Opinion
DOCKET NO. A-2571-13T3
07-29-2014
GERMAN AUTOMOTIVE OF TINTON FALLS, INC., NICHOLAS ROSSI and ROBYN ROSSI, Plaintiffs-Appellants, v. HARLEYSVILLE INSURANCE CO. OF NEW JERSEY, Defendant-Respondent.
Gerald A. Dienst argued the cause for appellants. Christian A. Cavallo argued the cause for respondent (Riker Danzig Scherer Hyland & Perretti, LLP, attorneys; Lance J. Kalik, of counsel; Mr. Cavallo and Mr. Kalik, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Yannotti and Maven. On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-1136-12. Gerald A. Dienst argued the cause for appellants. Christian A. Cavallo argued the cause for respondent (Riker Danzig Scherer Hyland & Perretti, LLP, attorneys; Lance J. Kalik, of counsel; Mr. Cavallo and Mr. Kalik, on the brief). PER CURIAM
Plaintiffs German Automotive of Tinton Falls, Inc., Nicholas Rossi and Robyn Rossi appeal from an order entered by the Law Division on January 17, 2014, which denied their motion to compel arbitration. We affirm.
This appeal arises from the following facts. German Automotive has its principal place of business on Shrewsbury Avenue in Tinton Falls. Nicholas and Robyn Rossi are the owners of the land, premises and structure at that location. On October 29, 2011, a vehicle driven by Rafael Vera-Hernandez struck the building, causing damage to the structure.
At the time, the building was insured under a Deluxe Garage Owners Policy that defendant Harleysville Insurance Company had issued to German Automotive, for the period from February 22, 2011, to February 22, 2012. Among other things, the policy provided $390,000 in coverage for damage to the building, and $91,250 for personal property contained in the building.
Plaintiffs provided Harleysville with notice of the accident, and Harleysville retained an engineering firm to evaluate the damage. Harleysville also retained an insurance adjuster, which estimated the cost of necessary repairs to the building to be $31,864.21, less depreciation of $2886.17, for an actual loss of $28,978.04. However, plaintiffs informed Harleysville that structural damage to the building would require major reconstruction and relocation on site. They submitted estimates to Harleysville in the amounts of $575,133 and $450,000.
On February 28, 2012, with the parties at an impasse, plaintiffs made a demand for appraisal of the loss pursuant to a provision of the policy entitled "Property Loss Conditions." Harleysville refused to proceed with the appraisal process because it objected to plaintiffs' proposed appraiser and had not received copies of the estimates that had been prepared.
On March 12, 2012, plaintiff filed a verified complaint in the Law Division, and Harleysville was required to show cause why an order should not be entered (1) declaring the policy to be in full force; (2) declaring that Harleysville breached the policy; (3) compelling an appraisal of the loss; (4) compelling arbitration; and (5) awarding plaintiffs counsel fees. Harleysville filed a response, arguing that the court should not grant the relief requested. The trial court considered the matter on May 22, 2012. The court entered an order stating that the relief requested could not be granted at that time, and that the parties had agreed that the case would proceed as a Track 1 case.
On May 30, 2012, Harleysville filed its answer to the complaint, and thereafter the parties engaged in extensive discovery and some motion practice. On December 11, 2013, plaintiffs filed a motion to compel arbitration. Plaintiffs also sought to stay the trial in the matter until their property-damage claims had been arbitrated.
Plaintiffs claimed that arbitration was required by the "Property Loss Conditions" provision in the policy. That section of the policy states:
If we and you disagree on the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding.
Harleysville opposed the motion. After hearing oral argument, the trial court entered an order dated January 17, 2014, denying the motion. Plaintiffs filed a notice of appeal on February 6, 2014. Thereafter, the trial court filed an amplification of the reasons for its order pursuant to Rule 2:5-1(b).
The court wrote that plaintiffs had not established the existence of an agreement requiring arbitration of the matter. The court said the appraisal provision in the policy that plaintiffs relied upon was not the "equivalent of an arbitration agreement" and it "is devoid of language that would compel this case to arbitration." The court also stated that, to the extent that plaintiffs ever had a right to compel arbitration, they had waived that right by litigating the matter for more than twenty-one months.
On appeal, plaintiffs argue that the trial court erred by denying their motion to compel arbitration. They contend the Harleysville policy requires "appraisal arbitration" in cases where there is a dispute as to the amount of damage. We disagree.
"'In the absence of a consensual understanding, neither party is entitled to force the other to arbitrate their dispute.'" Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 132 (2001) (quoting In re Arbitration Between Grover & Universal Underwriters, Ins. Co., 80 N.J. 221, 228 (1979)). "'Subsumed in this principle is the proposition that only those issues may be arbitrated which the parties have agreed shall be.'" Ibid. (quoting In re Arbitration, supra, 80 N.J. at 228). See also Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 187 (2013) (noting "the fundamental principle that a party must agree to submit" its claims to arbitration).
Here, the trial court correctly determined that the appraisal-dispute provision in the Harleysville policy is not an arbitration agreement. The court aptly noted that an appraisal agreement is not equivalent to an arbitration agreement. See Elberon Bathing Co. v. Ambassador Ins. Co., 77 N.J. 1, 17 (1978) (noting differences between appraisal and arbitration and finding that "appraisal establishes only the amount of loss and not liability"); Rastelli Bros., Inc. v. Netherlands Ins. Co. t/a Peerless Ins., 68 F.Supp. 2d 440, 446 (D.N.J. 1999) (noting that arbitration "may be wide in its scope," while appraisal is limited to the amount of the loss).
As the trial court observed, there is no provision in the policy which states that the parties agree to forego litigation in favor of arbitration. The court pointed out that plaintiffs had recognized that the dispute here concerned more than the value of the loss. Indeed, plaintiffs recognize that the parties disagree as to the extent of the damage sustained. The court correctly determined that there is nothing in the policy requiring arbitration of a dispute that concerns more than a disagreement as to the cost of a claimed loss.
Plaintiffs maintain, however, that the appraisal process under the policy permits the appraisers to determine the extent of the damage sustained as well as causation. We do not agree. As Harleysville notes, the policy language at issue here plainly and unambiguously provides that the appraisal process only pertains to a dispute as to "the amount of loss."
The policy thus indicates that, where there is no dispute as to the extent of damage or the scope of work required, the parties can invoke the policy's appraisal provision to resolve the dispute as to the amount of loss. Thus, the appraisal process is not intended to resolve disputes as to the extent of damage, the scope of work required, or the cause of the damage.
Plaintiff also argues that the trial court erred by determining that they waived their right to compel arbitration, assuming that they had such a right under the policy. Again, we disagree. In determining whether a party waived its right to arbitrate, the court must consider the totality of the circumstances. Cole v. Jersey City Med. Ctr., 215 N.J. 265, 280 (2013). The court should consider the following:
(1) the delay in making the arbitration request; (2) the filing of any motions, particularly dispositive motions, and their outcomes; (3) whether the delay in seeking arbitration was part of the party's litigation strategy; (4) the extent of discovery conducted; (5) whether the party raised the arbitration issue in its pleadings, particularly as an affirmative defense, or provided other notification of its intent to seek arbitration; (6) the proximity of the date on which the party sought arbitration to the date of trial; and (7) the resulting prejudice suffered by the other party, if any. No one factor is dispositive.However, a court will consider an agreement to arbitrate to have been waived if the party seeking arbitration simply asserts arbitration in its initial pleading and no other measures are taken to preserve the affirmative defense. Id. at 281.
[Id. at 280-81.]
Here, the record supports the court's determination that, if plaintiffs had a right to compel arbitration, they waived that right. When they filed their complaint, plaintiffs included arbitration as one of the demands for relief, but after the court denied the relief sought by their order to show cause on March 22, 2012, plaintiffs agreed that the matter should proceed as a Track 1 case.
The parties thereafter engaged in extensive discovery. They retained and deposed multiple expert witnesses. The parties also engaged in motion practice, although no dispositive motions were filed. In addition, the parties participated in a private mediation session with a retired judge, and a settlement conference with the court.
The trial court also pointed out that plaintiffs filed their motion to compel arbitration on December 11, 2013, over three months after the original trial date, which was adjourned at plaintiffs' request. The motion was filed two months before the February 18, 2014 trial date, which also was adjourned on plaintiffs' application.
The court further noted that Harleysville would be prejudiced if it were required to arbitrate the dispute at that time. Harleysville never agreed to arbitration. Furthermore, the case involves complex questions of law and fact pertaining to a claim that potentially involves coverage of $500,000. Harleysville litigated the matter with the expectation that the case would be resolved in court, and not decided by a panel of appraisers.
The trial court thus properly considered the factors enumerated in Cole. We are convinced that the court correctly ruled that, even if plaintiffs had a right under the policy to arbitrate the dispute as to their claim, the totality of circumstances indicate that they waived that right.
We have considered plaintiffs' other contentions and conclude that they are without sufficient merit to warrant discussion in this opinion. R. 2:11-3(e)(1)(E).
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION