July 18, 2019

Colorado Supreme Court: Litigation-Based Waiver is Issue for Trial Court, Not Arbitrator

The Colorado Supreme Court issued its opinion in Radil v. National Union Fire Insurance Company of Pittsburg, PA on June 28, 2010.

Follow-Form Endorsement—Excess Insurance—Uninsured/Underinsured Motorist Coverage—Arbitration Agreement—Litigation-Based Waiver Defense.

In this original proceeding, the Supreme Court affirmed the trial court’s order compelling arbitration of an injured employee’s claim for underinsured motorist benefits from her employer’s excess liability insurer, thereby discharging the rule in part. The Court reversed the trial court’s order directing the arbitration panel to determine the excess liability insurer’s defense of litigation-based waiver, thereby making the rule absolute in part.

Jennifer Radil was seriously injured in a work-related car accident. Her employer was insured under a primary commercial policy and under an umbrella policy issued by National Union Fire Insurance Company of Pittsburgh, PA (National Union). The National Union excess policy includes a follow-form endorsement of the primary policy’s uninsured/underinsured motorist UM/UIM coverage, which in turn includes an arbitration clause applicable to disputes over entitlement to or recoverable amount of UM/UIM damages. National Union argued that the trial court erred in compelling arbitration of Radil’s claim for UIM benefits because its follow-form endorsement does not bind it to the arbitration agreement contained in the underlying policy. National Union further asserted that, even if it is bound, Radil waived her right to compel arbitration and the trial court correctly directed the arbitration panel to determine National Union’s litigation-based waiver defense.

Absent express language defining the coverage endorsed or a disclaimer of particular terms or conditions, the excess insurer’s follow-form endorsement incorporates the terms and conditions that define the underlying coverage. Here, the follow-form endorsement of the underlying UM/UIM coverage contains no limiting language; therefore, National Union’s UM/UIM coverage is defined by the terms and conditions, including the arbitration clause, of the underlying UM/UIM coverage. Accordingly, National Union is subject to a valid arbitration agreement.

Absent the parties’ clear intent to the contrary, litigation-based waiver is an issue the trial court, not an arbitrator, properly determines. In this case, the issue is outside the limited scope of the arbitration clause because a litigation-based waiver is a procedural defense unrelated to the insured’s entitlement to or amount of UM/UIM damages. Accordingly, the trial court properly determined the issue.

Summary and full case available here.

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