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Powers v. United Services Automobile Association (8/11/00) sp-5302
Powers v. United Services Automobile Association (8/11/00) sp-5302
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
KARL POWERS and ANDREA POWERS,)
) Supreme Court No. S-8776
Appellants, )
) Superior Court No.
v. ) 3AN-97-6421 CI
)
UNITED SERVICES AUTOMOBILE )
ASSOCIATION and NORTHERN )
ADJUSTERS, ) O P I N I O N
)
Appellees. ) [No. 5302 - August 11, 2000]
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Dan A. Hensley, Judge.
Appearances: Michaela Kelley Canterbury,
Kelley & Kelley, Anchorage, for Appellants. Daniel T. Quinn and
Joyce Weaver Johnson, Richmond & Quinn, Anchorage, for Appellees.
Before: Matthews, Chief Justice, Eastaugh,
Fabe, Bryner, and Carpeneti, Justices.
CARPENETI, Justice.
I. INTRODUCTION
May an injured plaintiff who has successfully arbitrated
an uninsured motorist claim against a primary carrier preclude a
secondary carrier from further arbitration where the secondary
carrier had neither adequate notice of the first arbitration nor
any opportunity to participate in it? The trial court answered
this question in the negative. We agree and affirm.
II. FACTS AND PROCEEDINGS
Karl Roth Powers was injured in an automobile collision
in December 1994 involving an uninsured driver. At the time, he
was a passenger in a car insured by State Farm. The State Farm
policy included uninsured/underinsured motorist (UM/UIM) coverage.
Powers also had his own UM/UIM coverage with United Services
Automobile Association (USAA).
State Farm had the primary obligation to pay any damages
resulting from Powers's injury, up to the limit of its policy
coverage, under the priority criteria set forth in AS 28.22.221.
[Fn. 1] USAA was obligated to pay damages that exceeded those
covered by State Farm, up to the limits of its coverage. [Fn. 2]
Each policy contained an arbitration clause allowing either party
to the insurance contract to demand arbitration of any disputes.
[Fn. 3]
In June 1995 Powers and his wife Andrea demanded
arbitration with State Farm over the issue of damages. Karl Powers
sought compensation for medical expenses, loss of wages, pain and
suffering, and loss of enjoyment of life. Andrea Powers sought
compensation for loss of consortium. The Powerses did not make a
similar demand upon USAA.
Ten months later, in April 1996, counsel for Karl Powers
sent USAA's local representative, Northern Adjusters, a letter that
stated:
Mr. Powers is arbitrating his damages case
with State Farm. Northern Adjusters has secondary coverage for Mr.
Powers. To the extent that Northern Adjusters is liable for
excess, you are hereby advised of the Demand for Arbitration, and
a copy is enclosed.
Unfortunately, this letter did not contain a copy of the demand for
arbitration sent to State Farm; rather it contained an apparent
[Fn. 4] demand for arbitration with Northern Adjusters.
Neither the letter nor the demand for arbitration invited
USAA to participate in the State Farm arbitration, nor suggested
that USAA seek to intervene. Northern Adjusters forwarded the
letter and demand to USAA, and advised the Powerses' counsel to
review the document demanding arbitration with Northern Adjusters
as it contained errors. Counsel for the Powerses responded that
while the demand "was poorly drafted . . . it was/is intended to
advise USAA that the uninsured motorist case will be arbitrated,
and USAA is responsible for any excess." USAA did not respond to
the letter and took no action regarding the State Farm arbitration.
In October 1996 the arbitrators in the State Farm
arbitration issued their Decision and Order. Together with an
additional order issued in December, the award to the Powerses
totaled $259,105.70, plus costs and arbiters' fees. State Farm
paid the Powerses its UM/UIM policy limit of $100,000 plus costs
and fees for a total of $133,859.59. The Powerses then demanded
that USAA pay its coverage limit of $100,000 to compensate for the
excess damages not covered by State Farm. USAA responded that it
was not bound by the State Farm arbitration and requested Powers's
medical records for an independent evaluation. Ultimately, USAA
disputed the amount of damages claimed by the Powerses and demanded
separate arbitration.
The Powerses then filed suit against USAA seeking, among
other things, enforcement against USAA of the arbitration award.
The Powerses argued that USAA was collaterally estopped from re-
litigating the issues decided in the State Farm arbitration. The
Powerses also argued that USAA had waived its right to arbitrate
damages. USAA sought an order compelling the Powerses to arbitrate
their dispute with USAA and dismissing the case with prejudice.
The superior court found the parties' motions to be, "in
essence, requests for summary judgment regarding their rights and
obligations under the UIM policy." It then dismissed the Powerses'
complaint, and granted USAA's motion to enforce the arbitration
clause of the parties' insurance contract. The court held that
USAA was not collaterally estopped from demanding arbitration
because there was a lack of privity between State Farm and USAA.
It further held that because neither the Powerses nor USAA "took
any action to attempt a consolidation of arbitrations[,]" USAA did
not waive its right to arbitration.
This appeal followed.
III. STANDARD OF REVIEW
In "reviewing a grant of summary judgment, [we] must
determine whether any genuine issue of material fact exists and
whether the moving party is entitled to judgment on the law
applicable to the established facts." [Fn. 5] The applicability of
estoppel principles to a particular set of facts is a legal
question over which we exercise independent review. [Fn. 6]
IV. DISCUSSION
A. USAA Was Not Collaterally Estopped from Demanding
Arbitration.
Collateral estoppel, or issue preclusion, prohibits a
party from relitigating an issue where
(1) the party against whom the preclusion is
employed was a party to or in privity with a party to the first
action; (2) the issue precluded from relitigation is identical to
the issue decided in the first action; (3) the issue was resolved
in the first action by a final judgment on the merits; and (4) the
determination of the issue was essential to the final judgment.
[Fn. 7]
The Powerses argue that the superior court erred in
holding that collateral estoppel did not preclude USAA from
requiring a second arbitration of damages. This is so, the
Powerses contend, because USAA had notice of the arbitration, USAA
and State Farm's interests were identical, and USAA's interests
were adequately protected by State Farm's participation. USAA
challenges these assertions, and argues that the superior court
correctly concluded that USAA lacked the privity with State Farm
necessary to be bound by the determination in the first
arbitration. We agree.
1. Privity
USAA was not a party to the arbitration between the
Powerses and State Farm. As noted above, a prior judgment will
have a preclusive effect on a non-party only if the non-party was
in privity with a party to the prior action. [Fn. 8] Accordingly,
USAA can be bound by the prior Powerses-State Farm arbitration only
if it was in privity with State Farm.
We have adopted the approach of the Second Restatement of
Judgments to issues involving privity; it is an approach that
"relies on the various specific relationships that justify
preclusion." [Fn. 9]
According to the Restatement, a non-party may be bound by
a determination in a prior action if the non-party (1)
substantially participated in the control of a party's presentation
in the adjudication or had an opportunity to do so; [Fn. 10] (2)
agreed to be bound by the adjudication between the parties; [Fn.
11] or (3) was represented by a party in a capacity such as
trustee, agent, or executor. [Fn. 12]
None of these prerequisites exists here. There is no
evidence USAA participated in or controlled in any way State Farm's
presentation in the arbitration, nor that USAA had any relationship
with State Farm. To the contrary, the evidence indicates that USAA
had no involvement in the arbitration, and had no contractual
relationship with State Farm. In fact, the contract imposing
liability on USAA -- that between Powers and USAA -- specifically
stated that any judgment for damages arising out of a suit brought
without USAA's consent is not binding upon USAA.
In addition, USAA and State Farm's interests, while
similar, were not identical. USAA had no liability until State
Farm's policy limit was exceeded. [Fn. 13] Furthermore, USAA's
interest was markedly different in that it had no interest in
defending against any amount under $100,000, while State Farm had
no interest in defending against any amount over $100,000. As USAA
points out, State Farm would have considerably less interest in
appealing the final award than USAA, as even a substantial
reduction would still result in State Farm paying its full limit.
In sum, it can hardly be said that USAA and State Farm's
interests were identical, that State Farm protected USAA's
interests, or that USAA had meaningful notice and an opportunity to
be heard. USAA was aware of the arbitration, but that alone does
not constitute a relationship justifying imposition of liability.
[Fn. 14] The superior court correctly held that USAA was not
collaterally estopped from demanding arbitration with the Powerses
because it lacked privity with State Farm.
2. Other collateral estoppel issues
USAA also argues that it cannot be collaterally estopped
because the private arbitration between the Powerses and State Farm
did not constitute an action, and because the resulting decision
and order was not a "final judgment." [Fn. 15] Because we have
concluded that there was no privity between State Farm and USAA and
that USAA is therefore not collaterally estopped from demanding
arbitration, we need not reach these issues.
B. USAA Did Not Waive Its Right to Demand Arbitration.
Alternatively, the Powerses argue that USAA waived its
right to arbitrate this dispute by its "willful failure to
participate in the subject arbitration." This argument lacks
merit.
The superior court stated that "[t]here is much to
commend adoption of a policy encouraging consolidated arbitration
of claims arising out of the same auto accident" because it
provides "prompt, inexpensive and final resolution of disputes."
Nevertheless, the court held that because the contact between USAA
and the Powerses' counsel prior to arbitration was minimal, and the
Powerses did not demand that USAA participate in the State Farm
arbitration, or make any effort to consolidate the arbitrations,
USAA did not waive its right to arbitration. This reasoning is
sound.
Waiver is an "express or implied voluntary and
intentional relinquishment of a known or existing right." [Fn. 16]
For a waiver to be implied from a party's conduct, that conduct
"must be clear and unambiguous." [Fn. 17] In Airoulofski v. State,
[Fn. 18] we established the requirements for implied waiver:
An implied waiver arises where the course of
conduct pursued evidences an intention to waive a right, or is
inconsistent with any other intention than a waiver, or where
neglect to insist upon the right results in prejudice to another
party. To prove an implied waiver of a legal right, there must be
direct, unequivocal conduct indicating a purpose to abandon or
waive the legal right . . . .
Neglect to insist upon a right only
results in an estoppel, or an implied waiver, when the neglect is
such that it would convey a message to a reasonable person that the
neglectful party would not in the future pursue the legal right in
question. Even where neglect results in prejudice to another
party, for an implied waiver to arise there must be direct,
unequivocal conduct indicating a purpose to abandon the right. [Fn.
19]
Under the facts of this case, USAA cannot be said to have
engaged in direct, unequivocal conduct that indicated its purpose
to abandon its right to demand arbitration with the Powerses. Its
failure to pursue intervention in the State Farm arbitration would
not convey to a reasonable person that it would not pursue its
right to arbitration in the future, for several reasons.
First, the notice the Powerses provided USAA did not
invite USAA to participate in their arbitration with State Farm.
Without such an invitation, USAA cannot be said to have refused to
participate.
Second, following this notice, the Powerses took no
action to join USAA, or seek consolidation of their claims against
State Farm and USAA. As the superior court correctly noted,
"[w]hen an uninsured motorist is represented by counsel, the
motorist ordinarily cannot claim that her insurer waived its right
to arbitration unless the motorist herself makes some effort to
enforce that right." [Fn. 20]
Finally, it is not clear that USAA could have intervened
had it so desired. The arbitration between the Powerses and State
Farm was private, based upon a contract to which USAA was not a
party. As previously indicated, the Powerses did not invite USAA
to join. It does not appear that State Farm did either. State
Farm's contract with the Powerses is not part of the record, so the
question of whether or not USAA could have intervened based upon
the contractual language providing for arbitration is beyond this
court's review.
In Consolidated Pacific Engineering, Inc. v. Greater
Anchorage Area Borough, [Fn. 21] we held that where an agreement to
arbitrate is silent concerning consolidation, and one party
objects, the court has no jurisdiction to order consolidation. [Fn.
22] Again, while no party in this case objected to consolidation,
neither did either party invite USAA to participate. The Powerses
imply that because there were not two arbitrations to consolidate,
Consolidated Pacific Engineering is inapposite. However, the
Powerses did in fact send USAA a separate demand for arbitration
with USAA. Thus, there were two demands for two separate
arbitrations. In any case, even had the Powerses not sent USAA a
demand for arbitration, the Powerses do not explain how USAA could
have intervened, and the Alaska Uniform Arbitration Act provides no
guidance. [Fn. 23]
In conclusion, USAA did not engage in conduct directly or
unequivocally waiving its contractual right to arbitration. It was
not on notice it would be bound by the arbitration between the
Powerses and State Farm, it was not invited to participate, and it
is not clear that USAA could have intervened on its own motion.
The superior court's ruling that USAA did not waive its right to
arbitration was correct.
IV. CONCLUSION
Because USAA lacked privity with State Farm, it is not
collaterally estopped from demanding arbitration of the Powerses'
claim pursuant to its contract with the Powerses. Further, because
USAA did not engage in direct and unequivocal conduct evincing an
intention to waive its right to arbitration, it did not waive this
right. Accordingly, we AFFIRM the decision of the superior court.
FOOTNOTES
Footnote 1:
AS 28.22.221 states, in part:
Policy coverage and priorities. . . . If
a person is entitled to uninsured or underinsured motorist coverage
under more than one policy providing motor vehicle liability
coverage, payments will be made in the following order of priority,
subject to the limit of liability of each applicable policy or
coverage:
(1) a policy or coverage covering a motor
vehicle occupied by the injured person . . . as a named insured;
(2) a policy or coverage covering a motor
vehicle occupied by the injured person as an insured other than a
named insured;
(3) a policy or coverage not covering a
motor vehicle occupied by the injured person but covering the
injured person as a named insured . . . .
Footnote 2:
See id.
Footnote 3:
USAA's policy stated in part:
If we and a covered person do not agree:
1. Whether that person is legally
entitled to recover damages under this coverage; or
2. As to the amount of damages;
either party may make a written demand for
arbitration. . . .
Footnote 4:
The document enclosed by counsel is confusing. It begins with
a sentence fragment:
PLEASE TAKE NOTICE that the filing party, a
party to an Insurance Policy providing for protection against loss
due to personal injuries sustained in an accident involving an
Uninsured Motorist which provides for arbitration thereunder.
It then names, as the "Individual with whom claim was discussed,"
an adjuster for State Farm. Finally, under "claim number," it sets
out the number of Karl Powers's contract with USAA.
Footnote 5:
Jackinsky v. Jackinsky, 894 P.2d 650, 654 (Alaska 1995)
(quoting Wright v. State, 824 P.2d 718, 720 (Alaska 1992)).
Footnote 6:
See Sever v. Alaska Pulp Corp., 931 P.2d 354, 359 n.4 (Alaska
1996) (citing State v. United Cook Inlet Drift Ass'n, 895 P.2d 947,
950 (Alaska 1995)).
Footnote 7:
Jackinsky, 894 P.2d at 654 (citations omitted).
Footnote 8:
See Alaska Foods, Inc. v. Nichiro Gyogyo Kaisha, Ltd., 768
P.2d 117, 121 (Alaska 1989) (citing Blake v. Gilbert, 702 P.2d 631,
634-35 (Alaska 1985); Drickersen v. Drickersen, 546 P.2d 162, 170-
71 (Alaska 1976); Pennington v. Snow, 471 P.2d 370, 374-76 (Alaska
1970)).
Footnote 9:
Id. (citations omitted).
Footnote 10:
See Restatement (Second) of Judgments sec. 39 (1982).
Footnote 11:
See id. sec. 40.
Footnote 12:
See id. sec. 41.
Footnote 13:
See AS 28.22.221.
Footnote 14:
See Loveridge v. Fred Meyer, Inc., 887 P.2d 898, 900-01 (Wash.
1995) (holding mere awareness of a proceeding, without
participation or control, is insufficient to establish privity for
res judicata purposes).
Footnote 15:
For the elements of collateral estoppel, see supra text
accompanying note 7.
Footnote 16:
Hillman v. Nationwide Mut. Fire Ins. Co., 758 P.2d 1248, 1253
(Alaska 1988) (citations omitted).
Footnote 17:
Id. (citations omitted).
Footnote 18:
922 P.2d 889 (Alaska 1996).
Footnote 19:
Id. at 894 (citations and quotation marks omitted).
Footnote 20:
See Hillman, 758 P.2d at 1253.
Footnote 21:
563 P.2d 252 (Alaska 1977).
Footnote 22:
See id. At 255. The superior court indicated that there was
"a reasonable likelihood that the arbitrations would have been
consolidated if any party had so requested" because both USAA and
State Farm's arbitration clauses require application of local or
state rules, and Alaska Rule of Civil Procedure 42 encourages
consolidation of similar claims. This is arguably correct in that
the decision in Consolidated Pacific Engineering was based upon the
interpretation of an arbitration clause specifying the use of the
American Arbitration Association's rules, which require consent
from all parties to consolidate. See 563 P.2d at 255. However,
because the Powers-State Farm contract is not in the record, we
cannot determine what the arbitration terms were.
Footnote 23:
See AS 09.43.010-.180.
