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Rhode Island Supreme Court Redefines Requirements for Modifying an Arbitration Award that Exceeds Insurance Policy Limits

Posted in Insurance Litigation, Litigation Trends, Rhode Island Courts

In a recent decision, the Rhode Island Supreme Court ruled that when an arbitration award exceeds the insurance policy limits, the Superior Court cannot consider the policy limits, or the insurance policy itself, in a motion to modify the award, unless the insurance company asserted a policy limit defense at the arbitration and provided a copy of the policy to the arbitrator.

 

In Lemerise v. Commerce Ins. Co., the Rhode Island Supreme Court held that trial courts may not supplement the review of a motion to modify an arbitration award pursuant to R.I. General Laws Section 10-3-14 with testimony, other evidence, and even arguments, if those items were not raised during the arbitration.  137 A.3d 692 (R.I. 2016).  This new precedent provides instructions to the trial court when reviewing motions to modify arbitration awards.  Courts are now forbidden to review evidence and arguments that were not presented or raised during the arbitration proceedings, and have been instructed to confirm arbitration awards unless the narrow exceptions outlined in Section 10-3-14 apply.

 

The underlying matter in Lemerise involved a dispute between the plaintiff, Joseph Lemerise, and the defendant, the Commerce Insurance Company.  In August 2011, Mr. Lemerise was struck by an uninsured motorist while crossing a street in Newport, Rhode Island.  Lemerise, 137 A.3d at 697.  Following the accident, Mr. Lemerise filed a claim for coverage under his automobile insurance policy through Commerce.  Id.  The parties unsuccessfully attempted to negotiate appropriate compensation for Mr. Lemerise’s injuries and a suit was subsequently filed in the Newport County Superior Court.  Id.  After filing the suit, the parties agreed to participate in arbitration pursuant to the terms of Mr. Lemerise’s uninsured motorist policy.  Id. at 705.  The arbitrator sought to determine the extent of Mr. Lemerise’s injuries and award sufficient compensation.  Id. at 698.  The arbitrator assessed Mr. Lemerise’s injuries at $150,000 and added prejudgment interest of $47,550, which brought the total award to $197,550.  Id. This total was well above the policy limit of $100,000.  Id.

 

At the conclusion of the arbitration, Mr. Lemerise moved in the superior court to confirm the arbitration award, and Commerce filed a motion seeking modification.  Id. at 698.  While reviewing the motions, the superior court supplemented its review of the issues at hand with a copy of Mr. Lemerise’s insurance policy, as well as testimony from the arbitrator.  Id.  The superior court justice granted Commerce’s motion to modify the award to conform with the insurance policy limit of $100,000.  Id. at 699.  The justice stated that he would not “allow [Mr. Lemerise] to take advantage of some technicality to get more than he bargained for in this case.”  Id.  Mr. Lemerise appealed to the Rhode Island Supreme Court, seeking a reversal of the superior court’s holding and a confirmation of the initial arbitration award.  Id.

 

The sole issue presented before the Supreme Court was whether the trial justice erred in granting the motion to modify the award, when, after supplementing the record with the admission of the insurance policy and the testimony of the arbitrator, he reduced the award to conform to the policy limit of $100,000.  Id. at 700.  Upon review of the lower court’s holding, the Rhode Island Supreme Court expressed concern that litigants might sidestep the binding effect of arbitration awards by moving for modification of the awards.  Id. at 699.  The Court stated that “[p]ublic policy favors the finality of arbitration awards, and such awards enjoy a presumption of finality.” Id.  The Supreme Court further stated that courts reviewing a motion to confirm an arbitration award must limit the scope of their review to the arbitration record.  Id. at 700.

 

In Lemerise, the Court determined that Commerce effectively waived certain defense arguments regarding awards in excess of the insurance policy limits by not raising those defenses in the arbitration proceedings.  Id. at 704.  Particularly, the Court concluded that Commerce waived a policy limit defense by failing to submit a copy of Mr. Lemerise’s insurance policy during the arbitration proceedings.  Id.  In addition, the Court determined that the arbitrator did not err by awarding prejudgment interest.  Id. 700-04. The Court vacated the superior court’s order and remanded the case to the superior court with instructions to confirm the arbitrator’s award of $197,550.  Id. at 704-05.

 

In conclusion, the Rhode Island Supreme Court made clear that a trial court considering a motion to modify an arbitration award pursuant to section 10-3-14 may not expand its review beyond the arbitration record.  Therefore, when an insurance policy limit may be a defense, it is imperative that such arguments, and any supporting evidence, are introduced at the arbitration hearing; otherwise there is no remedy for arbitration awards in excess of the policy.