2015 Opinion No. 30
Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada County. Hon. Lynn G. Norton, District Judge.
District court's order confirming the arbitration award on underinsured motorist policy, affirmed.
Elam & Burke, Boise, and Johnson Law Group, Spokane, WA for appellant. Jeffrey A. Thomson argued.
Runft & Steele Law, Boise, for respondent Jon M. Steele argued.
BURDICK, Chief Justice
This appeal arose from an arbitration decision regarding Peggy Cedillo's underinsured motorist insurance policy with Farmers Insurance Company of Idaho ("Farmers") and damages for injuries she suffered in a motorcycle accident. After the arbitrator issued his final award, Farmers provided the arbitrator evidence that Farmers had already paid Cedillo the total amount of remaining damages. The arbitrator adjusted the award by subtracting Farmers' payment from the prejudgment interest Farmers owed Cedillo. The Ada County district court confirmed the arbitrator's amended award and awarded Cedillo attorney fees. On appeal, Farmers argues the district court should have modified the award because the arbitrator miscalculated prejudgment interest by applying Farmers' payment to the interest award. Farmers also argues on numerous grounds that Cedillo was not entitled to attorney fees in the district court. We affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
On May 25, 2008, Peggy Cedillo was injured while riding as a passenger on Jon Steele's motorcycle. The motorcycle drifted to the right and hit a concrete barrier. Cedillo later married Steele.
Cedillo had an insurance policy with Farmers. That insurance contract obligated Farmers to compensate Cedillo for damages from an underinsured motorist ("UIM"). Steele had his own insurance with $100, 000 in bodily injury coverage and $5, 000 in medical payment coverage. On July 28, 2009, Cedillo sent Farmers a letter stating that she had settled her claim against Steele for his policy limits. Her letter then demanded her policy limits of $500, 000 and asked that the claim be resolved in 30 days. On August 25, 2009, Farmers sent Cedillo a check for $25, 000 with a letter that stated the check was Farmers' valuation of her UIM claim.
The matter went to binding arbitration under Cedillo's policy's requirement to arbitrate. Cedillo and Steele signed a contingent fee agreement on November 11, 2011. On March 1, 2012, Steele provided a notice of conflict disclosure to Farmers and the arbitrator. Arbitration began on November 20, 2012, and the parties completed the evidentiary portion the next day. The parties submitted written closing arguments and responses. Steele represented Cedillo in the arbitration.
The arbitrator issued an interim award on January 16, 2013. That award determined Cedillo suffered $121, 700 in medical expenses and $135, 000 in lost income, which equaled $256, 700 in economic damages. The arbitrator also awarded $150, 000 in non-economic damages. This made the total award $406, 700 without any adjustments. The parties had stipulated that after the arbitrator issued the interim award, he would determine any adjustments "for prejudgment interest, set offs or collateral sources and subrogation issues . . . ." The arbitrator was to include these adjustments in his final award.
The arbitrator considered the parties' proposed adjustments and issued the final award on April 29, 2013. That award reduced the interim award by (1) $105, 000 that Steele's insurance already paid to Cedillo; (2) $180, 000 for Farmers' $25, 000 payment on August 25, 2009, and $155, 000 payment on October 18, 2012; and (3) $21, 367 for a pre-existing condition, an unsupported medical expense, and contractual adjustments. After these reductions, the adjusted interim award was $100, 333.
The arbitrator also awarded prejudgment interest. The arbitrator determined that prejudgment interest began accruing on August 25, 2009, because on that date Farmers had sufficient information to investigate and determine its liability in a fair and accurate manner. The arbitrator calculated prejudgment interest by applying the statutory interest rate of 12% to the initial amount of $255, 784. The arbitrator calculated the initial amount by reducing the interim award by $21, 367 for contractual and other minor adjustments and by $25, 000 for Farmers' payment on August 25, 2009. The arbitrator calculated interest on the initial amount from August 25, 2009, to October 18, 2012. Because Farmers paid Cedillo a $155, 000 UIM payment on October 18, 2012, the arbitrator calculated the remaining prejudgment interest at 12% of $100, 784 for October 18, 2012, to April 30, 2013. The arbitrator added these interest amounts together, which brought the final award's total prejudgment interest amount to $103, 135.
Cedillo then filed a petition to confirm the arbitration award in the Ada County district court. That petition was also for the award of attorney fees. On May 20, 2013, Farmers filed with the arbitrator a motion to reconsider the prejudgment interest award accompanied by evidence that Farmers paid Cedillo $100, 333 on March 25, 2013. Farmers argued that the arbitrator should adjust the prejudgment interest to account for the fact Farmers paid Cedillo $100, 333 before the arbitrator issued the final award. Farmers also argued that the arbitrator should recalculate the prejudgment interest on medical expenses, lost income, and general damages because Farmers could not mathematically calculate those amounts before the arbitrator issued his final award.
The arbitrator denied the motion on July 24, 2013, issuing the amended final award and a final order explaining his decision. The amended final award was $101, 948. The arbitrator noted that on March 25, 2013, Farmers owed Cedillo the adjusted interim award and the outstanding prejudgment interest. He then took into account Farmers' March 25, 2013 payment of $100, 333 and stated, "The payment was applied to the accrued prejudgment interest of $103, 135, leaving unpaid the award of $100, 33 plus accrued interest of $2, 80." The arbitrator then gave Farmers credit for 36 days of interest for paying in March. The arbitrator noted that prejudgment interest continued to accrue on the unpaid $100, 333 adjusted interim award after March 25, 2013.
The arbitrator explained that he could recalculate the award to include Farmers' March 2013 payment,  but had to deny the parts of Farmers' arguments that were based on a legal argument about how to apply prejudgment interest. He held controlling law mandated that he calculate prejudgment interest on the entire final award from the date that the insurer had sufficient information to investigate and determine liability. He determined that even if this decision was erroneous, he had no authority to correct the error because it was not a math error.
Farmers filed a second motion to reconsider and motion to modify on July 30, 2013. Farmers argued its March 2013 payment paid off the damage award, so there was no prejudgment interest award upon which to apply the payment. The arbitrator denied this motion on August 21, 2013. He held that the law entitled Cedillo to prejudgment interest regardless of whether the payment was applied to principal or interest. The arbitrator also found Farmers' request to apply the payment to principal instead of interest was not something he could modify under Idaho Code section 7-913.
On August 16, 2013, Cedillo filed an amended petition to confirm the arbitration award in the Ada County district court. This included an amended motion for the award of attorney fees. Farmers paid $101, 948 to Cedillo on September 11, 2013. Cedillo applied $7, 223 to outstanding prejudgment interest and $94, 725 to the adjusted interim award. On September 18, 2013, Farmers filed a motion for modification and/or correction of the arbitration award and a motion to disallow costs and attorney fees.
The district court confirmed the arbitrator's amended final award on November 14, 2013. The court held that it lacked authority to modify the arbitrator's prejudgment interest award because all of Cedillo's alleged errors were legal, which is not a ground to modify an arbitrator's award under Idaho Code sections 7-912 or 7-913. The district court also awarded Cedillo $121, 007 in attorney fees, holding that Cedillo's fee request was not based on an illegal contract, that the attorney fee agreement did not preclude an award, and that Cedillo was entitled to fees for the payments Farmers made after she agreed to her contingency fee contract with Steele. The district court's judgment on December 11, 2013, also awarded Cedillo $5, 608 for Farmers' unpaid balance on the adjusted interim award and prejudgment interest of $132. Farmers timely appealed.
II. STANDARD OF REVIEW
Judicial review of an arbitrator's decision is limited to examining the award to determine whether any of the grounds for relief in Idaho Code sections 7-912 and 7-913 are present. Cranney v. Mut. of Enumclaw Ins. Co., 145 Idaho 6, 8, 175 P.3d 168, 170 (2007). An arbitrator's rulings as to questions of law and fact are binding unless one of those statutory grounds for relief applies. Id. Even where a reviewing court considers some of the arbitrator's rulings on questions of law to be error, the arbitrator's decision is nevertheless binding on the reviewing court. Deelstra v. Hagler, 145 Idaho 922, 924, 188 P.3d 864, 866 (2008). When we review a district court's decision to confirm an arbitration award, this Court uses the same standard of review as the district court. Carroll v. MBNA Am. Bank, 148 Idaho 261, 264, 220 P.3d 1080, 1083 (2009).
Farmers appeals from the district court's confirmation of the arbitrator's amended final award and the court's award of attorney fees, arguing ...