Etheridge v. Levitsky, USAA; Scope of Arbitration

In Etheridge v. Levitsky, USAA (unpublished), the plaintiff (insured) was injured in an auto accident. The tortfeasor's liability insurer tendered its limits ($50,000). The plaintiff then demanded arbitration, and the parties reached an agreement to arbitrate. That agreement stated that the arbitrators were to determine "what amount of damages, if any, is recoverable by the Plaintiff in excess of the sum ($50,000) paid by the primary carrier." The arbitration panel ruled that the plaintiff had not established the defendant's negligence. The plaintiff argued to the court that the arbitrators were simply to determine damages, and not liability. (The plaintiff was a passenger on a motorcycle, and was injured when the motorcycle crashed. She contended that the operator of the motorcycle was negligent.) The Court of Appeals ruled that the arbitration agreement was sufficiently broad to encompass issues of liability and damages.

This case highlights some of the potential complications of arbitration. It is critical that the parties to arbitration clearly state the issues to be arbitrated, and understand the adjustments that can be made to the arbitration award by the court (e.g. the recovery of interest). In another case, the UIM carrier lost its coverage arguments by arbitrating the claim first.

John Kirby has handled may underinsured motorist cases, and has taught classes to attorneys and insurance adjusters on underinsured motorist law in North Carolina

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