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Despite the existence of a financial relationship between an arbitrator and an insurance company lawyer involved in an arbitration, it did not affect the outcome of the case, an appeals court has ruled.

A three-judge Superior Court panel upheld a Luzerne County judge's denial of summary judgment requested by Patricia and Stanley Neishel against Erie Insurance Exchange. The Neishels sought to vacate a $35,000 arbitration award granted by arbitrator Enid Harris, who had previously worked as an independent contractor for Erie's attorney in the case.

The Luzerne County judge reasoned that no undue influence tainted the case because Harris did not work on files pertaining to the case at hand while in the employ of Erie's representation, nor was she ever directly compensated by Erie.

On appeal, the Neishels questioned whether due process was observed in allowing the award to stand.

According to Judge Kate Ford Elliott's unpublished opinion, the Neishels argued that “'the suggested relationship between [the arbitrator selected by Erie] and [Erie's counsel] Robert T. Panowicz, Esquire, if accurate, prohibited a fair and impartial hearing.'”

“Appellants, however, neither alleged nor demonstrated that their rights were prejudiced by any evident corruption or misconduct on the part of attorney Harris,” Ford Elliott said. “Rather, appellants merely alleged and demonstrated that attorney Harris worked on some of attorney Panowicz's cases as a legal subcontractor and that it was possible that appellants' case was assigned to attorney Panowicz when attorney Harris rendered services to attorney Panowicz three years prior to the arbitration. This allegation, however, is not a statutorily valid ground to vacate the arbitration award. ”

Ford Elliott was joined by Judges Susan Peikes Gantman and Carolyn Nichols.

The ruling echoed Luzerne County Judge Thomas Burke Jr.'s holding, contained in the Superior Court's opinion:

“ While in hindsight it is clear that [Erie's] choice of attorney Harris as its arbitrator without, minimally, disclosing the nature of her prior professional relationship with [appellants'] counsel was less than ideal, the court was not persuaded that the law required that the award be vacated under the circumstances of this case, especially where, as here, the award was unanimous and there was no evidence whatsoever to indicate that attorney Harris exerted any influence over the other two arbitrators, one of whom is a well-seasoned plaintiff's attorney and the other a retired judge.”

Jeffrey Stanton of Haggerty, Goldberg, Schleifer & Kupersmith in Philadelphia represents the Neishels and said that the situation was “disheartening.”

“Despite the court's ruling to the contrary, we believe this case highlights the importance of the disclosure of potential conflicts of interest in extra judicial proceedings,” Stanton said.

Panowicz, Erie's attorney, said, “We had raised a number of defenses in our position and the court chose to take the narrowest approach, which is consistent with the basic judicial canons.”

(Copies of the 8-page opinion in Erie Insurance Exchange v. Neishel, PICS No. 19-0166, are available at http://at.law.com/PICS.)