The Superior Court of New Jersey, Appellate Division, recently ruled in Vega v. 21st Century Insurance, 430 N.J. Super. 18 (App. Div. 2013), that insurance carriers do not have to explicitly demand a trial to nullify an arbitration award for uninsured motorist coverage. The Court found that a party is not required to exactly assert its “demand for a trial” to nullify an award; “the insurer’s rejection of the arbitration award [is] sufficient.”
In Vega, the Plaintiff, Marleny Vega, claimed to have been injured when her motor vehicle, which was insured by Defendant, 21st Century Insurance Company, was struck by a hit-and-run driver. She made a claim under the policy’s uninsured-motorist (UM) endorsement, and the parties proceeded to arbitration which resulted in an award of $87,500. Since the award exceeded the minimum liability coverage required by law, “either party” could “demand the right to a trial on all issues,” provided the demand was made in writing within thirty (30) days of the arbitrators’ decision. See, R. 4:21A-6.
When a policy provision such as the one referred to above is properly triggered, the arbitration award is nullified and the claimant must file a Complaint. If no trial is demanded, the arbitration award becomes “binding.” In this case, Defendant, 21st Century Insurance Company, wrote a letter to Plaintiff’s attorney regarding the arbitration award. The letter stated:
Pursuant to the provisions of the 21st Century Insurance Policy… the UM Arbitration Award of June 16, 2011 is hereby rejected. Kindly be guided accordingly and contact the undersigned to discuss possible settlement of this matter.
Plaintiff commenced an action against Defendant to uphold the arbitration award, claiming that the award became binding because the insurer failed to “demand a trial.” The Court found that there was no other “plausible alternative interpretation” in the language above, other than the insurer having made a demand for a trial.
The Appellate Division’s decision in Vega is significant because it rejected the ruling in LoBianco v. Harleysville Insurance Co., 368 N.J. Super. 515 (Law Div. 2003), which required explicit language, such as “we demand a trial,” in order to reject an arbitration award and request a trial. In Vega, the Appellate Division cautioned that a party who fails to expressly demand a trial runs the risk that the demand will be found to be ambiguous. That being said, the Court is obligated to enforce what they perceive to be the reasonable expectation of the insured and will look to the fair implication of the correspondence between the attorneys in a manner that does not exalt form over substance.
The lesson learned is simple: though you don’t have to explicitly state that you want a trial, the best practice is to do so in order to clear any and all ambiguities that may arise. Better to be safe than sorry.