Krakower v. Nationwide Mutual Insurance Company

�1 This is an appeal from a trial court order vacating an arbitration award entered against Nationwide and in favor of Appellant based on a claim for underinsured motorist coverage. We reverse and remand for further proceedings.

�2 Appellant, driving a car insured by Quaker City Insurance Company (Quaker City), was struck from behind by a vehicle operated by Mary Flanagan. Appellant brought a tort action against Flanagan who was covered under a policy issued by Allstate Insurance Company with a liability limit of $15,000/$30,000. During the pendency of her action against Flanagan, Appellant sought underinsured motorist coverage from Appellee Nationwide Mutual Insurance Company (Nationwide). Appellant pursued this coverage after being advised by the Pennsylvania Property and Casualty Insurance Guarantee Association (PIGA) that her carrier, Quaker City, was in liquidation due to insolvency and that she should pursue other coverage. Appellant sought coverage from Nationwide because it issued a policy of insurance to Appellant’s mother and Appellant was a resident of her mother’s household at the time of the accident. Appellant demanded underinsured motorist arbitration with Nationwide and offered Nationwide a credit of $15,000, representing the amount available under Flanagan’s third party coverage. Nationwide contended that the claims were not ripe for arbitration until the underlying tort action had been resolved, but the arbitrators rejected this claim, ordered arbitration and eventually issued an award to Appellant in the amount of $50,000. The January 24, 2000, award directed Appellant to give Nationwide a credit for the full $15,000 available under Flanagan’s third party coverage and stated that “Nationwide shall not be obliged to make any payment on account of this award until Plaintiff’s action against the tortfeasor is resolved and concluded by payment of any settlement or judgment.”

�3 Appellant’s case against Flanagan proceeded to a jury trial resulting in a verdict in favor of Flanagan on February 10, 2000. On February 22, 2000, Nationwide filed a motion to vacate the arbitration award. Therein it asserted that the arbitrators erred in permitting the claims to proceed without first requiring resolution of the tort action, that recovery of underinsured motorist benefits was barred by a household exclusion in the policy, and that the proper primary source for underinsured motorist benefits was PIGA. The trial court considered Nationwide’s motion and ruled in its favor finding the underinsured motorist claims were not ripe until the limits of all applicable liability policies had been exhausted or resolved. The court found the arbitration action seeking underinsured motorist benefits was premature and Appellant should have been estopped from bringing it while the underlying tort action was pending. It stated “[a]llowing the UIM claim to proceed forward first merely gave rise to inconsistent results.” Trial Court Opinion 10/20/00 at 10. *fn1