Deeds v. Regence Blueshield of Idaho

TROUT, Justice.

This case involves the enforceability of an arbitration agreement under a health care insurance policy. Appellant Regence Blue Shield of Idaho (Regence) appeals from a district court order and decision, concluding the disputed arbitration agreement is unenforceable and vacating the court’s prior order compelling arbitration.

I.

FACTUAL AND PROCEDURAL BACKGROUND

Respondent Brooke Deeds (Deeds), the insured, filed a complaint against Regence after it declined to pay for Deeds’ treatment for injuries resulting from a motor vehicle accident. In answer to the complaint, Regence demanded the claim be arbitrated pursuant to a provision in the health insurance policy that mandates “arbitration in accordance with the applicable rules of the American Arbitration Association [AAA]”. The district judge agreed and stayed the proceedings, pending arbitration.

Thereafter, Deeds discovered that after the health insurance policy was written, the AAA had implemented a policy, declaring that in health insurance cases “it will no longer accept the administration of eases involving individual patients without a post-dispute agreement to arbitrate” signed by both parties. Deeds refused to sign a post-dispute agreement and filed a motion to vacate the arbitration order. The district court concluded that based on the change in AAA’s policy, the entire arbitration agreement failed. It therefore granted Deeds’ motion and lifted the order to arbitrate, ordering the matter to trial.

Regence then filed a Notice of Appeal pursuant to I.C. § 7-919 and the matter is now before us without any final resolution as to the remainder of the ease. In addition to the briefing on the enforceability of the arbitration clause, this Court requested supplemental briefing regarding the issue of whether or not this appeal originates from a final, appealable order or judgment under I.A.R. 11.

II.

STANDARD OF REVIEW

“On appeal, this Court must address finality even if the parties fail to raise it because the issue is jurisdictional.” Hartman v. Double L Mfg. Co., 141 Idaho 456, 457, 111 P.3d 141, 142 (2005). “In disputes involving arbitration, this court has stated: ‘The question of arbitrability is a question of law properly decided by the court. When questions of law are presented, this court exercises free review____’” Murphy v. Mid-West Nat. Life Ins. Co. of Tennessee, 139 Idaho 330, 331 78 P.3d 766, 767 (2003) (internal citations omitted).

III.

DISCUSSION

The principal issues on appeal are (1) whether the district court’s Order Lifting Partial Stay and Vacating Arbitration Order is a final appealable order; and (2) whether the arbitration clause in the health insurance policy is enforceable. Deeds also requests attorney fees on appeal.

A. Final appealable order

Idaho Code § 7-919 states, in pertinent part, “(a) \a\n appeal may be taken from: (1) An order denying an application to compel arbitration....” I.C. § 7-919(a)(1).1 By enacting I.C. § 7-919, the legislature, as a substantive matter, clearly created the right to appeal an order denying a motion to compel arbitration. Regarding the procedure for bringing the appeal, however, I.C. § 7-919 specifically states: “(b) The appeal shall be taken in the manner and to the same extent *212as from orders or judgments in a civil action.” I.C. § 7-919(b). In turn, I.C. § 13-201 provides the procedure for appealing civil judgments and orders: “An appeal may be taken to the Supreme Court from a district court in any civil action by such parties from such orders and judgments, and within such times and in such manner as prescribed by Rule of the Supreme Court.” I.C. § 13-201. See Camp v. East Fork Ditch Co., Ltd., 137 Idaho 850, 860, 55 P.3d 304, 314 (2002) (“The right to appeal to this Court as a matter of right is governed by the Idaho Appellate Rules.”).

Analogous to the directives contained in I.C. §§ 7-919 and 13-201, the Idaho legislature created the right to appeal from an Industrial Commission order in I.C. § 72-724, and likewise instructed the appeal be brought pursuant to Supreme Court Rules: “An appeal may be made to the Supreme Court by such parties from such decision and order of the [Industrial] commission and within such times and in such manner as prescribed by Rule of the Supreme Court.” Despite the language in I.C. § 72-724 creating the right to appeal from an Industrial Commission order, this Court has held on numerous occasions that this type of order is only appealable if, under our rules, it is final. See Hartman v. Double L Mfg., 141 Idaho 456, 111 P.3d 141 (2005) (holding Industrial Commission’s order did not constitute a final appealable order under Idaho Supreme Court rules and was, therefore, not appealable). Thus, while the legislature originally creates the right to appeal, it is this Court’s responsibility to then determine the procedures for bringing the appeal. This determination includes ruling on the finality of a particular judgment or order.

Under our rules, in a civil action “[a]n appeal as a matter of right may be taken to the Supreme Court from ... [judgments, orders and decrees which are final, including orders of the district court granting or denying peremptory writs of mandate and prohibition.” I.A.R. 11(a)(1). This Court has held an order is final under I.A.R. 11 “if the instrument ‘ends the suit,’ ‘adjudicate(s) the subject matter of the controversy,’ and represents a ‘final determination of the rights of the parties’____” Idah Best, Inc. v. First Sec. Bank, N.A., Hailey Branch, 99 Idaho 517, 519, 584 P.2d 1242, 1244 (1978).

An order denying a motion to compel arbitration does not meet our Rule 11 requirements by ending the suit in its entirety. Yet, the legislature has indicated these orders may be appealed, and as a practical matter, these orders are final with respect to arbitration. It does not make sense to force parties to an arbitration agreement to proceed through litigation only to discover later the matter should have been arbitrated. Thus, we hold that an order denying a motion to compel arbitration (or here, an order vacating an earlier order to arbitrate) is final for the purposes of our rules and is therefore appealable as a matter of right.

B. Enforceability of arbitration clause

Under the Uniform Arbitration Act “arbitration and agreements to arbitrate are encouraged and given explicit recognition as effective means to resolve disputed issues.” Lovey v. Regence BlueShield of Idaho, 139 Idaho 37, 41, 72 P.3d 877, 881 (2003) (quoting Loomis, Inc. v. Cudahy, 104 Idaho 106, 108, 656 P.2d 1359, 1361 (1982)). In this case, the arbitration clause in the health insurance policy provides as follows:

ARBITRATION
Any controversy or claim arising out of or relating to this Policy, or the breach thereof, shall be settled by arbitration in accordance with the applicable rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitration shall be held at such place as may be selected by mutual agreement. All fees and expenses of the arbitration shall be borne by the parties equally. However, each party to the arbitration proceeding shall bear the expenses of its own counsel, experts, witnesses, and preparation and presentation of proofs, (emphasis added).

Because under its new policy the AAA will not designate an AAA arbitrator to administer the dispute without a post-dispute agreement to arbitrate, Deeds claims the entire arbitration clause fails. This Court sees no *213reason, however, why the arbitration cannot proceed “in accordance with the applicable rules of the AAA” using a different arbitrator. With the exception setting forth the method for parties to appoint a designated AAA arbitrator, the AAA rules governing this dispute are simple procedural rules of general applicability. For example, the rules sets forth time frames for filing various documents, the manner in which the final award will be delivered and generic evidentiary guidelines, giving the arbitrator broad discretion to allow in evidence. There is no reason only an AAA arbitrator could comply with these basic procedures.

In addition, there is no evidence the AAA itself is central to the agreement to arbitrate. “Only if the choice of forum is an integral part of the agreement to arbitrate, rather than an ‘ancillary logistical concern’ will the failure of the chosen forum preclude arbitration.” Brown v. ITT Consumer Financial Corp., 211 F.3d 1217 (11th Cir.2000). Deeds misguidedly directs this Court to case law in which the courts held selection of the forum was central to the parties’ agreement to arbitrate and, therefore, refusal by the organization to hear the ease rendered the arbitration agreement unenforceable. See In re Salomon Inc., 68 F.3d 554 (2nd Cir.1995); Smith Barney, Inc. v. Critical Health Sys. of North Carolina, Inc., 212 F.3d 858 (4th Cir.2000); Alan v. UBS PaineWebber, 111 Cal.App.4th 217, 3 Cal.Rptr.3d 377 (2003). These cases involve federal securities law and the decision to arbitrate before a self-regulatory organization (SRO), a forum which must operate in strict compliance with the Securities and Exchange Act of 1934(SEC):

“As part of the comprehensive system of federal regulation of the securities industry, the Exchange Act authorizes SROs within the securities to self-regulate their members subject to oversight by the United States Securities and Exchange Commission (SEC). SROs are subject to extensive oversight, supervision, and control by the SEC on an ongoing basis____The Exchange Act directs SROs to adopt rules and by-laws that conform with the Exchange Act____With some exceptions ... the SEC must approve all SRO rules, policies, practices, and interpretations prior to their implementation . . . . Each SRO must comply with the provisions of the Exchange Act as well as its own rules____”

Alan, 111 Cal.App.4th at 222, 3 Cal.Rptr.3d at 382 (quoting Mayo v. Dean Witter Reynolds, Inc., 258 F.Supp.2d 1097, 1101-02 (N.D.Cal.2003)).

In contrast to the SROs, which are closely governed by the Securities and Exchange Commission and have developed complex regulatory schemes for overseeing arbitration of securities disputes, the AAA simply provides a list of potential arbitrators from which the parties can choose, as well as procedural rules for conducting the arbitration, and coordinates the logistics of setting up the parties with the chosen arbitrator. Here, no one has argued the dominant intent of the parties was that only an AAA arbitrator could handle the dispute or that an AAA arbitrator, or the AAA as an organization, has some type of special expertise. Unlike the SROs, arbitration “in accordance with the applicable rules of the AAA” is not dependent on the AAA overseeing the arbitration.

The only provision of these rules that fails is the method for appointing an arbitrator because the AAA rules provide for the appointment of a designated AAA arbitrator. The Idaho legislature, however, has explicitly addressed this type of situation. Specifically, I.C. § 7-903 serves as a savings clause for an arbitration agreement when the method of appointing an arbitrator fails:

If the arbitration agreement provides a method of appointment of arbitrators, this method shall be followed. In the absence thereof, or if the agreed method fails or for any reason cannot be followed, or when an arbitrator appointed fails or is unable to act and his successor has not been duly appointed, the court on application of a party shall appoint one or more arbitrators. An arbitrator so appointed has all the power of one specifically named in the agreement, (emphasis added).

Since the AAA’s method of appointing an arbitrator can no longer be followed, we remand the case to the trial court to appoint another arbitrator pursuant to I.C. § 7-903, who shall proceed with the arbitration in *214accordance with the AAA rules governing the arbitration.

C. Attorney fees

Deeds requests attorney fees on appeal under I.C. § 41-1839 and § 12-121. I.C. § 41-1839 provides for the award of attorney fees if the insurance company fails to pay an amount justly due under the policy within thirty days after proof of loss. Here, although an action has been brought in court to recover under the terms of the insurance policy, there has been no determination of what amount, if any, is justly due under the policy. Because the substantive claim of this dispute, i.e., the amount owed to Deeds, if any, under the policy has not been resolved, we decline to award attorney fees under I.C. § 41-1839. In addition, because we find no evidence that Regence has acted unreasonably in these proceedings, Deeds is not entitled to attorney fees under I.C. § 12-121.

IV.

CONCLUSION

We reverse the district court decision and remand the case to the district court to appoint another arbitrator pursuant to I.C. § 7-903, who shall proceed with the arbitration in accordance with the AAA rules governing the arbitration. We award costs on appeal to Regence.

Justice BURDICK concurs.

. In all practical effect, the district court’s decision "ordering] that resolution of this matter proceed through litigation” and finding the arbitration clause unenforceable, equates to a denial of Regence’s application to compel arbitration. "Whether an instrument is an appealable order or judgment must be determined by its content and substance, and not by its title.” Howell v. Reimann, 77 Idaho 84, 87, 288 P.2d 649, 651 (1955).