Opinion
C.A. No. N10C-07-116 CLS.
Submitted: March 14, 2011.
Decided: June 30, 2011.
On Third-Party Defendants' Motion to Dismiss. GRANTED in part and DENIED in part.
Edward T. Ciconte, Esq., Wilmington, DE, Attorney for Plaintiff.
William J. Cattie, III, Esq., Wilmington, DE, Attorney for Defendant/Third-Party Plaintiff.
Richard D. Abrams, Esq., Timothy H. Rohs, Esq., Wilmington, DE, Attorneys for Third-Party Defendants.
ORDER
Introduction
Before this Court is the Third-Party Defendants' motion to dismiss. The Court has reviewed the parties' submissions and heard argument. For the reasons that follow, the Third-Party Defendants' Motion to Dismiss is GRANTED in part and DENIED in part.
Facts
On August 31, 2003 there was a motor vehicle accident involving Richard Williams ("Williams"), a pedestrian, and Randall Boyles ("Boyles"), the driver of an automobile owned by Danielle and Terrence Burke (collectively, "the Burkes"). The facts of the case appear to be in dispute. Williams alleges that Boyles hit him with the car after a verbal dispute. Boyles alleges that Williams intentionally jumped onto the hood of the car he was driving and then fell off.
On or about June 9, 2005, Williams filed an amended complaint (the "personal injury action") against Terrence Burke and Boyles seeking compensation for his alleged injuries. The case settled for $50,000 and was dismissed on or about May 8, 2007. Progressive defended Burke and Boyles in the personal injury action and paid the settlement.
At the time of the accident the Burkes' vehicle was insured by Progressive Classic Insurance Company ("Progressive"). Progressive provided a defense in the personal injury action and paid the settlement. After determining Williams did not meet its definition of "insured" under the Burkes' policy, Progressive denied Williams' personal injury protection ("PIP") claim.
Williams then filed this lawsuit on April 11, 2007 against his automobile insurance carrier, AAA Mid-Atlantic ("AAA") seeking PIP benefits. AAA initially filed a request for Intercompany Arbitration against Progressive to require Progressive to pay Williams' PIP benefits. On June 5, 2007, AAA withdrew the arbitration request in favor of litigation, and on June 13, 2007, it filed a third-party complaint against Progressive, the Burkes, and Boyles. This is the Third-Party Defendants' motion to dismiss.
Discussion
I. AAA Does Not Have a Subrogation Right by the Burkes and Boyles.
There is no subrogation right of reimbursement from insured tortfeasors. The statutory right to subrogation of PIP benefits is located in 21 Del. C. § 2118(g)(1), which states in relevant part: "[s]uch subrogated rights shall be limited to the maximum amounts of the tortfeasor's liability insurance coverage available for the injured party after the injured party's claim has been settled or otherwise resolved. . . ." The Delaware Supreme Court has interpreted that subsection to mean "[w]hen two parties are involved in an accident, and both are insured, the insurance company does not have `a statutory right of subrogation for reimbursement against the individual tortfeasor. . . ." Since AAA does not have a right to subrogation against the alleged tortfeasors, the Boyles and Burkes' motion to dismiss the third-party complaint is granted.
Waters v. United States, 787 A.2d 71, 73 (Del. 2001).
Id. at 74.
II. The PIP Coverage Issue Must be Decided by Mandatory Arbitration.
A dispute among insurance carriers as to whether benefits should be paid is required to go through arbitration. The relevant part of 21 Del. C. § 2118(g)(3) states that "[d]isputes among insurers as to liability or amounts paid pursuant to paragraphs (1) through (4) of subsection (a) of this section shall be arbitrated by the Wilmington Auto Accident Reparation Arbitration Committee or its successors." Arbitration Forums, Inc. ("AFI") is a successor to Wilmington Auto Accident Reparation Arbitration Committee. AFI Rule 2-4, relating to affirmative pleadings and defenses, states:
See Zurich Am. Ins. Co. v. St. Paul Surplus Lines, Inc., 2009 WL 4895120, *2 (Del. Ch. 2009).
The parties must raise and support affirmative pleadings or defenses in the Affirmative Defenses/Pleadings section of the contentions sheet or they are waived. If a denial of coverage is being pled (see Denial of Coverage definition), a copy of the denial of coverage letter to the party seeking coverage for the loss must be provided as part of the evidentiary material submitted. If provided, the case will be administratively closed as lacking jurisdiction. If not provided or where the issue concerns concurrent coverage (Article First (b), Special Arbitration Agreement), the case will proceed to hearing wherein the arbitrator(s) will consider and rule on the coverage defense.
So, before the issue of insurance coverage could be decided by this Court, AFI had to close the case for lack of jurisdiction.
AAA filed an application in AFI for PIP subrogation. On June 22, 2005, Progressive filed a response to the application indicating it did not admit insurance coverage. In the list of evidence section of the PIP subrogation form Progressive indicated it included a copy of the liability denial letter, the record is unclear as to whether it was sent to AFI or AAA. If the letter was attached AFI may have closed the case for lack of jurisdiction, despite the letter pertaining to liability and not PIP coverage. In reliance on the denial by Progressive, AAA withdrew the case from arbitration and added Progressive as a third-party defendant in this action.
Response to Motion to Dismiss Ex. A.
The practice in Delaware is to have a case decided on the merits and not on a technicality. The case should have proceeded through arbitration as required by 21 Del. C. § 2118. It was only after Progressive denied coverage that AAA withdrew the action in arbitration in favor of adding Progressive as a third-party defendant in this suit. Since the insurance carriers were required to litigate the issue first in arbitration, it is more appropriate to stay this action pending arbitration and not dismiss Progressive as a third-party defendant.
Episcopo v. Minch, 203 A.2d 273, 275 (1964); See also CCS Investors, LLC v. Brown, 977 A.2d 301, 309 (Del. 2009), Salzman v. Canaan Capital Partners, L.P., 1996 WL 422341 (Del. Ch.).
Parfi Holding AB v. Mirror Image Internet, Inc., 926 A.2d 1071, 1075 (Del. 2007) (A stay in favor of a resolution through arbitration is not an abuse of discretion when it would be efficient to the litigation and allow the court to determine the impact of the arbitration on the Delaware claims with the benefit of a complete record.).
III. Progressive is Estopped from Asserting the Statute of Limitations Defense in Arbitration.
AAA has satisfied the elements of equitable estoppel to prevent Progressive from raising the statute of limitations defense in arbitration. Equitable estoppel applies when one party misleads another party and that party relies on the misrepresentation to its detriment. To establish equitable estoppel, AAA has to demonstrate it did not have knowledge of the truth or the means of obtaining that knowledge, that it relied on the conduct of Progressive, and based on its reliance, suffered a prejudicial change in position. When it filed an application in AFI, AAA could not have known whether Progressive was going to deny coverage, especially since Progressive defended Burke and Boyles in the personal injury action. AAA relied on Progressive's denial of coverage in withdrawing the arbitration application and adding Progressive as a third-party defendant in this suit. As a result AAA has suffered prejudice because the proper forum for this case was arbitration. AAA will also suffer prejudice if Progressive should reimburse AAA for the payment of PIP benefits to Williams because the statute of limitations has passed. Therefore, equitable estoppel prevents Progressive from asserting the statute of limitations defense in arbitration.
Bantum v. New Castle County Vo-Tech Educ. Ass'n, 2011 WL 1880966 (Del.) (citations omitted); See also Chestnut Hill Plaza Holdings Corp. v. Parkway Cleaners, Inc., 2011 WL 1885256 n. 25 (Del. Super. Ct.).
Bantum, 2011 WL 1880966, at *5.
The accident at issue occurred on August 31, 2003. The statute of limitations for a personal injury action is two years. 10 Del. C. § 8119.
Conclusion
Based on the forgoing, the Third-Party Defendants' motion to dismiss is
GRANTED in part and DENIED in part.
IT IS SO ORDERED.