Auto Insurance Law
Insurance commissioner rules arbitration
provision mandatory for UM/UIM disputes
In an important victory for Pennsylvania consumers, state Insurance Commissioner M. Diane Koken has denied a petition filed by the Insurance Federation of Pennsylvania, Inc. The petition challenged the state Insurance Department�s authority to mandate arbitration for uninsured and underinsured motorist coverage. Attorney Kevin McKeon, along with Immediate Past PaTLA President Timothy A. Shollenberger, and President-Elect David L. Lutz, worked together and filed an amicus curiae brief on behalf of PaTLA in favor of mandatory arbitration.
In a declaratory opinion and order issued July 16 in In Re: The Requirement of An Arbitration Provision in Private Passenger Uninsured and Underinsured Motorist Coverage, Koken said that mandating binding arbitration for both UM and UIM coverage results in similar disputes being heard in similar forums, thus making insurance policies less confusing to consumers. Koken wrote:
Consistency of practice and procedure for the two similar types of cases benefits consumers, the industry, attorneys and judiciary. The same efficient procedures are available to resolve both UM and UIM disputes. Thus, by requiring binding arbitration for UM and UIM disputes, the Insurance Department has acted within its authority and consistent with the public policy set forth in the MVFRL: insurance policies shall provide UM and UIM coverage to protect persons who suffer injury from an uninsured or underinsured motor vehicle.
PaTLA Amicus Chair Dale M. Larrimore said the opinion is significant because the arbitration provision in auto insurance policies provides proper protection to victims of uninsured and underinsured motorists. "The insurance commissioner�s opinion affirms the Legislature�s intent of the Motor Vehicle Financial Responsibility Law that public policy favors arbitration of this type of dispute," Larrimore said. In addition, Larrimore said that the opinion asserts that the department has wide discretion when establishing rules, regulations, and standards as well as performing administrative duties and functions.
According to the opinion, the Pennsylvania Insurance Department requires that private passenger automobile insurance policies include a provision requiring binding arbitration for disputes concerning UM and UIM coverage. The authority was challenged by the Insurance Federation of Pennsylvania, Inc., which filed a petition for declaratory order in 1997. PaTLA then filed amicus briefs in the case.
According to Koken�s opinion, the controversy raised by the petition is the Federation�s assertion that the department does not have the authority under existing statutes and regulations to require private passenger auto policies to include an arbitration provision. However, Koken said that statutes and controlling appellate authority compel a different conclusion. Koken cited Prudential Property and Cas. Ins. Co. v. Muir, in which the Commonwealth Court said that the Insurance Department had the "implied authority to promulgate the regulation in question."
She also said that the Department�s authority to require both UM and UIM dispute arbitration also arises out of the provision of the MVFRL, which states that �the department has the power to administer and enforce those provisions of this chapter as to matters of its jurisdiction.�
Koken then said that the arbitration provision serves the purpose of aiding innocent victims. She again cited the court�s decision in Muir which held that the arbitration provision serves inncocent victims by providing them with "whatever proceeds to which they are entitled as quickly as possible" in "the most expeditious manner, as well as the least expensive, of accomplishing this salient goal." "Simply put," said Koken, "public policy favors arbitration."
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