picture of signed contract paper with glasses
picture of signed contract paper with glasses (lev dolgachov)

The Pennsylvania Supreme Court won’t disturb a state Superior Court ruling that an arbitration award in a motor vehicle accident case did not collaterally estop a plaintiff from seeking underinsured motorist benefits.

A unanimous three-judge panel issued a memorandum April 18 in Fernandez v. Erie Insurance Group finding that Bridget Fernandez can pursue UIM benefits above and beyond the amount assigned in arbitration because the arbitration agreement did not make clear the limit of the arbitrator’s jurisdiction. A jury must settle the jurisdictional ambiguity, the panel said in reversing the trial court’s ruling and remanding the case.

In 2009, Fernandez was driving her car when she was struck from behind by a vehicle driven by Holly Trask, who was insured by State Farm with a $50,000 liability limit, Senior Judge James J. Fitzgerald III wrote for the Superior Court. After Fernandez filed a civil complaint against Trask and her husband, the parties agreed to submit the case to binding arbitration and the arbitrator found in favor of Fernandez for $87,000, molding the finding to $50,000. Fernandez signed the release and included a handwritten note indicating that she “expressly reserves the right to pursue her underinsured motorist claim against Erie Insurance,” her insurer.

In a 2014 complaint alleging breach of contract and bad faith against Erie, Fernandez contended that her policy provided for $250,000 in UIM benefits. Erie filed a motion for summary judgment arguing that the arbitration award collaterally estopped Fernandez from pursuing UIM benefits, and asked the court to grant her a total of $37,000 in UIM benefits—the difference between the arbitration finding and the molded award. The trial court granted Erie’s motion.

Fernandez argued on appeal that the arbitrator’s award should not prevent her from obtaining more than $37,000 in UIM benefits. Erie countered that she had a full and fair opportunity to litigate her total amount of damages during arbitration.

“We agree that under collateral estoppel principles, the arbitration award was binding on appellant to the extent of the arbitrator’s jurisdiction, which in turn depended on the terms of the arbitration agreement between appellant and the Trasks,” Fitzgerald said. “We cannot tell, however, whether appellant and the Trasks imposed any limit on the arbitrator’s jurisdiction.”

Fitzgerald noted ambiguity in the arbitration agreement. One sentence providing for an $87,000 “award” in Fernandez’s favor indicated the arbitrator had jurisdiction to determine the entire amount of damages, but another said the arbitrator would mold the finding based on the parties’ “prior agreement.”

“Prior agreement” could mean an agreement to determine damages up to the Trasks’ $50,000 policy limits, or it could mean that the arbitrator’s award would be binding up to the limit and “merely advisory” above the limit, Fitzgerald said.

“Under these constructions, any reference by the arbitrator to damages in excess of $50,000 would be nonbinding ‘dicta,’” Fitzgerald said.

He also pointed to Fernandez’s handwritten reservation of rights to pursue her UIM claim against Erie as an ambiguity that prevented clarity on whether the arbitration award placed a ceiling on her recoverable UIM benefits.

“We disagree with appellee’s contention that the arbitration award and the release collaterally estop appellant from recovering UIM benefits in excess of $37,000,” Fitzgerald said. “The award and release simply do not resolve this question as a matter of law, which makes the scope of the agreement between appellant and the Trasks a fact question for the jury.”

Timothy Hough of Jaffe & Hough in Philadelphia, who represented Fernandez, said the Supreme Court “made the correct decision” in leaving the lower court’s ruling in place because there were damages that were not addressed in the first proceeding.

Jessica Bowman of Pancio Law Group in Lansdale, who represented Erie, said, “We thank the Supreme Court for their consideration of the matter. We still believe our position was correct but we look forward to carrying through with the case.”