Third Party Binding Arbitration Award May Not Collaterally Estop a Claimant From Pursuing a Subsequent UIM Claim

In the case of Fernandez v. Erie Ins. Group, a non-precedential Pennsylvania Superior Court Memorandum, Bridget Fernandez appealed from an Order of the Montgomery County Court of Common Pleas granting Erie Insurance Company’s Motion for Summary Judgment.  The trial court had held that Ms. Fernandez was collaterally estopped from obtaining UIM benefits in excess of a $37,000 award entered by the arbitrator in her underlying personal injury action against the tortfeasor.

In the third party action, Ms. Fernandez agreed to have her case decided by a binding sole arbitrator via binding arbitration. The available third party limits were $50,000.  Following the binding arbitration, the sole arbitrator awarded $87,000, which was reduced down to the $50,000 policy limits given the oral agreement of the parties.  Thereafter, Ms. Fernandez signed a Release releasing any and all claims arising out of the accident. However, there was a separate written text in the Release indicating “By signing this release, (Fernandez) expressly reserves the right to pursue her underinsured motorist claim against Erie Insurance Co.”

Following the settlement of the third party case, Ms. Fernandez then asserted an underinsured motorist claim against Erie.  Erie filed a Motion for Summary Judgment arguing the arbitrator’s award collaterally estopped her from seeking damages in excess of $37,000.   After the Court granted Erie’s Motion for Summary Judgment, Ms. Fernandez appealed and alleged that the lower Court committed an error of law in finding the arbitrator’s award precluded Ms. Fernandez’s recovery of UIM damages in excess of $37,000.

The Superior Court agreed that the arbitrator’s award in the third party action was binding on Ms. Fernandez to the extent of the arbitrator’s jurisdiction, which depended upon the terms of the arbitration agreement.  However, given the ambiguity of the arbitration agreement, the Court found that they could not tell whether Ms. Fernandez and the third party tortfeasor imposed any limits on the arbitrator’s jurisdiction because there was no written agreement. The Court was compelled by the fact that the binding arbitrator molded his award down to $50,000 in consideration of the third party policy limits, which could mean that the parties agreed that any amount the arbitrator awarded above the $50,000 was advisory and not binding. The Court concluded that the jury must resolve the ambiguity.

The Superior Court also ruled that the Release in the third party action was ambiguous. The Court found that although the Release contained general language in which Ms. Fernandez agreed to release “all other person, firms or corporations liable or, who might be claimed to be liable” from “any and all claims, demands, damages, actions, causes of action or suits of any kind or nature whatsoever, and particularly on account of all injuries, known and unknown”, the Release also contained writing in Ms. Fernandez’s own hand that: “By signing this release, (Fernandez) expressly reserves the right to pursue her underinsured motorist claim against Erie Insurance Co.” The Court found that the handwritten proviso carved out an exception which authorizes Ms. Fernandez to pursue UIM benefits from Erie, but it does not address whether the arbitration award places a ceiling on recoverable UIM benefits.

Finding that the award and Release do not resolve the question, as a matter of law, whether the arbitration award collaterally estopped Ms. Fernandez from recovering UIM benefits, the Court found the scope of the agreement between Ms. Fernandez was a question of fact for the jury. Therefore, the Court reversed the Order granting summary judgment and remanded the case for further proceedings.

Questions about this case can be directed to Christin L. Kochel, Esquire.

Christin L. Kochel

Office: King of Prussia
Phone: (610) 977-4114
Practice Areas: Coverage, General Liability, Third Party, UM/UIM