Opinion
C.A. WC-2018-0331 WC-2018-0333
03-04-2021
MICHAEL J. MULLANE v. UNITED SERVICES AUTOMOBILE ASSOCIATION MICHAEL J. MULLANE v. AMICA MUTUAL INSURANCE COMPANY
For Plaintiff: Chloe A. Davis, Esq.; Richard A. Sinapi, Esq. For Defendant: Dana M. Horton, Esq.; John A. Donovan, III, Esq.; Judah H. Rome, Esq. For Interested Party: William M. Daley, Esq.
For Plaintiff: Chloe A. Davis, Esq.; Richard A. Sinapi, Esq.
For Defendant: Dana M. Horton, Esq.; John A. Donovan, III, Esq.; Judah H. Rome, Esq.
For Interested Party: William M. Daley, Esq.
DECISION
TAFT-CARTER, J.
Before the Court for decision is plaintiff Michael J. Mullane's Motion to Stay Litigation and Compel Arbitration (Motion) pursuant to G.L. 1956 § 10-3-3. The defendants, United Services Automobile Association (USAA) and Amica Mutual Insurance Company (Amica) (collectively, Defendants) oppose the Motion by arguing that Mr. Mullane waived his right to compel arbitration by filing the present actions; USAA's insurance policy with Mr. Mullane is binding and precludes arbitration because both parties must agree to arbitration; and compelling Amica and Mr. Mullane to arbitrate would be an unproductive use of judicial resources. See USAA Mem. Opp'n Mot. (USAA Mem.) 4-9; Amica Mem. Opp'n Mot. (Amica Mem.) 5-7. The Court has jurisdiction pursuant to G.L. 1956 § 8-2-14(a).
The Court (McGuirl, J.) ordered the consolidation of WC-2018-0331 and WC-2018-0333 on motion of USAA on July 1, 2019. (Order of July 1, 2019.)
I
Facts and Travel
In this consolidated action, Mr. Mullane seeks uninsured motorist coverage for personal injuries that he sustained due to the negligence of David Cummiskey, the owner and operator of an uninsured motor vehicle.
At approximately 11 p.m. on July 4, 2016, Mr. Mullane was a passenger in a BMW sedan traveling north on Boston Neck Road in the town of North Kingstown, Rhode Island, owned and operated by Mr. William T. Shore. (USAA Compl. ¶ 6; Amica Am. Compl. ¶ 6.) Mr. Shore decelerated as he drove over the Hussey Bridge in accordance with traffic, road conditions, and the relevant speed limit. Id. ¶ 7. As Mr. Shore did so, Mr. Cummiskey, the owner and operator of a Ford pickup truck, struck the BMW in the rear, injuring Mr. Mullane. Id. ¶¶ 7-11, 16. Mr. Cummiskey was uninsured at the time of the collision. Id. ¶ 14.
"Id." refers to both complaints jointly.
Mr. Shore maintained an automobile insurance policy through Amica at the time of the collision. (Amica Am. Compl. ¶ 15.) The policy covered collision as well as personal injury protection and uninsured motorist benefits. Id. Mr. Mullane was informed on July 6, 2016 that he should place a claim for coverage through his automobile insurance policy with USAA. Id. ¶ 24(a). Mr. Mullane wrote to the Amica claims representative to dispute this demand. Id. ¶ 24(b). Mr. Mullane and Amica communicated through July and August 2016, resulting in the Amica claims representative informing him that Amica was the primary insurer. Id. ¶¶ 24(b-f).
Mr. Mullane maintained an automobile insurance policy through USAA that included medical payments and uninsured motorist coverage. (USAA Compl. ¶ 15.) Mr. Mullane reported the collision to USAA on July 6, 2016. Id. ¶ 24(a). Mr. Mullane also informed USAA that Amica had flatly denied his claim and that he was pursuing a claim with USAA based on the denial. Id. On July 9, 2016, Mr. Mullane informed USAA that Amica retracted its denial of his claim. Id. ¶ 24(b). Mr. Mullane also informed USAA about his injuries and that Amica had yet to determine coverage applicability over his claim. Id. ¶¶ 24(c-d).
Through the end of 2016 into 2017, Mr. Mullane and Amica claims representatives experienced scheduling and communications difficulties, and Amica denied payment for further chiropractic treatment. (Amica Am. Compl. ¶¶ 24(h-k)). On October 31, 2017, Mr. Mullane submitted a printed, paper copy of his claim demand to Amica's imaging center because Amica refused to accept an emailed or digital copy. Id. ¶ 24(1). Amica confirmed receipt of the demand on November 7, 2017 and contacted USAA to challenge primacy of coverage on November 15. Id. ¶¶ 24(m-n). On November 27, 2017, an Amica claims representative informed Mr. Mullane to submit his claim demand to USAA. Id. ¶ 24(o). Amica eventually submitted the two insurance policies, Mr. Shore's with Amica and Mr. Mullane's with USAA, "to a Rhode Island law firm to review how the policy coverages could apply." Id. ¶ 24(t).
On August 11, 2016, USAA closed Mr. Mullane's claim after determining that Mr. Shore's policy with Amica sufficiently covered his injuries, without informing him. (USAA Compl. ¶¶ 24(e-f; q).) USAA reopened Mr. Mullane's claim on December 2, 2017, after he demanded uninsured motorist insurance benefits. Id. ¶ 24(i). On December 22, 2017, again without informing Mr. Mullane, USAA closed his claim after determining a second time that Mr. Shore's policy with Amica sufficiently covered Mr. Mullane's injuries. Id. ¶¶ 24(j; q).
On January 26, 2018, Mr. Mullane submitted a complaint to the Rhode Island Department of Business Regulation Insurance Division (DBR) against Amica for failing to determine primacy of coverage in a reasonable time. (Amica Am. Compl. ¶ 24(v).) On February 16, 2018, Amica's Rhode Island Claims Manager contacted Mr. Mullane to advise that Amica accepted primacy of coverage but was still reviewing the claim. Id. ¶ 24(w). Mr. Mullane responded that nineteen months, going back to July 2016, was an unreasonable amount of time to review a claim, when such reviews were typically completed within thirty to forty-five days. Id. Four days later, an Amica claims representative claimed that Amica received Mr. Mullane's claim in July 2017, rather than 2016. Id. ¶ 24(x).
As with Amica, Mr. Mullane submitted a complaint to the DBR regarding USAA's failure to make a coverage determination. (USAA Compl. ¶ 24(r).) USAA's response to the DBR was that it found on August 11, 2016, that Amica was the primary coverage applicable and that Mr. Shore's Amica policy was enough to cover any uninsured motorist claim. Id. ¶ 24(u). USAA apologized for not informing Mr. Mullane of this determination and admitted that its "adjuster did not send a written correspondence explaining the primacy of coverage issue[.]" Id. ¶¶ 24(v-w).
As of February 2018, Amica's file on Mr. Mullane's claim was missing a year of communications between Mr. Mullane and an Amica claims representative, causing Mr. Mullane to have to supply the missing communications between the parties. (Amica Am. Compl. ¶ 24(y).) Amica then claimed that it was reviewing Mr. Mullane's medical records, specifically his eye and neck records. Id. ¶¶ 24(z-cc). On March 30, 2018, Amica submitted a settlement offer of $45,000 to Mr. Mullane, which was less than his claimed medical bills and lost wages. Id. ¶ 24(dd).
Mr. Mullane's complaints do not specify the amount of damages he is claiming, including the amount of his medical bills and lost wages. See Amica Am. Compl. 8-11; USAA Compl. 6-11.
In April 2018, Mr. Mullane inquired into the low settlement offer, especially given that Amica had not yet reviewed an expert medical report regarding Mr. Mullane's eye injuries. (Amica Am. Compl. ¶¶ 24(ee-hh).) On April 16, 2018, Amica responded that it had not received the expert medical report, despite the report being dated from one week prior, April 9, 2018. Id. ¶ 24(ii). Mr. Mullane retained counsel in May 2018 and asserted a bad faith claim against Amica. Id. ¶ 24(jj). Amica then doubled its settlement offer, without explanation, which still did not suffice. Id.
The First Amended Complaint dates this as occurring on "4/16/19[.]" (Amica Am. Compl. ¶ 24(ii).) This 2019 date is presgumed to be a typographical error because of the chronological nature of Mr. Mullane's complaint and the surrounding facts occurring in 2018. Id. ¶¶ 24(dd-jj).
Mr. Mullane filed complaints against both USAA and Amica in separate actions on July 2, 2018. Both complaints included counts of (1) breach of contract; (2) breach of good faith and fair dealing; and (3) insurer's bad faith refusal to pay or settle a claim in violation of G.L. 1956 § 9-1-33. (USAA Compl. ¶¶ 44-49; Amica Compl. ¶¶ 35-40.) Both complaints included jury trial demands. Id. at 11. Mr. Mullane filed an amended complaint against Amica on September 6, 2018. Amica filed an answer on September 25, 2018, and USAA filed an answer on November 6, 2018. Amica filed an amended answer with a counterclaim under §§ 9-30-1 et seq. on October 12, 2018, to which Mr. Mullane filed an answer on November 13, 2018. (Amica Am. Answer 10-11.)
Amica and Mr. Mullane filed cross-motions for partial summary judgment on February 12, 2019 and May 3, 2019, respectively. The Court (Taft-Carter, J.) denied Amica's motion and granted Mr. Mullane's. (Order of October 4, 2019.)
Mr. Mullane filed the instant Motion and a memorandum of law on January 21, 2021. Amica and USAA objected to the Motion and filed memoranda of law on February 8 and 9, 2021, respectively. Mr. Mullane filed a reply memorandum on February 12, 2021. The Court now renders its decision.
II
Standard of Review
Under Rhode Island law, "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." DeFontes v. Dell, Inc., 984 A.2d 1061, 1066 (R.I. 2009) (quotations omitted). "The determination of whether the parties have formed an agreement to arbitrate is a matter of state contract law." Id. (citations omitted). The Court's "determination of whether a party has agreed to be bound by arbitration is a question of law[.]" Id. (brackets and quotations omitted).
III
Analysis
A. Choice of Law
Amica argues that its policy with Mr. Shore is governed by New Jersey law. (Amica Obj. Mot. (Amica Mem.) 5.) Thus, per Amica, because the policy stems from New Jersey law, Amica asks the Court to apply New Jersey law when interpreting Mr. Shore's policy. Id. Mr. Mullane argues that Rhode Island law should apply. (Pl. Mem. 5-6.)
There is no question that Rhode Island law applies to Mr. Mullane's policy with USAA. See USAA Mem. 4-9.
To determine which state's law applies in interpreting a contract, the Rhode Island Supreme Court "has adopted the interest-weighing approach[.]" See Harodite Industries, Inc. v. Warren Electric Corporation, 24 A.3d 514, 534 (R.I. 2011) (quotations omitted). "In carrying out that approach, we look at the particular * * * facts and determine therefrom the rights and liabilities of the parties in accordance with the law of the state that bears the most significant relationship to the event and the parties." Id. (emphasis in original) (quotations omitted). Further, Rhode Island courts "analyze the contested terms of an insurance policy according to the same rules established for the interpretation of other contracts." Mendez v. Brites, 849 A.2d 329, 337 (R.I. 2004) (citation omitted). "When the terms are clear, [courts] will apply them as written, giving the language its plain, ordinary and usual meaning." Id. at 338 (quotations omitted). "When contractual language is unambiguous . . . the parties' intentions must govern[.]" Id. (citation omitted).
Here, several indicators signal the intent that New Jersey law should govern because New Jersey has the most significant relationship regarding Mr. Shore's policy with Amica. First, the insurance policy's arbitration clause within the uninsured motorist claim section specifies that if the arbitration award exceeds the amount specified by New Jersey financial responsibility law, the parties may demand a jury trial if the arbitration award is insufficient. (Amica Ex. 4 Obj. Mot. (Ex. 4) 54.) Second, the policy is written to comply with the New Jersey Automobile Reparation Reform Act. See id. at 33. Third, the policy is referred to as a "New Jersey Personal Auto Policy[.]" Id. at 2. Fourth and finally, Mr. Shore was a New Jersey resident at the time of the collision, with a New Jersey driver's license and address. Id. at 15. Thus, New Jersey law governs Mr. Shore's policy with Amica and therefore applies in this action because New Jersey has the most significant relationship with the parties to Mr. Shore's insurance policy through Amica.
B. Waiver
The Defendants argue that, under the election of remedies doctrine, Mr. Mullane waived his right to compel arbitration. (USAA Mem. 4-6; Amica Mem. 5-6.) The Defendants also argue that the laws governing each of these policies, Rhode Island for USAA and New Jersey for Amica, preclude the right to compel for arbitration after commencement of litigation and engaging in discovery. Id. Thus, the Defendants argue that Mr. Mullane waived this right. Id.
Mr. Mullane argues that the two policies should both be read to allow arbitration. (Pl. Mem. 5-7.) Mr. Mullane also argues that § 10-3-2 applies and should require arbitration of his claims against the Defendants. Id. Furthermore, Mr. Mullane's position is that he has not waived his right to move to compel arbitration because he has consistently and continually demanded arbitration over the past two years. (Pl. Reply Mem. 3-5.)
i. USAA Policy
USAA argues that Mr. Mullane is bound by the doctrine of election of remedies. (USAA Mem. 4-6.) In support of this waiver argument, USAA cites Soprano v. American Hardware Mutual Insurance Co., 491 A.2d 1008, 1010-11 (R.I. 1985) and Binienda v. Atwells Realty Corporation, No. 15-253 WES, 2018 WL 1271443, at *3-4 (D.R.I. Mar. 9, 2018). Id. These cases, however, are readily distinguishable from the facts here.
Mr. Mullane cites Newman v. Valleywood Associates, Inc., 874 A.2d 1286, 1289 (R.I. 2005) and North Smithfield Teachers Association v. North Smithfield School Committee, 461 A.2d 930, 934 (R.I. 1983) in opposition. (Pl. Reply Mem. 3-5.)
In Soprano, the Rhode Island Supreme Court held that a plaintiff waived his right to compel arbitration because, after he filed suit, the plaintiff unilaterally sought arbitration without informing the trial court or opposing counsel. Soprano, 491 A.2d at 1010. The plaintiff in Soprano did not move to stay litigation and compel arbitration under § 10-3-3. Id. at 1011. Thus, the Court in Soprano reasoned that because the plaintiff failed to inform the trial court and opposing counsel that he was seeking arbitration after filing his complaint and engaging in discovery, or make a motion to compel arbitration, the plaintiff wasted judicial resources. Id. at 1010-11.
Here, Mr. Mullane properly moved to stay litigation and compel arbitration under § 10-3-3 and thus informed the Court and opposing counsel. See WC-2018-0331, Pl.'s Mot. of Jan. 7, 2021. What drew the ire of the Rhode Island Supreme Court in Soprano was the plaintiff unilaterally seeking arbitration without informing the trial court or opposing counsel after filing suit and engaging in discovery. See Soprano, supra. Thus, the reasoning of Soprano does not aid USAA's argument that Mr. Mullane waived his right to move to compel arbitration.
In Binienda, Judge William E. Smith of the District of Rhode Island denied the defendants' motion to compel arbitration because, while the defendants claimed to be missing the contract between them and the plaintiff for two years, "business owners are presumed to possess a baseline level of constructive knowledge of the documents in their custody." Binienda, supra, at *4. The defendants in Binienda raised other unpersuasive arguments, including that: they asserted their arbitration rights in pre-trial conferences; the plaintiff possessed "unclean hands"; and the defendants did not knowingly waive their right to compel arbitration. Id. at *3-4.
Here, the Defendants took almost two years to determine primacy of coverage and for Amica to make an initial settlement offer to Mr. Mullane. (Amica Am. Compl. ¶ 24; USAA Compl. ¶ 24.) It was only after Mr. Mullane filed complaints against both Defendants with the DBR that they determined primacy and informed him of their decision. (Amica Am. Compl. ¶¶ 24(v-jj); USAA Compl. ¶¶ 24(r-w).) Therefore, unlike the defendants in Binienda, who misplaced the contract between the parties for two years until the plaintiff testified that she never signed an agreement to arbitrate, Mr. Mullane is not at fault for the extended time it has taken for this matter to go before the Court. See Binienda, supra, at *3-4. Thus, the reasoning of Binienda also does not aid USAA's argument that Mr. Mullane waived his right to move to compel arbitration.
In both Soprano and Binienda, the parties who sought arbitration did so improperly; in Soprano, by unilaterally seeking arbitration without informing the trial court or opposing counsel; and in Binienda, by misplacing the contract between the parties for two years and waiting until the plaintiff testified in deposition before finding it. The facts here do not result in this Court concluding that Mr. Mullane acted improperly in moving to compel arbitration. Thus, USAA's argument that Mr. Mullane waived his right to compel arbitration is unpersuasive.
ii. Amica Policy
Amica argues under Farese v. McGarry, 568 A.2d 89, 94 (N.J. 1989) that Mr. Mullane waived his right to compel arbitration. However, as with USAA's cited cases, the facts and reasoning of Farese do not support Amica's argument.
Amica also cites Wein v. Morris, 944 A.2d 642, 644 (N.J. 2008). (Amica Mem. 6.) However, the facts of Wein involved court-ordered arbitration over both parties' objections, rather than a motion to compel arbitration initiated by a party. See Wein, 944 A.2d at 645 ("After almost five years of court-supervised discovery, both sides moved for summary judgment. Over the objection of the parties, the trial court ordered the matter to arbitration and dismissed the action.")
In Farese, the court held that a plaintiff waived his right to move to compel arbitration because he did not allege arbitrability as an affirmative defense to a counterclaim until amending his answer two weeks before trial. Farese, 568 A.2d at 94. The lease between the parties in Farese also included an arbitration clause regarding disputes over repairs made to the property that required notices to be provided to a defaulting party, which did not occur. Id. at 93-94. Thus, the court in Farese reasoned that the plaintiff waived his right to compel arbitration because the notices were not provided per the lease and he made the motion in an amended answer to a counterclaim nine months after filing the complaint and two weeks before trial. Id. at 94.
Also, New Jersey law has "a presumption against waiver of an arbitration agreement, which can only be overcome by clear and convincing evidence that the party asserting it chose to seek relief in a different forum." See Spaeth v. Srinivasan, 959 A.2d 290, 294 (N.J. 2008) (citations omitted). "In fact, 'the mere institution of legal proceedings . . . without ostensible prejudice to the other party' does not constitute a waiver." Id. (quoting Hudik-Ross, Inc. v. 1530 Palisade Corp., 329 A.2d 70, 74 (N.J. 1974)). Indeed, in support of the presumption that initiating litigation does not constitute a waiver of the right to compel arbitration, the Supreme Court of New Jersey has articulated a seven-factor totality of the circumstances test for courts to determine whether waiver has occurred. See Cole v. Jersey City Medical Center, 72 A.3d 224, 233 (N.J. 2013) ("In deciding whether a party to an arbitration agreement waived its right to arbitrate, [New Jersey courts] concentrate on the party's litigation conduct to determine if it is consistent with its reserved right to arbitrate the dispute.") Thus, New Jersey law does not support Amica's argument that "engaging in litigation amounts to a waiver of a party's right to arbitrate." (Amica Mem. 5.)
Here, there has been no trial date scheduled, in contrast to the facts in Farese, where the plaintiff raised arbitrability as an affirmative defense two weeks before trial. See Farese, 568 A.2d at 94. Further, as mentioned supra, Amica delayed for nearly two years before making a settlement offer. (Amica Am. Compl. ¶ 24; USAA Compl. ¶ 24.) Mr. Mullane also properly moved pursuant to § 10-3-3 after the Court's issuance of partial summary judgment. See WC-2018-0331, Pl.'s Mot. of Jan. 7, 2021. Thus, under New Jersey law, Mr. Mullane cannot be said to have waived his right to compel arbitration.
C. Arbitration Agreements
The Defendants also argue that the insurance policies are the controlling contracts between the parties. (USAA Mem. 6-9; Amica Mem. 7.) USAA alleges that its policy's arbitration clause precludes arbitration because it requires each party to agree to arbitration, which USAA does not. (USAA Mem. 6-9.) Amica alleges that arbitration would be a waste of judicial resources because its arbitration agreement with Mr. Mullane would only be binding "if the amount does not exceed the minimum limit for liability specified by the financial responsibility law of New Jersey." (Amica Mem. 7.) Amica alleges that New Jersey law sets a minimum limit for liability of $15,000 per person and $30,000 per accident, and that Mr. Mullane's claim exceeds this amount. Id.
Mr. Mullane argues that both contracts stated that the Defendants agreed to arbitrate issues. (Mullane Mem. 5-7.) Mr. Mullane also asks the Court to apply § 10-3-2, which provides that an insured person may elect to arbitrate insurance claims "in all contracts of primary insurance, wherein the provision for arbitration is not placed immediately before the testimonium clause or the signature of the parties[.]" Id. at 6-7.
i. USAA
Mr. Mullane's insurance policy with USAA provides for the following regarding uninsured motorist claims more than $50,000:
"B. The following Arbitration provision applies to Uninsured Motorists Coverage claims greater than fifty thousand dollars ($50,000):
"1. If [USAA] and a covered person disagree as to:
"a. Whether the covered person is legally entitled to recover damages from the owner or operator of an uninsured motor vehicle; or
"b. The amount of damages that the covered person is legally entitled to collect from that owner;
"then, that disagreement may be arbitrated, provided both parties so agree." (emphasis omitted) (Mullane Ex. B in Supp. Mot. (USAA Policy) 18.)
As the above-quoted language states, the parties may arbitrate claims exceeding $50,000, provided both parties agree. Id. Here, USAA does not consent to arbitration. See USAA Mem. 8.
Although the arbitration clause relating to uninsured motorists appears on page eighteen of the USAA policy, which is not immediately before the testimonium clause, Mr. Mullane's reliance on this point is of no avail. (USAA Policy 18.) See § 10-3-2. First, § 10-3-2 "applies in cases in which the insurer demands that an insured arbitrate a claim." See Kraczkowski v. Quincy Mutual Fire Insurance Company, 898 A.2d 720, 722 (R.I. 2006). Here, Mr. Mullane, as the insured plaintiff, is demanding arbitration with USAA, the insurance company, not, as the statute instead applies, an insurance company demanding arbitration with a policyholder. Id. at 722-23. Second, mutual assent is required for the arbitration provision to be enforceable, and USAA does not agree to arbitration. See Stanley-Bostich, Inc. v. Regenerative Environmental Equipment Co., Inc., 697 A.2d 323, 326 (R.I. 1997) ("Mutual assent objectively manifested by the writings of the parties is a condition precedent to the formation of a binding agreement to arbitrate." (citations omitted)).
Therefore, because § 10-3-2 does not apply, and there is no mutual assent to agree to arbitration, Mr. Mullane's argument fails.
ii. Amica
Amica argues that submitting Mr. Mullane's claim to arbitration would be a waste of judicial resources because, under Mr. Shore's policy, if the arbitrator's award exceeds New Jersey's minimum limit for liability specified by law, either party may demand the right to a trial within sixty days. See Mullane Ex. A in Supp. Mot. (Ex. A) 60. Amica claims that because of two failed previous attempts to mediate the claim, the parties are unlikely to accept non-binding arbitration and would demand a jury trial after arbitration concludes. (Amica Mem. 7.) Mr. Mullane argues that arbitration is a favored method of dispute resolution by Rhode Island courts and that the Defendants are responsible for the delays. (Pl. Reply Mem. 3-4.)
Here, given that Mr. Shore's Amica policy allows for a party that is unsatisfied with the arbitration award to demand a jury trial if the award exceeds $15,000, and the parties have already failed to agree to mediation twice previously, arbitration would not be an economical use of judicial resources. See Ex. 4 at 25; Amica Am. Compl. ¶ 24(dd); Amica Mem. 7. Mr. Mullane has already rejected settlement offers of $45,000 and $90,000. (Amica Am. Compl. ¶ 24(dd).) It is unlikely that the award will be less than $15,000. Id. Thus, submitting Mr. Mullane's claim against Amica to arbitration would not be an economical use of judicial resources because the parties are likely to demand a jury trial given that the arbitration award would be non-binding.
IV
Conclusion
Therefore, while Mr. Mullane has not waived his right to compel arbitration, because USAA has not consented to arbitration and non-binding arbitration would not be an economical use of judicial resources regarding Mr. Mullane's claim with Amica, the Court denies Mr. Mullane's Motion to Stay Litigation and Compel Arbitration.