Reinsurance Focus

A trial court had no basis to vacate arbitration awards, the New Jersey Appellate Division has held. An insurer, Selective, sued a bus company, Coach, in a subrogation action, but subsequently offered to pursue the dispute in an arbitral forum. The attorney for Coach agreed and the litigation was voluntarily dismissed on stipulation of the parties specifying the particular forum to be used. Shortly before the stipulation was filed, Coach’s attorney indicated to Selective’s attorney that it was self-insured, and that Sedgwick Claims Management served as its third-party administrator of claims made against it. The arbitration was later filed, and Sedgwick was served by Selective in accordance with the rules of the arbitral forum. Neither Coach nor Sedgwick appeared at the arbitration hearing, and the arbitrator issued two awards in Selective’s favor. Selective then sought the awards’ confirmation. The trial court initially confirmed the awards, and entered a default judgment against Coach for failure to answer. However, the trial court later vacated both the default judgment and the arbitration awards, concluding that there had not been due process notice of the arbitration to Coach, which the trial court determined had not designated Sedgwick as its “local representative” to handle the claim in accordance with the arbitral rules.

On appeal, Selective argued that the trial court erred because it had served Coach in accordance with the rules. Coach countered that the awards were properly vacated for lack of notice of the arbitration, that it provided a timely defense to the awards after receiving actual notice, and that it was never a proper party to any subrogation action. The appellate court first determined that the awards should be enforced. The stipulation of voluntary dismissal expressly acknowledged that the parties would arbitrate in the forum designated. Moreover, it was undisputed that Coach’s counsel furnished the name and address of a Sedgwick adjuster as the person to whom Selective should direct any questions or inquiries. Adequate notice of the arbitration was thus given to Coach. Next, the court determined that the default judgment was properly vacated because, although Coach had failed to answer in a timely fashion, it nonetheless moved to vacate the entry of default two days after the entry of judgment. However, Coach was estopped to present any defense that it was not a proper party to a subrogation action, since the statute it relied on, N.J.S.A. 39:6A-9.1, was not a defense to an arbitration award and, in any event, applied to self-insureds, which Coach had admitted it was. Selective Insurance Co. v. Coach Leasing, Inc., Case No. A-4007-06T2 (N.J. App. Div. June 16, 2008).

This post written by Brian Perryman.