Opinion
No. CV03-0180156 S
March 25, 2004
MEMORANDUM OF DECISION
This motion filed by Northern Insurance Company of New York seeks to vacate an arbitration award. The plaintiff issued an automobile insurance policy (policy) to Extra Hand Inc., the employer of Robert Covillion, in which the underinsured motorist coverage included in the policy provided that amounts paid thereunder shall be reduced by amounts paid or payable under workers' compensation, disability benefits or similar law.
On January 17, 1997, during the course of his employment, the defendant was injured in an automobile accident while operating a vehicle insured under the policy. As a result of the injuries sustained, the defendant recovered workers' compensation benefits and, in accordance with the terms of the policy, filed an underinsured motorist claim with the plaintiff Pursuant to the policy and § 38a-336(c) of the General Statutes, an uninsured/underinsured motorist statute, the claim was submitted to arbitration and was heard by a panel of three arbitrators.
Section E, "Changes in Conditions," of the "Connecticut Uninsured and Underinsured Motorist Coverage" endorsement to the policy provides in relevant part: "(4) Arbitration (a) If we and an `insured' disagree whether the 'insured' is legally entitled to recover damages from the owner or driver of an `uninsured motor vehicle,' or do not agree as to the amount of damages, the `insured' may make a written demand for arbitration . . . If the amount of damages the `insured' demands is more than $40,000, each party will select an arbitrator. The two arbitrators will select a third . . . (b) . . . A decision agreed to by the arbitrator(s) will be binding."
Section 38a-336(c) of the General Statutes provides: "Each automobile liability insurance policy issued on or after October 1, 1971, which contains a provision for binding arbitration shall include a provision for final determination of insurance coverage in such arbitration proceeding. With respect to any claim submitted to arbitration on or after October 1, 1983, the arbitration proceeding shall be conducted by a single arbitrator if the amount in demand is forty thousand dollars or less or by a panel of three arbitrators if the amount in demand is more than forty thousand dollars."
On July 24, 2003, the majority of the arbitrators found in favor of the defendant and awarded him $700,000. The award was reduced by $139,000, which resulted in a net award of $561,000. One of the arbitrators issued a dissenting opinion in which he questioned the severity of the claimed injuries and indicated that he would have awarded a gross award of $200,000.
The arbitration award stated: "The undersigned arbitrators, having reviewed the evidence both testimonial and documentary, hereby find in favor of . . . Robert Covillion, and find economic damages in the amount of $63,055.12 and non-economic damages in the amount of $636,944.88 for a gross award of $700,000.
"The undersigned also deduct, as agreed by the parties, $139,000 from said gross award for a net award of $561,000 to . . . Robert Covillion." Plaintiff's Exhibit M.
On August 22, 2003, the plaintiff filed an application to vacate the arbitration award, alleging that the arbitrators failed to conform their award to Connecticut law, thereby exceeding their powers or so imperfectly executing them that a mutual, final and definite award upon the subject matter was not made. The plaintiff alleges that the arbitrators erred in one or more of the following respects: First, the arbitration panel awarded damages for elements of loss that were properly payable in the workers' compensation forum; second, the arbitration panel awarded damages for which the defendant has already received compensation; and third, the arbitrators precluded the plaintiff from exercising its rights under the policy with regard to an independent evaluation of the defendant.
On September 12, 2003, Covillion filed an application to confirm the arbitration award.
"[V]oluntary arbitration and compulsory arbitration are fundamentally different if only because one may, under our system, consent to almost any restriction upon or deprivation of right, but similar restrictions or deprivations, if compelled by government, must accord with procedural and substantive due process." (Internal quotation marks omitted.) Schoonmaker v. Cummings Lockwood of Connecticut, P.C., 252 Conn. 416, 427 n. 5 (2000). The arbitration provision of § 38a-336(c) has been characterized by the Supreme Court as a compulsory arbitration provision; Chmielewski v. Aetna Casualty Surety Co., 218 Conn. 646, 658 (1991); and compulsory arbitration calls for a higher level of judicial review. Quigley-Dodd v. General Accident Ins. Co. of America, 256 Conn. 225, 234 (2001); see also American Universal Ins. Co. v. DelGreco, 205 Conn. 178, 187 (1987).
"[W]here judicial review of compulsory arbitration proceedings required by [§ 38a-336(c)] is undertaken . . . the reviewing court must conduct a de novo review of the interpretation and application of the law by the arbitrators." (Internal quotation marks omitted.) Travelers Ins. Co. v. Pondi-Salik, 262 Conn. 746, 751 (2003); see also Vitti v. Allstate Ins. Co., 245 Conn. 169 (1998); Chmielewski v. Aetna Casualty Surety Co., supra, 659. Because there was a stipulation of facts in American Universal Ins. Co. v. DelGreco, the court noted that it need only articulate the standard of review necessary with regard to determining questions of law. Nonetheless, the court also noted the following regarding arbitration proceedings: "There is no requirement that a verbatim record be made . . . no formal requirements of procedure and practice . . . and no findings of fact or conclusions of law . . . Unless required by the submission, the decision of the arbitrator need contain no more than the actual decision, and need not make reference to the specific claims of the parties." (Citations omitted; internal quotation marks omitted.) American Universal Ins. Co. v. DelGreco, supra, 190-91.
In Chmielewski v. Aetna Casualty Surety Co., supra, the court was required to determine the question left unanswered in DelGreco, that is, what scope of review is to be accorded the factual findings of arbitrators. The court thus held that when reviewing factual findings of the arbitrators, "the appropriate standard of review is the `substantial evidence' test that prevails in review of factual determinations by administrative agencies." Chmielewski v. Aetna Casualty Surety Co., supra. Cognizant of its earlier observations in DelGreco regarding the lack of a requirement of a verbatim record in arbitration proceedings, the court further held that "in order to ensure that the court is able to undertake [substantial evidence] review effectively, [General Statutes § 38-175c, now 38a-336, is construed] to incorporate a requirement that a record of the arbitration proceedings be preserved and made available to the Court in connection with any such review." Id., 661.
"The substantial evidence test in the context of arbitration requires that a court determine whether substantial evidence exists in the record to support the [arbitration panel's] findings of basic fact and whether the conclusions drawn from those facts are reasonable. Substantial evidence will be found to exist if the . . . record supplies a substantial basis of fact from which the court reasonably can infer the fact in issue." (Internal quotations omitted.) Lawrence v. New Hampshire Ins. Co., 29 Conn. App. 484, 490 (1992). "[A]rbitrators, as fact finders, have the right to believe or disbelieve the evidence presented in whole or in part." Capozzi v. Liberty Mutual Fire Ins. Co., 32 Conn. App. 250, 260 (1993).
A. Workers' Compensation and Underinsured Motorist Law
"[Section 38a-334 of the General Statutes] . . . explicitly authorizes the insurance commissioner to adopt regulations relating to exclusions." Rydingsword v. Liberty Mutual Ins. Co., 224 Conn. 8, 14 (1992). Section 38a-334-6 of the Regulations of Connecticut State Agencies provides for protection against underinsured motorists. The regulation further provides that an underinsured motorist policy may provide for reduction of the insurer's obligations by amounts paid under any workers' compensation law. The plaintiff argues that it took advantage of that regulation by incorporating such language in the policy issued to the defendant, and that the arbitrators incorrectly applied the regulation and policy to the current matter.
Section 38a-334 provides in relevant part: "Minimum provisions in automobile liability policies. (a) The Insurance Commissioner shall adopt regulations with respect to minimum provisions to be included in automobile liability insurance policies issued after the effective date of such regulations and covering private passenger motor vehicles . . ."
Section § 38a-334-6 of the Regulations of Connecticut State Agencies provides in relevant part: "(a) Coverage. The insurer shall undertake to pay on behalf of the insured all sums which the insured shall be legally entitled to recover as damages from the owner or operator of an uninsured or underinsured motor vehicle because of bodily injury sustained by the insured caused by an accident involving the uninsured or underinsured motor vehicle. This coverage shall insure the occupants of every motor vehicle to which the bodily injury liability coverage applies. `Uninsured motor vehicle' includes a motor vehicle insured against liability by an insurer that is or becomes insolvent."
Subsections (c) and (d) of § 38a-334-6 of the Regulations of Connecticut State Agencies provide: "(c) Exclusions. The insurer's obligation to pay may be made inapplicable . . . (3) to pay or reimburse for workers' compensation or disability benefits.
"(d) Limits of Liability. (1) . . . the policy may provide for the reduction of limits to the extent that damages have been . . . (B) paid or payable under any workers' compensation law . . ."
The underinsured motorist coverage endorsement of the policy provides in relevant part: "(D) Limit of Insurance . . . (2) The Limit of Insurance shall be reduced by: (a) All sums paid or payable under any workers' compensation, disability benefits or similar law . . ." (Plaintiff's Exhibit A.).
"The public policy established by the uninsured [and underinsured] motorist statute is that every insured is entitled to recover for the damages he or she would have been able to recover if the uninsured [or underinsured] motorist had maintained a policy of liability insurance . . . It is a time-honored rule that an injured party is entitled to full recovery only once for the harm suffered . . . [A]n insured may not recover double payment of damages under overlapping insurance coverage." (Citations omitted; internal quotation marks omitted.) Rydingsword v. Liberty Mutual Ins. Co., supra, 18. Where substantial evidence exists, it is not improper for an arbitration panel to assign a value to an unrealized specific indemnity in order to assign a value to a credit to which an insurer is entitled. Id., 22.
The plaintiff argues that the defendant claimed 30 percent disability for headache and neck pain and 40 percent disability for fatigue at the arbitration proceeding. In support of this argument, the plaintiff offers Exhibit H, a copy of the report of Madeleine Kitaj, a physician with Comprehensive Pain Headache Treatment Centers, LLC, which report was available to the arbitrators. The plaintiff combines these two percentages and asserts that the defendant is now claiming a 70 percent disability of the brain that cannot be compensated in the arbitration forum because the defendant stipulated to a 20 percent disability of the brain in the workers' compensation forum. The plaintiff's rationale is that pursuant to the policy and subsections (c) and (d) of § 38a-334-6 of the Regulations of Connecticut State Agencies, the stipulated 20 percent disability of the brain would be an offset against the uninsured/underinsured motorist benefits and the remaining 50 percent disability of the 70 percent disability of the brain now claimed would be a claim payable in the workers' compensation forum, not the arbitration forum. The plaintiff therefore argues that the arbitration award should be vacated because the 50 percent disability of the brain for which no compensation was made in the workers' compensation forum constitutes $153,067.20 improperly included in the arbitration award. The plaintiff argues that the award should be vacated or, alternatively, an additional set-off of $153,067.20 should be applied to the arbitration award.
The plaintiff argues that it received this report for the first time on April 17, 2003, as part of the arbitration packet. The defendant has also submitted Kitaj's report as Exhibit A.
The law upon which the plaintiff relies in support of its claim that the arbitration panel awarded damages properly compensated in the workers' compensation forum is Rydingsword v. Liberty Mutual Ins. Co., supra. In Rydingsword, a panel of arbitrators had credited the defendant underinsured motorist carrier with an amount equal to the value of the unrealized workers' compensation claim for which the plaintiff had not yet applied. The trial court vacated the set-off to the defendant. Reversing the judgment of the trial court, the Supreme Court held that "the arbitrators had the authority to award a set off upon the presentation of substantial evidence on which to base their determination of the amount of this prospective award where the claimant had chosen to bypass the workers' compensation forum." Rydingsword v. Liberty Mutual Ins. Co., supra, 10.
The plaintiff argues that the situation in the present case is not unlike that in Rydingsword — that the defendant "cannot choose to pursue only 20% of his claimed disability in workers' compensation, holding the additional 50% in reserve for his underinsured motorist claim, where he might receive an additional benefit." The flaw in this argument, however, as pointed out by the defendant, is that it is only the plaintiff who asserts that the defendant's claim of injury to the brain is now 70 percent. In support of its argument, the plaintiff relies on Kitaj's report. That report, however, speaks solely to Kitaj's determination of a partial disability rating for headache and neck pain of 30 percent and a disability for fatigue of 40 percent. She makes no mention of either what methods were used to arrive at these ratings or whether the ratings relate solely to the effects of the accident in issue, and nowhere in her report does she reference specifically to brain injury.
The plaintiff suggests that this court can take notice of the Workers' Compensation Act, specifically § 31-308 of the General Statutes, to compute the value of the newly claimed injury to the brain. Using that formula, the plaintiff concludes that $153,067.20 is the value of the 50 percent disability of the brain not previously compensated in the workers' compensation forum, which should be an additional set-off in the arbitration forum. While it is true that a formula exists that would allow such computation, the validity of the computation is dependent upon the validity of the 70 percent disability used in the calculation.
This court's determination of whether the arbitrators incorrectly applied § 38a-334-6 and the corresponding policy language to the current matter is a question of law and subject, therefore, to de novo review. Knowledge of the arbitrators' factual finding regarding the percentage of the defendant's disability of the brain is necessary to determine whether the arbitration panel misapplied § 38a-334-6 and awarded damages for elements of loss properly payable in the workers' compensation forum. The plaintiff, however, has failed to provide the court with a record of the arbitration proceedings, as required by General Statutes § 38a-336. Without a record of the proceedings this court cannot even ascertain whether the defendant actually claimed a 70 percent disability of the brain during the arbitration proceedings and whether the plaintiff presented its argument regarding such an increase in the defendant's claimed disability to the arbitrators. Even if this court were to assume for the sake of argument that the arbitrators found a 70 percent disability, it is impossible to determine whether substantial evidence exists to support that finding without a record. In essence, therefore, the plaintiff is asking this court to apply a de novo scope of review to factual questions. The Supreme Court, however, has stated that "a de novo scope of review of factual questions would be inconsistent with the purposes of the compulsory arbitration provisions of [§ 38a-336], namely, avoiding congestion of the courts with piecemeal litigation and leveling the playing field by avoiding the risks that insurers would use their superior economic resources by subjecting contested claims for coverage to undue litigation." Chmielewski v. Aetna Casualty Surety Co., supra, 660.
The court acknowledges our Supreme Court's statement that ordinarily, "no findings of fact or conclusions of law are required" in arbitration proceedings. American Universal Ins. Co. v. DelGreco, supra, 190-91. Nevertheless, this court's standard of review for compulsory arbitration awards under § CT Page 4616 38a-336 requires de novo review of the arbitrator's legal conclusions in light of their factual findings, and a review of the factual findings to determine whether they are supported by substantial evidence. It is difficult to see how the court could undertake such review unless it has available to it a record of the arbitrators' findings of fact.
The arbitrators in the present case determined a gross award by combining economic and non-economic damages. In their words, they "reviewed the evidence both testimonial and documentary," and, "as fact finders, [they had] the right to believe or disbelieve the evidence presented in whole or in part." Capozzi v. Liberty Mutual Fire Ins. Co., supra. Furthermore, the defendant in the present case, unlike the plaintiff in Rydingsword v. Liberty Mutual Ins. Co., did not bypass the workers' compensation forum; rather, he stipulated to a 20 percent disability of the brain in that forum, and the plaintiff received a set-off for the workers' compensation benefits paid. For all of the reasons stated above, this court fails to find support for the plaintiff's first ground for vacating the arbitration award, that is, that the arbitration panel awarded damages for elements of loss that were properly payable in the workers' compensation forum.
See footnote 3.
B. Double Recovery CT Page 4610
The second error claimed by the plaintiff as a ground for vacating the arbitration award is that the arbitration panel awarded damages for which the defendant had already received compensation. It asserts that the defendant sought and received payments through his workers' compensation claim, at the statutorily mandated rate, for medical bills, lost wages, wage differential and permanent impairment and that the arbitration panel erred in its application of the policy and governing law by including in its award "payment for these same elements at the rate of `tort' damages."
The plaintiff notes that § 38a-334-6(c) authorizes the following language contained in § D of its underinsured motorist endorsement: "We will not pay for an element of `loss' if a person is entitled to receive payment for the same element of `loss' under any workers' compensation . . . law." The plaintiff interprets this language to mean that when an underinsured motorist claimant has made a claim for and received workers' compensation benefits and the applicable underinsured policy incorporates the exclusion authorized by § 38a-334-6(c), the claimant is limited to those elements of loss or damage not compensable in the workers' compensation forum, i.e., pain and suffering. Although the plaintiff indicates that it has found no case law specifically adopting this interpretation, it urges this court to consider dicta in cases such as Wilson v. Security Ins. Co., 213 Conn. 532 (1990) and Vitanza v. Amica Mutual Ins. Co., 76 Conn. App. 570 (2003) as lending support to its interpretation.
See footnote 7.
The defendant argues in opposition that § 38a-334-6 "does not immunize an underinsured carrier from fair, just and reasonable money damages for specific injuries compensated to a lesser degree with workers' compensation benefits, but only provides a dollar-for-dollar reduction for the money paid in workers' compensation benefits." The defendant further argues that the plaintiff's interpretation of the regulation would contradict General Statutes § 38a-336(f), which provides that "[n]otwithstanding subsection (a) of Section 31-284, an employee of a named insured injured while occupying a covered motor vehicle in the course of employment shall be covered by such insured's otherwise applicable uninsured and underinsured motorist coverage."
The defendant contends that the plain language of § CT Page 4611 38a-334-6(c)(3) requires a set-off from the underinsured motorist benefits only for the actual dollar amounts paid or payable in workers' compensation benefits and does not relieve the insurer from paying fair, just and reasonable damages arising from the injury simply because those injuries were compensated through workers' compensation.
Assuming, without deciding, that the plaintiff's interpretation of § 38a-334-6 and the corresponding policy language were correct, the court's de novo review of the legal question of whether the arbitrators misapplied the policy language by including in its award payment for elements of damage for which the defendant received compensation in the workers' compensation forum is, once again, thwarted by the lack of a record.
The arbitrators awarded economic damages in the amount of $63,055.12 and non-economic damages in the amount of $633,944.88 with no discussion of the specific components of those categories. Furthermore, the award notes a deduction by the arbitrators "as agreed by the parties" of $139,000. These awards, standing alone, are insufficient for this court to determine, as a matter of law, that the arbitrators awarded damages that had been compensated in the workers' compensation forum, even if this court were to adopt the plaintiff's interpretation of the policy and regulation. Furthermore, it is not known whether this legal argument, for which there is only limited support in dicta, was presented to the arbitrators for their consideration. Accordingly, the second claim of error offered by the plaintiff as a ground for vacating the arbitration award fails.
C. Medical Examination
The third ground offered by the plaintiff for vacating the arbitration award is that the arbitrators precluded the plaintiff from exercising its rights under the policy with regard to an independent evaluation of the defendant. The plaintiff argues that the policy contained two provisions that constituted conditions precedent to the defendant's right to arbitration. The first was to provide medical records or other pertinent information to the plaintiff and the second, to submit to a medical examination by a physician of the plaintiff's choosing, at the plaintiff's expense, as often as reasonably required by the plaintiff.
Subsection (A)(2) of Section IV — Business Auto Conditions of the policy provides in relevant part: "(b) Additionally, you and any other involved `insured' must: . . . (4) Authorize us to obtain medical records or other pertinent information.
"(5) Submit to examination, at our expense, by physicians of our choice, as often as we reasonably require."
The plaintiff argues that the defendant thwarted the first of these provisions by failing to provide the plaintiff with copies of neuropsychological testing undergone by the defendant after repeated requests. The plaintiff claims that it learned of this testing for the first time when it conducted an examination of the defendant under oath in preparation for arbitration and only received the requested copies shortly before the commencement of the arbitration proceedings. The plaintiff also argues that the second provision was thwarted by the defendant's failure to submit to the plaintiff's request for a physical examination and the arbitration panel's denial of the plaintiff's "request" for such examination.
The defendant argues in opposition that the arbitration panel's decision to deny the medical examination was consistent with the policy language stating that a claimant is required to submit to examination as often as the insurer "reasonably requires." He argues that the plaintiff's request was unreasonable in light of the surrounding circumstances. Specifically, the defendant argues that the requested medical examination was unreasonable for three reasons: first, the plaintiff was the insurer in the workers' compensation case, which contained copies of the records, and thus the plaintiff was privy to these documents; second, the plaintiff had already conducted several medical examinations of the defendant, which resulted in issued reports addressing the defendant's injuries; and third, the request for the medical examination came after the defendant testified and his counsel had presented their case in chief before the arbitration panel. Finally, the defendant argues that the plaintiff was not prejudiced because the arbitration panel invited James Donaldson, the doctor who conducted a prior independent medical examination at the request of the plaintiff, to make further comments about the defendant's injuries.
There were four separate independent medical exams. The exams were conducted on September 8, 1997; June 25, 1998; May 9, 2000; and January 27, 2003.
In Safeco Ins. Co. v. Santagata, 29 Conn. Sup. 300 (1971), the court noted that a claimant's compliance with policy language nearly identical to the policy language in the present case that requires a claimant to "[s]ubmit to examination at our expense, by physicians of our choice, as often as we reasonably require" is a condition precedent to arbitration. In Rippe v. West American Ins. Co., Superior Court, judicial district of New Haven, Docket No. 353954 (December 2, 1993, Meadow, J.T.R.) ( 10 Conn.L.Rptr. 491, 492), the court noted that the determination of whether a claimant's failure to get an independent medical examination once the parties have agreed to arbitration and the arbitrators have been selected constitutes "a breach of the contract on the part of the [claimant] so as not to comply with the conditions of the contract and to forfeit coverage is left to the arbitration panel."
Among the numerous exhibits filed by the plaintiff in support of its motion to vacate is a copy of a letter dated April 24, 2003, from the plaintiff's counsel to the defendant's counsel advising the defendant that he had been scheduled for a neuropsychological examination. (Plaintiff's Exhibit I.) A letter dated May 2, 2003 from the plaintiff's attorney to one of the arbitrators advised the arbitrator that the plaintiff had exercised its right under the policy to conduct such an exam. (Plaintiff's Exhibit K.) By letter dated May 8, 2003, the attorney for the defendant informed the arbitrators that the defendant was opposed to the scheduling of the examination, because although the policy authorized examinations, they must be reasonably requested and this one was not reasonable. Counsel indicated that unless ordered to do so by the panel, the defendant would not submit to the examination. (Plaintiff's Exhibit J.) The panel responded by letter dated May 9, 2003, to counsel for both parties that it had decided "by a 2 to 1 decision to deny [plaintiff counsel's] request for an independent medical exam . . ." (Emphasis added.) (Plaintiff's Exhibit L.)
This letter was written one week following the first arbitration hearing held on April 17, 2003.
There is no record in this case and therefore no means by which this court can ascertain whether the plaintiff at the June 10, 2003 hearing questioned the panel's authority to construe the plaintiff's notification to the panel of the scheduling of an examination as a "request" needing the panel's approval. Nor can this court ascertain whether the plaintiff argued before the panel the coverage issue of whether the defendant's failure to submit to the examination constituted "a breach of the contract on the part of the [defendant] so as not to comply with the conditions of the contract and to forfeit coverage"; Rippe v. West American Ins. Co., supra, 10 Conn. L. Rptr. 492; notwithstanding the exchange of letters noted above. Although the plaintiff moves to vacate on the ground that the arbitrators precluded it from exercising its rights under the policy, the controlling question is whether the defendant's failure to submit to an examination constituted a breach of the insurance contract so as to avoid coverage. That question was a legal determination to be made by the arbitrators as a substantive matter concerning coverage if properly raised by the plaintiff. Because of the lack of a record indicating that that question was raised and answered by the arbitrators, there is no question of law for this court to review relative to the plaintiff's third ground for vacating the arbitrators' award. Having previously found that the first and second errors offered by the plaintiff do not constitute grounds for vacating the arbitrators' award, the court, accordingly, denies the plaintiff's motion to vacate the arbitration award.
Plaintiff's Exhibit J, the letter from the defendant's counsel objecting to the medical examination indicates that the defendant had rested his case at the April 17, 2003 hearing.
Moraghan, J.T.R.