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The Pennsylvania Supreme Court has refused to disturb an arbitration award in an uninsured motorist dispute, letting stand two lower court rulings rejecting allegations that the arbitrator and an insurance company lawyer involved in the case had a financial relationship that affected the outcome.

A three-judge Superior Court panel earlier this year 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According to Judge Kate Ford Elliott’s unpublished opinion, the Neishels argued that “‘the suggested relationship between [the arbitrator selected by Erie] and [Erie's counsel] Robert T. Panowicz, Esquire, if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.”

On Aug. 14, the Supreme Court issued a one-page order denying allocatur in the case.

Panowicz, Erie’s attorney, said he was not surprised that the court declined to take up the case, in part because of recent amendments to the state’s Uniform Arbitration Act, “which address the very issue that was raised in this case.”

The changes to the law, which took effect July 1, require arbitrators to disclose any potential conflicts of interest. The failure to disclose a conflict can now be factored into a determination of whether to vacate an arbitration award.

Panowicz said the question of how much weight the failure to disclose a conflict should be given in vacatur proceedings is still unanswered and will likely need to be litigated in the future, but the Neishel matter was not the proper vehicle to do that.

Counsel for the Neishels, Ralph J. Johnston Jr. of Johnston & Johnston in Kingston, said he was disappointed the high court denied allocatur as he and his client believed the arbitrator in the case had violated the standard with regard to disclosing conflicts of interest. As for whether the July amendments to the UAA will help remedy similar situations in the future, Johnston said it remains to be seen because Ford Elliott’s opinion in Neishel seemed to indicate that, regardless of whether a conflict is disclosed, there must be evidence of actual misconduct.