UNION LABOR LIFE INSURANCE COMPANY v. DOERRIE

Reset A A Font size: Print

Court of Appeal, Second District, Division 4, California.

The UNION LABOR LIFE INSURANCE COMPANY, Petitioner and Appellant, v. Elsie A. DOERRIE et al., Respondents.

Civ. 44837.

Decided: May 28, 1975

Adams, Duque & Hazeltine, Richard C. Field and James H. Fleming, Los Angeles, for petitioner and appellant. Wayne Jett, Albert Rush, Johnson, Bannon, Wohlwend & Johnston and William E. Johnston, Los Angeles, for respondents.

The Union Labor Life Insurance Company appeals from a judgment denying its petition to compel arbitration and denying its motion to stay proceedings1 in an action against it which sought declaratory relief and damages.2

The plaintiffs in the basic action were: 19 employees3 working under the jurisdiction of the International Union of Operating Engineers, Local No. 12, and the members of the board of trustees of the Operating Engineers Health and Welfare Fund.4 The first amended complaint alleged: on October 1, 1969, in the city of Los Angeles, defendant Union Labor Life Insurance Company executed its group policy of disability insurance (attached to the complaint and incorporated therein by reference) to plaintiff trustee as ‘policyholder’; the policy was issued, and became effective, on November 1, 1969; it insured employees of the International Union of Operating Engineers, Local No. 12, against long-term total disability; the policy provided that, after a ‘qualifying period’ of 6 months of total disability, a disabled employee was eligible to receive a monthly benefit for the duration of his disability, but in no event for longer than 54 months following completion of the qualifying period; ‘total disability’ was defined to mean: during the first 24 months of any period of disability the employee was unable, because of disease or injury, to perform the duties of his job as an operating engineer, and thereafter was unable to work at any reasonable occupation.

It was further alleged: while the policy was in effect, each of the plaintiff employees became totally disabled under its terms, and therefore was entitled to receive disability benefits; defendant paid disability benefits to 15 plaintiffs for varying periods, after which it terminated payments; defendant refused to pay any benefits whatever to 4 plaintiffs who were entitled to benefits; such termination and denial of benefits was based on the ground (among others) that the plaintiff in question was not totally disabled within the meaning of the policy.

Plaintiffs alleged that a controversy had arisen between the parties concerning their respective rights, duties and liabilities under the policy, and requested that the court declare them.

It was further alleged that termination and denial of disability benefits by defendant constituted a breach of its obligation to each of the plaintiffs to act in good faith and deal fairly, and further constituted interference with each plaintiff's property interest in the policy, for which plaintiffs sought both compensatory and punitive damages.

Defendant filed a petition to compel arbitration (Code Civ.Proc. § 1281.2), naming, as respondents, the plaintiff employees but not the plaintiff trustees. The petition alleged: on February 24, 1971, defendant and the trustees (as policyholder of the group disability insurance policy) executed a letter agreement pertaining to the policy; such agreement provided for arbitration of disputes concerning the definition of total disability under the policy; on January 9, 1973, after the effective date of the policy and the date of the letter agreement, certain disputes existed between defendant and respondents regarding the disability status of respondents and their entitlement to benefits under the policy; on March 28, 1973, defendant demanded arbitration of such disputes; respondents refused to arbitrate.

Defendant also moved for an order staying further proceedings in the action until determination of the petition to compel arbitration. (Code Civ.Proc. § 1281.4.)

Plaintiff employees (as respondents to the petition) filed a response to the petition, admitting that the letter agreement provided for arbitration of the disputes described therein, and denying that defendant had demanded arbitration of such disputes. As one affirmative defense (among others), the response alleged that there was no written agreement under which the respondents, or any of them, were bound to arbitrate disputes arising from their claims for long-term disability benefits under the policy issued by defendant/petitioner.

Declarations and points and authorities were filed in support of, and in opposition to, the petition to compel arbitration and the motion to stay proceedings. A hearing was had, and the matter was submitted for determination; thereafter, the court concluded it should deny defendant's petition and its motion. Findings of fact and conclusions of law were signed and filed.

Among the facts found by the trial court were the following: respondents are persons insured and claimants under a group policy of long-term disability insurance issued by defendant; said policy was issued and delivered, and became effective, on November 1, 1969; the policy was terminated by action of the trustees on December 31, 1970; between November 1, 1969, and December 31, 1970, some of the respondents (named in the findings) became entitled to benefits by reason of their total disability within the meaning of the policy; on February 24, 1971, defendant and the trustees executed, and thereby made effective, a letter agreement; such agreement provided that, in the event of a disagreement between defendant and the trustees regarding the capability of any insured under the policy to perform a reasonable occupation after the initial 24 months of total disability, defendant and the trustees would submit such disagreement to arbitration, and that the result of the arbitration would be binding upon each of them; no respondent signed the letter agreement; no respondent was identified or referred to in the agreement as a person who was considered a party thereto or bound thereby; defendant failed to prove that it and the trustees intended that any of the respondents, individually, should be bound to arbitrate any dispute as a result of execution of the agreement by defendant and the trustees, or that the letter agreement was executed before any respondent had made his claim for policy benefits; defendant failed to prove that the trustees had the express or implied authority or power as agents of respondents to bind them to any arbitration agreement.

From the foregoing facts the court determined, as conclusions of law: no respondent was a party to the letter agreement between defendant and the trustees; no written agreement existed whereby any of the respondents was bound to arbitrate any dispute with defendant.

Judgment was entered denying the petition to compel arbitration and the motion to stay proceedings.

Appellant contends that, because the trial court found the existence of an agreement to arbitrate, Code Civ.Proc. § 1281.25 required the granting of the petition to compel arbitration; the court could not refuse to order arbitration based on its conclusion that respondents were not parties to the arbitration agreement, because such conclusion necessitated determination of a ‘jurisdictional fact,’ which is a matter to be determined by an arbitrator, not by a court.

In support of its contention, appellant cites and relies upon Van Tassel v. Superior Court, 12 Cal.3d 624, 116 Cal.Rptr. 505, 526 P.2d 969 (1974); Orpustan v. State Farm Mut. Auto. Ins. Co., 7 Cal.3d 988, 103 Cal.Rptr. 919, 500 P.2d 1119 (1972); Members Ins. Co. v. Felts, 42 Cal.App.3d 617, 117 Cal.Rptr. 54 (1974) and Allstate Ins. Co. v. Superior Court, 35 Cal.App.3d 137, 110 Cal.Rptr. 709 (1973). Each of these cases involved the question of arbitrability of a dispute regarding uninsured motorist coverage. In each case it was held that, under Ins.Code § 11580.2 (which requires that an automobile liability insurance policy contain both uninsured motorist coverage and a provision for arbitration of any controversy regarding such coverage) the entire controversy, including jurisdictional facts, is subject to determination by the arbitrator. Thus, in the cases relied upon by appellant, arbitration was not a method of settling disputes chosen by the contracting parties, but was imposed upon them by statute.

Where, as here, arbitration is not mandated by statute, but is a matter of contract, it is the role of the court to determine whether a party resisting arbitration has agreed to arbitrate. (Retail Clerks Union v. Thriftimart, Inc., 59 Cal.2d 421, 425–427, 30 Cal.Rptr. 12, 38 P.2d 652 [1963]; O'Malley v. Wilshire Oil Co., 59 Cal.2d 482, 490–491, 30 Cal.Rptr. 452, 381 P.2d 188 [1963]; Lovret v. Seyfarth, 22 Cal.App.3d 841, 859, 101 Cal.Rptr. 143 [1972]; Unimart v. Superior Court, 1 Cal.App.3d 1039, 1045, 82 Cal.Rptr. 249 [1969]; Retail Clerks Union v. L. Bloom Sons Co., 173 Cal.App.2d 701, 702–703, 344 P.2d 51 [1959].)

A party can be compelled (absent statutory compulsion) to submit a dispute to arbitration only where he has contracted in writing to do so. (Code Civ.Proc. §§ 1281, 1281.2; Paud v. Alco Plating Corp., 21 Cal.App.3d 362, 369, 98 Cal.Rptr. 706 [1971]; Berman v. Renart Sportswear Corp., 222 Cal.App.2d 385, 388, 35 Cal.Rptr. 218 [1963].) The letter agreement containing the provision for arbitration was executed by appellant and the trustees; none of respondents signed the agreement, and the trial court so found. Appellant contents that respondents, nevertheless, were bound by the arbitration provision. In support of this contention, appellant cites and discusses several cases. (Doyle v. Giuliucci, 62 Cal.2d 606, 43 Cal.Rptr. 697, 401 P.2d 1 [1965]; Berman v. Dean Witter & Co., Inc., 44 Cal.App.3d 999, 119 Cal.Rptr. 130 [1975]; Retail Clerks Union, Local 775 v. Purity Stores, Inc., 41 Cal.App.3d 225, 116 Cal.Rptr. 40 [1974]; Holayter v. Smith, 29 Cal.App.3d 326, 104 Cal.Rptr. 745 [1972]; Ware v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 24 Cal.App.3d 35, 100 Cal.Rptr. 791 [1972]; Paud v. Alco Plating Corp., supra, 21 Cal.App.3d 362, 98 Cal.Rptr. 706; Frame v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 20 Cal.App.3d 668, 97 Cal.Rptr. 811 [1971]; Gear v. Webster, 258 Cal.App.2d 57, 65 Cal.Rptr. 255 [1968]; Mencher v. B. & S. Abeles & Kahn, 274 App.Div. 585, 84 N.Y.S.2d 718 [1948].) All of these cases are factually distinguishable6 from the instant case, and none is controlling here.

Appellant further contends that the trustees acted as agents of respondents for the purpose of procuring the group disability insurance policy from appellant (see: Civ.Code. § 2295; Blos v. Bankers Life Co., 133 Cal.App.2d 147, 150–151, 283 P.2d 744 [1955]) and that, therefore, respondents were bound by the arbitration agreement because the trustees in signing the agreement, acted within the scope of their authority as agents. (See: Civ.Code § 2330; Geary St., etc., R. R. Co. v. Rolph, 189 Cal. 59, 64, 207 P. 539 [1922]; Burgess v. Security-First Nat. Bank, 44 Cal.App.2d 808, 819, 113 P.2d 298 [1941]; Milonas v. Sarantitis, 109 Cal.App. 343, 344, 292 P. 978 [1930].)

‘The reference of a dispute to arbitration is an extraordinary method of settlement, substituting the judgment of the arbitrators for the discretion of the agent. It is not a method of settlement usually employed by an agent, and the authority thus to settle a dispute is not one of the implied powers of a general agent.’ (Pope v. Wheatley, 54 S.W.2d 846, 847 [Tex.Civ.App.1932]. See also: Talmade v. Arrowhead Reservoir Co., 101 Cal. 367, 371–372, 35 P. 1000 [1894]; 6 Cal.Jur.3d 21, ‘Arbitration and Award’ § 8.) Accordingly, the agent's authority to submit his principal's disputes to arbitration must be specifically conferred, either expressly or by implication. (Dunn v. Moore, 22 Tenn.App. 412, 123 S.W.2d 1095, 1097 [1938]; Pope v. Wheatley, supra; Manufacturer's & Builders Fire Ins. Co. v. Mullen, 48 Neb. 620, 67 N.W. 445 [1896]; 2A C.J.S. Agency § 236, p. 938; 5 Am.Jur.2d p. 567, ‘Arbitration and Award’ § 64: ‘Authority to submit his principal's disputes to arbitration is not within the powers of a general agent, for his power to bind the principal by his own acts and determinations does not include the authority to delegate such a power to others.’)

The extent of an agent's authority is a question of fact. (Bergtholdt v. Porter Bros. Co., 114 Cal. 681, 688, 46 P. 738 [1896]; Grosse-Becker v. Becker, 102 Cal. 226, 227, 36 P. 433 [1894]; Thompson v. Machado, 78 Cal.App.2d 870, 876–877, 178 P.2d 838 [1947].) ‘Where, as here, it is claimed that the contract was made with an agent, and because whereof it is sought to charge the principal thereunder, the burden is upon the plaintiff to show that the agent had authority from the principal to enter into the contract.’ (Ewing v. Hayward, 50 Cal.App. 708, 716, 195 P. 970, 974 [1920]. See also: California Viking Sprinkler Co. v. Pacific Indemn. Co., 213 Cal.App.2d 844, 850, 29 Cal.Rptr. 194 [1963].) The trial court found, as fact: ‘Petitioner failed to prove that the Trustees of the Operating Engineers Health & Welfare Fund had the express or implied authority or power as agents or representatives of respondents to bind respondents to any arbitration agreement.’ Such finding is supported by the record.

Since respondents were neither parties to the arbitration agreement nor bound thereby, the petition to compel arbitration was properly denied.

The judgment is affirmed.

FOOTNOTES

1.  The judgment is appealable insofar as it denied the petition to compel arbitration. (Code Civ.Proc. § 1294, subds. (a), (d).) That portion of the judgment denying the motion to stay proceedings is not appealable (Code Civ.Proc. § 1294), but is reviewable on appeal from the judgment denying arbitration. (Code Civ.Proc. § 1294.2; Berman v. Renart Sportswear Corp., 222 Cal.App.2d 385, 387–388, 35 Cal.Rptr. 218 [1963].)

2.  In the body of their complaint, plaintiffs also seek ‘reasonable attorney's fees.’ However, such damages are not sought in their prayers for relief.

3.  One of the plaintiffs was the executrix of the estate of a deceased employee.

4.  Also named as a plaintiff was the Southern California Operating Engineers Benefits Administration, Inc., a corporation. The presence of such plaintiff in the action is immaterial for the purpose of this appeal.

5.  Code Civ.Proc. § 1281.2 provides in part: ‘On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶](a) The right to compel arbitration has been waived by the petitioner; or [¶] (b) Grounds exist for the revocation of the agreement. [¶] If the court determines that a written agreement to arbitrate a controversy exists, an order to arbitrate such controversy may not be refused on the ground that the petitioner's contentions lack substantive merit. . . .’

6.  In Doyle, it was held that a parent has authority to bind his minor child to arbitrate claims arising under a health care contract signed by the parent and of which the child is a beneficiary. In Berman, persons who were not signatories to a written arbitration agreement nevertheless were bound thereby because each had acted as an agent of a signatory in entering into a transaction which was arbitrable under the terms of the agreement. In Retail Clerks Union, Holayter and Paud, the court applied the principle of federal law that where there is a substantial similarity of operation and continuity of identity of a business enterprise before and after a change in ownership, a collective bargaining agreement containing an arbitration provision entered into by the successor-employer is binding on the successor-employer. In Ware and in Frame, an employer was entitled to enforce against its employee an arbitration agreement contained in an application for employment signed by the employee alone, because the application was an ‘indispensable part of the arrangements by which respondent was employed by appellant. In Gear, a real estate salesman, by signing a pledge to adhere to the bylaws of a real estate association, became bound by a provision for arbitration contained in such bylaws. In Mencher, each of the members of an association of manufacturers was bound by an arbitration clause in a collective bargaining agreement signed by the association, because the bargaining agreement expressly provided that it applied to and bound the parties thereto and their respective members.

DUNN, Asociate Justice.