Summary
In Shuff, this court held that if a jury returned a verdict against the insured, the insured could not request arbitration to reopen the issue decided by the verdict.
Summary of this case from Bryant v. ClarkOpinion
No. 80-1506
Decided July 15, 1981.
Insurance — Uninsured motorist provision — Demand for arbitration — Barred, when — Prior action determinative.
An insured who seeks to recover damages from his insurer under an uninsured motorist policy and is unsuccessful after a trial on the merits and a jury verdict, may not thereafter submit to arbitration the issue of the liability of the uninsured motorist. (R.C. 3937.18, applied.)
APPEAL from the Court of Appeals for Montgomery County.
Appellee Tom L. Shuff was injured on June 12, 1977, in a collision between his automobile and one driven by Michael G. Williams. At the time of the accident, Shuff was an insured under a policy issued by Universal Underwriters Insurance Company ("Universal"), appellant herein. This policy contained an uninsured motorist endorsement which provides, in pertinent part:
"The company will pay all sums which the INSURED or his legal representative shall be legally entitled to recover as damages from the owner or operator of an UNINSURED HIGHWAY VEHICLE because of BODILY INJURY sustained by the INSURED, caused by accident and arising out of the ownership, maintenance or use of such UNINSURED HIGHWAY VEHICLE; provided, for the purposes of this coverage, determination as to whether the INSURED or such representative is legally entitled to recover such damages and if so the amount thereof, shall be made by agreement between the INSURED or such representative and the company or, if they fail to agree, by arbitration."
Appellees Tom and Wanda Shuff filed case No. 78-874 in the Court of Common Pleas of Montgomery County, seeking damages for personal injuries from Williams and others. Williams filed a counterclaim against appellees. Appellees also joined appellant Universal in a separate count, seeking a declaration whether Williams was uninsured. A jury denied recovery to appellees on their claim and also denied recovery to Williams on the counterclaim. The trial court, in case No. 78-874, declared that Williams was an uninsured motorist at the time of the collision.
After appellees submitted a demand for arbitration, appellant filed this action, case No. 79-1349, seeking a declaration that the jury verdict, in case No. 78-874, remains a binding determination barring any claim by appellees under their insurance policy with Universal. The trial court, in case No. 79-1349, declared that appellees are entitled to arbitration as to their right to recover damages and the amount of damages. The Court of Appeals affirmed.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Mr. Thomas M. Green, for appellant.
Mr. William H. Thornburgh, for appellees.
This appeal presents one issue: whether appellees may submit to arbitration their claim against an uninsured motorist after a trial on the merits and after a jury returned a verdict against appellees. We hold that appellees may not submit this issue to arbitration.
Insurance policies are subject to the same rules of construction and "should be enforced in accordance with their terms as are other written contracts." Rhoades v. Equitable Life Assur. Soc. of U.S. (1978), 54 Ohio St.2d 45, 47. This insurance policy permits arbitration when the insured is legally entitled to recover from an uninsured motorist. The trial court, in case No. 78-874, declared that Williams was uninsured when he collided with Shuff. Under the terms of the policy, therefore, an arbitration panel could require Universal to pay the Shuffs damages for the injuries caused by Williams if the Shuffs were legally entitled to recover those damages from Williams. This contractual language duplicates the statutory language of R.C. 3937.18.
R.C. 3937.18(A) permits "coverage for bodily injury or death***for the protection of persons***who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom." (Emphasis added.)
If appellant were to sue Williams in a court of law, the doctrine of res judicata would bar it from maintaining this action. Res judicata means that "[i]f the defendant is successful in the prior action, the plaintiff is `barred' from suing, in a subsequent action, on the same cause of action." Whitehead v. Genl. Tel. Co. (1969), 20 Ohio St.2d 108, 112. In this case, although the doctrine on res judicata does not directly prohibit appellees from insisting on arbitration, the doctrine does dictate the necessary result. The rationale leading to this conclusion is as follows.
Customarily, arbitrators decide issues without judicial review. See Corrigan v. Rockefeller (1902), 67 Ohio St. 354, 368. A court may, however, vacate an arbitration result when the arbitrators rule contrary to law ( Torrance v. Amsden [D.C. Ohio, 1844], 24 Fed. Cas. 62), or make "such manifest mistake as naturally works a fraud." Corrigan v. Rockefeller, supra, at page 368. See, also, Springfield v. Walker (1885), 42 Ohio St. 543, 548, and R.C. 2711.10. That is, even if appellees compelled appellant to arbitrate this matter and received a damage award, that result would clearly be erroneous and contrary to law under the doctrine of res judicata. Universal would then be entitled to undertake another proceeding to reinstate the jury verdict. After all this, the parties would be exactly where the jury left them. Arbitration, in this case, would be a "vain thing," and the well-settled policy of caution is expressed by the maxim, "equity will not decree a vain thing." Watterson v. Ury (1891), 5 C.C. 347, 360, affirmed 52 Ohio St. 637. Therefore, under the terms of this insurance policy, Universal may refuse to arbitrate.
To rule otherwise would ignore the legislative intent behind both uninsured motorist coverage and arbitration. The purpose of uninsured motorist coverage is to increase the likelihood that people who are injured in motor vehicle collisions will be compensated for their damage. R.C. 3937.18 (see footnote herein). "Arbitration is favored because its purpose is `to avoid needless and expensive litigation.'" Springfield v. Walker, supra, at 546; Dayton Teachers Assn. v. Dayton Bd. of Edn. (1975), 41 Ohio St.2d 127, 132-133.
Requiring arbitration in this case would, nevertheless, decrease the likelihood of recovery by other insureds and increase the likelihood of future litigation, i.e., if insureds may refer an uninsured motorist case to arbitration after a full trial on the merits, then insurance companies may certainly do the same. The mere threat of another proceeding would put a powerful tool in the hands of a party whose bargaining power is typically greater. Insureds would have to weigh the strategic advantage of a judicial proceeding against a possible war of attrition waged by their own insurance companies. In the latter case, insureds may receive a diminished net recovery either due to the expense of a second proceeding or as a settlement to stave off this threat.
Appellees exercised their option. They elected to try the case on its merits. The trial court, in case No. 78-874, declared that Williams was uninsured. This ruling was necessary before appellees could request arbitration. On the other hand, the jury refused to award damages to the Shuffs. In effect, they argue that the declaration of the trial judge should endure while the jury verdict abates. Yet, if the jury had awarded appellees substantial damages, they would be unlikely to complain.
Accordingly, the trial court, in case No. 79-1349, erred. The jury verdict against appellees, in case No. 78-874, bars any recovery by appellees under the uninsured motorist provision of their policy with appellant.
The judgment of the Court of Appeals is reversed, and the cause is remanded to the Court of Common Pleas for further proceedings consistent with this opinion.
Judgment reversed.
CELEBREZZE, C.J., P. BROWN, SWEENEY and HOLMES, JJ., concur.
W. BROWN and C. BROWN, JJ., dissent.
I find the doctrine of res judicata inapplicable to this case. We do not deal with the effect of a prior judgment on a later court action, but the effect of a prior lawsuit on contractual rights. See Auto-Owners Ins. Co. v. Higby (1976), 69 Mich. App. 485,
245 N.W.2d 102, and Farm Bureau Mutual Ins. Co. v. Bower (1978), 87 Mich. App. 305. I find no authority for the proposition that the principle of res judicata applies to nullify or control arbitration provisions in a contract.
Issues decided in a legal action are not binding upon the arbitrators in an arbitration proceeding between the same parties where the contract providing for arbitration contains a clear intent to ignore prior legal proceedings between the contracting parties. This clear intent of the contracting parties is contained in that part of the uninsured motorist provision excerpted in the majority opinion which, in part, reads as follows:
"***provided, for the purposes of this coverage, determination as to whether the INSURED or such representative is legally entitled to recover such damages and if so the amount thereof, shall be made by agreement between the INSURED or such representative and the company or, if they fail to agree, by arbitration."
On the other hand, the principle of res judicata is that material facts or questions which were in issue in a former suit and were there judicially determined by a court of competent jurisdiction are conclusively settled by a judgment therein so far as concerns the parties to that action and persons in privity with them with reference only to a future legal action. Such material facts and questions become res judicata and cannot be litigated in any future legal action between the same parties or privies in a collateral suit in the same or any other court. Trautwein v. Sorgenfrei (1979), 58 Ohio St.2d 493; LaBarbera v. Batsch (1967), 10 Ohio St.2d 106; Norwood v. McDonald (1943), 142 Ohio St. 299; State, ex rel. Kopchak, v. Lime (1975), 44 Ohio St.2d 3; 32 Ohio Jurisprudence 2d 438-439, Judgments, Section 229.
Clearly, the contracting parties here intended that any uninsured motorists claim be determined solely "by agreement between the INSURED or such representative and the company or, if they fail to agree, by arbitration." The parties exclude the right to a determination of the uninsured motorists claim in court, thereby precluding application of res judicata principles.
I would also affirm the Court of Appeals based on Universal Underwriters' failure to furnish "written consent" to be bound by the judgment, as required by the insurance contract. Absent such written consent, the insured is entitled to arbitrate his claim as specified by the language in the contract, language selected by the insurance carrier. Auto Owners Ins. Co. v. Higby, supra; Monaghan v. J.C. Penney Cas. Ins. Co. (1977), 57 Ohio Misc. 11; Mailman v. Motor Veh. Acci. Indem. Corp. (1962), 36 Misc.2d 825, 235 N.Y. Supp. 2d 14.
The insurance contract issued by Universal Underwriters Ins. Co. to Shuff contained the following provisions:
"No judgment against any person or organization alleged to be legally responsible for the BODILY INJURY shall be conclusive, as between the INSURED and the company, of the issues of liability of such person or organization or of the amount of damages to which the INSURED is legally entitled unless such judgment is entered pursuant to an action prosecuted by the INSURED with a written consent of the company."
For all these reasons the Court of Appeals' judgment in favor of defendants should be affirmed.
W. BROWN, J., concurs in the foregoing dissenting opinion.