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An automobile insurance package, which affords the policyholder arbitration of disputed claims of uninsured motorist coverage but is silent on any arbitration rights with regard to underinsured motorist benefits, will not be read as providing arbitration rights in UIM claims, a Superior Court panel has ruled. In Neuhard v. Travelers Insurance Co., PICS Case No. 03-1172 (Pa. Super. July 25, 2003) Lally-Green, J. (9 pages), a unanimous three-judge panel led by Judge Maureen Lally-Green said it would not recognize an ambiguity in a policy that provided arbitration rights for one type of claim but was silent on arbitration over another type of claim. Instead, the panel said, the silence on the issue of arbitrability of UIM claims would be taken for what it was – the lack of arbitration rights over such claims. The panel – on which Judges Correale F. Stevens and Richard B. Klein sat with Lally-Green – reversed a Luzerne County trial court ruling that found an ambiguity and construed the policy as guaranteeing arbitration in both UM and UIM claims. The ruling applies to policies issued before the state Insurance Commissioner’s order of July 2001 requiring that binding arbitration provisions be included in all UM and UIM policies sold in Pennsylvania. In Neuhard, the claimant was a passenger in a car that was struck in an automobile accident in December 1999. For injuries suffered in the crash, Ryan Neuhard collected against policies of the tortfeasor and of the driver of the car he was riding in. Then, he sought to collect underinsured motorist benefits under his parent’s policy as a member of their household. In seeking the benefits, Neuhard filed a petition asking the insurance company that issued the policy, Travelers Insurance Co., to show cause why arbitration should not be compelled. The trial court said that arbitration should proceed on the UIM claim, since the policy appeared to take no position on the issue and arbitration rights were afforded to policyholders making claims for uninsured motorist benefits. The trial judge made that decision explicitly in light of the Insurance Commissioner’s 2002 declaratory opinion and order mandating arbitration of all UM and UIM disputes. The trial court issued a motion to compel arbitration, and Travelers appealed the decision. Under the policy, either the insurer or policyholder may make a written demand for arbitration in a dispute over uninsured motorist coverage. There was no mention at all in the policy of any method of resolving disputes over underinsured motorist coverage. Neuhard argued that UM and UIM coverage were treated “indistinguishably” throughout the policy, and the dispute resolutions applying to one type of coverage should naturally extend to the other. The panel members, however, preferred to give effect to the express language of the policy, as well as the express absence of language on the key issue in the case. The policy clearly titles its provision so that they clearly apply to one type of coverage or the other, Lally-Green pointed out. “Since Travelers chose to omit UIM claims from the title of the arbitration provision, the arbitration provision does not apply to UIM claims,” Lally-Green wrote. “Therefore, UIM claims are outside the scope of the arbitration agreement, and the trial court erred by ordering arbitration.” The omission of UIM claims from the arbitration clause creates no ambiguity at all, the judges concluded. Even if it did, they went on in dicta, arbitration could not be invoked to resolve the contractual dispute. That is because the policy precludes arbitration of the meaning of contract terms, the court said. The judges furthermore said that the Insurance Commissioner’s 2002 order should not require the courts to read the mandatory arbitration requirement into pre-existing insurance policies. The trial court’s application of the commissioner’s order, Lally-Green said, “was a retroactive application of a pronouncement of the Insurance Commissioner.” Such a retroactive application, the court said, was error.

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