in what amount?”1

On February 3, 1995, the arbitration panel awarded Kutch $176,800, inclusive of interest and exclusive of costs. The panel subsequently awarded Kutch $3,349.20 in costs for a revised total of $180,149.20. On March 1, 1995, Kutch’s attorney sent a demand letter to State Farm requesting payment of only the $100,000 policy limit plus post-judgment interest. In response, State Farm tendered a draft in the amount of $103,349.20, which represented the policy limit plus the arbitration panel’s award of costs. Kutch refused the offer and filed suit in Denver District Court (the district court) on May 10, 1995, seeking confirmation of the arbitration panel’s entire award because State Farm failed to request vacation or modification of the award within ninety days.2

The district court confirmed the arbitration panel’s entire award and refused to enforce the $100,000 limit set forth in the policy because State Farm “failed to apply for an order vacating the award within ninety days after delivery of a copy of the award as required by section 13-22-214(2).” The court of appeals reversed, concluding that

notwithstanding the fact that the insurer did not bring its objection within the thirty-day statutory time period, the insurer may raise a defense in a confirmation action that the arbitration award exceeded the applicable policy limits. To rule otherwise would allow an arbitration panel to increase the limit of liability contained in an insurance policy.

Kutch v. State Farm Mut. Auto. Ins. Co., 944 P.2d 623, 626 (Colo.App.1997).

II.

Section 13-22-214(l)(a), 5 C.R.S. (1997), provides that, upon application of a party, a court shall vacate an arbitration award where:

(I) The award was procured by corruption, fraud, or other undue means;
(II) There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party;
(III) The arbitrators exceeded their powers;
(IV) The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the pro*101visions of section 13-22-207, as to prejudice substantially the rights of a party; or
(V) There was no arbitration agreement and the issue was not adversely determined in proceedings under section 13-22-204 and the party did not participate in the arbitration hearing without raising the objection.

Section 13-22-214(2) further provides that “[a]n application under this section shall be made within thirty days after delivery of a copy of the award to the applicant.” Additionally, section 13-22-215(1), 5 C.R.S. (1997), provides that “[ufcon application made within thirty days ..., the court shall modify or correct the award where:

(a) There was an evident miscalculation of figures or an evident mistake in the description of any person, thing, or property referred to in the award;
(b) The arbitrators awarded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon'the issues submitted; or
(c) The award is imperfect in a matter of form, not affecting the merits of the controversy.

The majority holds that State Farm is -time barred from raising the $100,000 policy limit as a defense because State Farm did not attempt to vacate or modify the arbitration panel’s award within thirty days. I disagree. The arbitration provision in this ease does not call for a complete adjudication of all legal issues between the parties. On the contrary, it limits the scope of arbitration to two issues: (1) whether Kutch was entitled to recover damages from the uninsured motorist; and (2) the amount of those damages. Consequently, the arbitration provision purposely excludes questions concerning State Farm’s uninsured motorist coverage, including the $100,000 policy limit, from the arbitration panel’s consideration. In my, view, legal issues contractually excluded from the arbitration panel’s consideration are not subject to the procedural requirements of the UAA because .these issues cannot be arbitrated. See Meade v. Lumbermens Mut. Cas. Co., 423 So.2d 908, 910 (Fla.1982).3

Subjecting contractually excluded issues to the UAA’s procedural requirements contravenes the intent of the parties, which controls and defines the manner in which the arbitration is conducted. Here, the parties agreed to arbitrate the limited issues of whether the uninsured motorist, not State Farm, was liable for damages, and if so, in what amount. These issues were resolved by the arbitrators and are subject to the UAA’s procedural requirements.. However, the parties reserved questions concerning State Farm’s liability under the insurance policy for a determination outside of the arbitration process. In my view, these issues were never part of the arbitration process and may therefore be raised in the confirmation proceeding. As our court of appeals has explained, “[i]t is the arbitration agreement between the parties, and not the Uniform Arbitration Act, that controls the nature of the arbitration.... [T]he purpose of the Act is to provide ground rules and procedures for enforcement of awards through the courts, but not to supersede the agreement entered into, by the parties.” See Water Works Employees Local No. 1045 v. Board of Water Works, 44 Colo. App. 178, 179-80, 615 P.2d 52, 53 (1980).

Relying exclusively upon our decision in State Farm Mutual Automobile Insurance Co. v. Cabs, Inc., 751 P.2d 61 (Colo.1988), the majority explains that State Farm could have sought .to vacate the panel’s award pursuant to section 13 — 22—214(l)(a)(III) by arguing that the arbitrators exceeded their powers in awarding more than the policy limit. See maj. op. at 97-98.4 As explained above, how*102ever, I do not believe State Farm was obligated to raise the policy limit within thirty days because the terms of the insurance contract were not before the arbitration panel. Furthermore, none of the grounds in section 13-22-214 or section 13-22-215 apply because the arbitration panel fulfilled its obligations under the terms of the arbitration provision.5

Finally, the majority permits Kutch to recover an amount in addition to the contractual policy limit despite her knowledge and acceptance, recognized in her initial demand letter, that the insurance policy limited her recovery to $100,000. While the majority asserts that such an inequitable result is necessary to preserve the integrity of the UAA, I believe it comes at the expense of the overriding policy of enforcing contractual provisions as they are written. See Water Works, 44 Colo.App. at 179-80, 615 P.2d at 53; see also Bennett Bear Creek Farm, Water and Sanitation Dist. v. City and County of Denver, 928 P.2d 1254, 1266 (Colo.1996) (explaining that “[cjontraets cannot simply be abrogated, or ignored, and must be given effect in light of their essential purpose and effect”)- Because enforcing the arbitration panel’s award is in clear violation of the $100,000 policy limit contained in the insurance contract, I would not permit Kutch to recover in excess of that amount.

III.

I believe State Farm is entitled to have its policy limit enforced regardless of the fact that this contractual provision, which was purposely excluded from the arbitration process, was not raised as part of a request to vacate or modify the arbitration award within thirty days of the arbitration ruling. For this reason, I would affirm the court of appeals.-

I am authorized to say that KOURLIS and HOBBS, JJ., join in this dissent.

. Following its ruling, a member of the arbitration panel submitted a sworn affidavit stating that "[t]he insurance policy and its limits of coverage were not evidence presented to the arbitrators at or before the time of the arbitration." Additionally, the affidavit states that "[t]he arbitrators were not asked by either Claimant or Respondent to determine the extent of coverage under the State Farm Automobile Insurance policy applicable to the uninsured motorist claim of Kay Kutch."

. At the time Kutch's complaint was filed, section 13-22-214(2), 6A C.R.S. (1993 Supp.), provided that parties seeking modification of an arbitration award must do so within thirty days. Previously, a ninety-day time limit was in place. See § 13-22-214(2), 6Á C.R.S. (1987). As the majority notes, however, State Farm did not raise the contractual policy limit until after ninety days. Therefore, Kutch's reliance upon a statutory provision no longer in effect is inconsequential.

. In Meade, the Florida Supreme Court was faced with an almost identical issue. There, the court held as follows:

[T]he grounds for seeking vacation or modification of an arbitration award ... limit the applicability of the ninety-day rule to issues submitted to an arbitration panel. The sole issue before the arbitrators was the amount of damages sustained by Meade. Since the policy limits were not before the arbitration panel in this case, the insurer was not precluded from raising the defense of the policy limits in the confirmation proceeding filed by petitioner.

Meade, 423 So.2d at 910.

. Contrary to the majority, I do not view our decision in Cabs as controlling. In Cabs, we barred a party from raising the constitutionality *102of an arbitration statute in a confirmation proceeding because the issue could have been raised as a claim that the arbitrators exceeded their powers pursuant to section 13 — 22—214(1 )(a)(III). Cabs, 751 P.2d at 66. Cabs, however, did not address the issue presented by this case of whether the UAA is applicable in situations where the parties submit limited issues to arbitration while reserving others for judicial determination.

. I disagree with the majority’s assertion that State Farm could have asked to vacate the arbitration panel's award pursuant to section 13-22-214(l)(a)(III) by arguing that the arbitrators exceeded their powers in awarding Kutch more than $100,000. In essence, the majority is asserting that State Farm should have argued that the arbitration panel's award should be vacated because the panel exceeded its powers in not enforcing a contractual provision it was prohibited from considering. State Farm should not be forced to make such a strained legal argument in order to have a clear and unambiguous contractual provision enforced by a court of law.