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Perez v. Mid-Century Insurance Co.

April 15, 1997

CAROLINA PEREZ AND PEDRO PEREZ, WIFE AND HUSBAND, AS GUARDIANS OF PAUL PEREZ, A MINOR, APPELLANTS,
v.
MID-CENTURY INSURANCE COMPANY, RESPONDENT AND CROSS-APPELLANT.



Appeal from Superior Court of Yakima County. Docket No: 94-2-02407-7. Date filed: 04/14/95. Judge signing: Hon. Stephen Brown.

Authored by Frank L. Kurtz. Concurring: John A. Schultheis, Ray E. Munson.

The opinion of the court was delivered by: Kurtz

KURTZ, J. Summary judgment was entered in favor of Mid-Century Insurance Company and against the Perez family denying their request for declaratory and equitable relief disqualifying Yakima attorney David A. Thorner as an arbitrator in an underlying uninsured motorist (UIM) arbitration. The Perez family objects to Mr. Thorner's participation as Mid-Century's party arbitrator on a tripartite arbitration panel arguing that Mr. Thorner's close and continuing relationship with Mid-Century creates an inference of partiality. We affirm the order of the trial court.

FACTS

Three-year-old Paul Perez was injured when a pickup truck backed into him and broke his leg. The child's medical expenses were covered by the tort-feasor's insurance policy and his parents' policy with Mid-Century. In addition, the tort-feasor's insurer paid its full limits of liability coverage. Paul's parents, Carolina and Pedro Perez, then asserted a UIM claim on behalf of their son. The parties were unable to agree on the amount of the $25,000 UIM limits needed to compensate Paul for his injuries. The Perez family demanded arbitration pursuant to the terms of their policy with Mid-Century.

The arbitration clause in the policy reads as follows:

If an Insured person and we do not agree (1) that the person is legally entitled to recover damages from the owner or operator of an underinsured motor vehicle, or (2) as to the amount of payment under this Part, either that person or we may demand that the issue be determined by arbitration.

In that event, the Insured person will select an arbitrator and we will select another. The two arbitrators will select a third. If they cannot agree on the third arbitrator within 30 days, the Judge of a court having jurisdiction will appoint the third arbitrator. The Insured person will pay the arbitrator selected by that person. We will pay the arbitrator we select. The expense of the third arbitrator and all other expenses of arbitration will be shared equally.

Arbitration will take place in the county where the Insured person lives. Local court rules governing procedures and evidence will apply.

The decision in writing of any two arbitrators will be binding subject to the terms of this insurance.

Pursuant to these provisions, the Perezes' attorney wrote to the senior claims representative for Mid-Century and nominated Yakima attorney Rodney K. Nelson as their arbitrator-nominee. In the same letter Perezes' attorney acknowledged his assumption that Mid-Century would choose either Walter G. Meyer or Mr. Thorner as its nominee. Mr. Meyer subsequently appeared as counsel of record for Mid-Century and nominated Mr. Thorner as Mid-Century's nominee to the arbitration panel.

Carolina and Pedro Perez subsequently brought action against Mid-Century asking the court to declare their respective rights under the policy and to compel Mid-Century to name an impartial and unbiased person as its nominee to the UIM panel. The Perez family objected to Mr. Thorner's participation on the arbitration panel contending his ongoing business and legal relationship with Mid-Century created the inference of partiality. The Perezes contend Mr. Thorner might be partial while serving on the panel because he would be motivated to keep any award small in an effort to retain his ongoing professional relationship with Mid-Century.

The Perezes submitted the affidavit and deposition testimony of Yakima attorneys Wiley Hurst and Richard Johnson to support their position.

Both attorneys testified that most of the defense work in the Yakima area for Mid-Century Insurance had been referred to either Mr. Meyer or to Mr. Thorner. If one of these attorneys was chosen as defense counsel in a case, that attorney would then appoint the other as the party arbitrator to the tripartite panel. The experience of Mr. Hurst was that the attorney appointed by the insurer tended to act as an advocate for the insurer while serving as an arbitrator on the panel. Mr. Hurst testified he has never taken action to set aside an award or attempt to disqualify Mr. Thorner from serving as an arbitrator. Mr. Johnson ...


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