Opinion
No. 2003-434-Appeal, (PC 03-803)
June 3, 2004
ORDER
This case came before the Supreme Court for oral argument on May 10, 2004, pursuant to an order directing the parties to appear and show cause why the issues presented on appeal should not summarily be decided. The defendant in this case, United Services Automobile Association (defendant or USAA), appeals a Superior Court judgment confirming an arbitration award in favor of the plaintiff, Carla Thurston (plaintiff or Thurston), requiring USAA to pay her $9,000 under the terms of the uninsured motorist provision of her insurance policy, and $4,500 in prejudgment interest. Cause has not been shown, and we proceed to decide the appeal at this time.
Facts and Travel
On March 4, 1996, Thurston was traveling in her automobile on Main Street in West Warwick when an uninsured motorist rear-ended her vehicle causing Thurston to experience pain and discomfort in her right shoulder, arm, hip, and neck. Three separate doctors treated Thurston for these ailments over the next two years, but her pain persisted.
As a result of the collision, Thurston sought to recover uninsured motorist (UM) benefits from her automobile insurance carrier, USAA. The limit on Thurston's UM policy was $25,000. USAA paid $2,500 of Thurston's medical expenses, and, in September 1998, offered Thurston an additional $4,800 to resolve her claim. Thurston verbally rejected the offer, demanding the full $25,000 policy limits. Thereafter, Thurston retained new counsel, who provided USAA with additional documentation reflecting medical expenses she incurred as a result of her injuries. As a result of this new information, on November 6, 1999, USAA increased its settlement offer to $12,000. Thurston rejected this second settlement offer, and reiterated her demand for the $25,000 limit of her UM provision.
On September 25, 2002, Thurston and USAA proceeded to arbitration before a three member arbitration panel. The panel awarded Thurston $9,000 for injuries relating to the March 4, 1996 motor vehicle accident. In a separate decision, rendered on December 17, 2002, the arbitration panel awarded Thurston prejudgment interest in the amount of $4,500 or fifty percent of her $9,000 award. According to the written decision, a majority of the panel found that prejudgment interest accrued as of September 1998, when USAA made its first settlement offer to Thurston. One arbitrator dissented from the decision to award prejudgment interest, reasoning that because Thurston received less at arbitration than USAA offered her in November 1999, USAA could not be said to have denied Thurston's claim or breached its contract.
On February 13, 2003, USAA moved the Superior Court to modify the arbitration panel's award of interest, arguing that it had never denied nor refused to pay Thurston's UM claim. The hearing justice declined to modify the arbitrator's award, and granted plaintiff's motion to confirm the award. Judgment was entered on March 24, 2003, from which USAA timely appealed. We affirm the judgment.
Discussion
"This Court has long recognized that arbitrators may add prejudgment interest to their awards unless the parties specifically provide otherwise by agreement." Geremia v. Allstate Insurance Co., 798 A.2d 939, 940 (R.I. 2002) (citingWaradzin v. Aetna Casualty and Surety Co., 570 A.2d 649, 651 (R.I. 1990)). The Superior Court's authority to "vacate or modify an arbitrator's award is both limited and prescribed by G.L. 1956 § 10-3-12." Id. An arbitration award will generally be upheld unless the award is based on a manifest disregard of the law or represents a completely irrational result. Id.; Westminster Construction Corp. v. PPG Industries, Inc., 119 R.I. 205, 210, 376 A.2d 708, 711 (1977). In Geremia, we affirmed that a "manifest disregard of the law 'must be something beyond and different from a mere error in the law or failure on the part of the arbitrators to understand or apply the law * * *.'" 798 A.2d at 940 (quoting Westminster Construction Corp., 119 R.I. at 211, 376 A.2d at 711). For example, an arbitration panel or a court manifestly disregards the law when it understands or correctly states the law but then proceeds to disregard it. Id.
We are not persuaded that the arbitration panel's decision that prejudgment interest accrued as of September 30, 1998, when USAA made its initial offer of settlement, was a manifest disregard of the law or an irrational result. An insurer must make payment within a reasonable time after an insured makes a claim against a policy. USAA had already investigated and confirmed at least part of plaintiff's damages by September 30, 1998, as the $2,500 payment of medical expenses demonstrates. An arbitration panel is "free to * * * determine the facts of a dispute before them without their award being subject to judicial revision."Belanger v. Matteson, 115 R.I. 332, 356, 346 A.2d 124, 138 (1975). In this instance, the arbitration panel implicitly found that USAA's September 30, 1998 offer was unreasonable, and declared that interest began to accrue as of this date. The Superior Court hearing justice declined "to tamper with [this] award" based on the limited standard of judicial review of arbitration panel findings. Further, considering that USAA had, at that point, almost two years for it to investigate plaintiff's claims, we can not disagree with the panel's conclusion. Therefore, the panel's decision to accrue interest from September 30, 1998, did not manifestly disregard the law.
Conclusion
The judgment of the Superior Court confirming the arbitration panel's award is affirmed. The papers of the case are remanded to the Superior Court.