Michigan Court of Appeals; Docket No. 177339; Published
Judges White, Sawyer, and Pajtas; Unanimous; Per Curiam
Official Michigan Reporter Citation: 219 Mich App 231; Link to Opinion 
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Uninsured Motorist Benefits: Arbitration of Underinsured Motorist Claims
Revised Judicature Act – Arbitration (MCL 600.5001, et seq.)
Private Contract (Meaning and Intent)
CASE SUMMARY:
In this unanimous per curiam published Opinion involving an appeal of Item No. 1734, the Court of Appeals rendered significant holdings regarding an uninsured motorist arbitration provision that permitted either party to demand a court trial in any case where an arbitration award exceeds the minimum financial responsibility limits of the state (i.e., $20,000 in Michigan). The trial court held that this clause was not enforceable because arbitration under the uninsured motorist policy was subject to Michigan's arbitration statute and the corresponding court rule (MCLA 600.5001 and MCR 3.602). As such, the arbitration award was binding. Moreover, the defendant had failed to apply to the circuit court to vacate the award within 21 days as required by the Michigan Court Rule.
The Court of Appeals reversed the trial court's holding with regard to the applicability of the Michigan arbitration statute and the Michigan arbitration court rule. The court held that enforcement of an arbitration award pursuant to the arbitration statute is available only where the parties have clearly evidenced an intent to activate statutory arbitration by the inclusion of a provision in an arbitration contract that a court will enter a judgment upon an arbitration award. Although the arbitration provision in the insurance contract in question provided that local rules as to procedure and evidence "were to apply, that reference is insufficient to evidence an intent to convert the arbitration process into "statutory arbitration "pursuant to the statute and court rule. Therefore, the trial court erred in including that arbitration under this uninsured motorist contract was statutory arbitration.
In a significant passage, however, the Court of Appeals decided to remand the case to the trial court for further proceedings to determine if the uninsured motorist arbitration contractual language "is void as against public policy because it unfairly benefits the insurer and defeats the purposes of arbitration by declaring arbitration awards falling below the minimum liability limits, which are more likely to be contested by the insured, binding on the parties, while preserving the right to trial for awards exceeding that amount, which are more likely to be contested by the insurer." The Court of Appeals stated that the trial court did not reach this issue and the record is insufficient for us to do so, except to the extent that we have concluded that the provision is not void as violative of the arbitration statute."
In remanding the case to circuit court, the Court of Appeals made the following comments with regard to the public policy issue:
"We observe that the following considerations and questions may be pertinent to the issue and should be addressed by the parties and the court to the extent possible. How prevalent is the provision in issue? Can an insured obtain a policy from defendant or another insurer that provides for fully binding arbitration, or no arbitration, of uninsured motorist claims where the coverage exceeds the statutory minimum? How often is arbitration demanded by the insured, by the insurer, by neither party, and does it depend on the amount of the coverage? How often do awards in excess of the statutory minimum result in a demand for trial? How often and under what circumstances is the demand made by the insured, and how often and under what circumstances is the demand made by the insurer? What does arbitration cost the parties as compared to what would be the real cost of litigation, and what is the added cost when the parties arbitrate and also litigate in court? Assuming that plaintiff's construction of the arbitration provision is correct, what is the benefit to insureds of a binding decision in arbitration regarding the insured's legal entitlement to damages, separate and apart from the amount of damages?"
The court also observed that even if it is concluded that the uninsured motorist clause violates public policy, "it does not necessarily follow that the remedy is to enforce the arbitration provision without the clause. One might conclude that because the clause violates public policy, an insurer should not be permitted to compel arbitration under the provision when the coverage exceeds the statutory minimum or that the arbitrators' decision should not be binding on the insured even when less than the statutory limit.... The parties and the court should explore the general effect and appropriateness of all possible remedies, recognizing that this arbitration clause and other forms of arbitration clauses are common in uninsured motorist coverage and that the dispute will arise in a variety of contexts.. .. We express no opinion regarding whether the clause violates public policy and the appropriate remedy if it does, but simply note that these are open questions."
Finally, the Court of Appeals, "for the sake of judicial economy," addressed the related issue of whether the arbitrators may enter an award in excess of the policy limits. In the case at bar, the uninsured motorist coverage was $100,000, but the arbitration award was for $150,000. With regard to this issue, the court held, "We conclude that any judgment entered on the arbitration award must be limited to the $100,000 limits of liability under the policy, plus applicable interest and costs."
