New Jersey auto policies generally contain a clause that decisions rendered in uninsured motorist arbitrations will be binding on the insurer, unless they exceed a certain amount.   New Jersey’s Appellate Division has now clarified, in a published opinion, under what circumstances an insurer may reject an arbitration award.  In Badiali v. N.J. Manufacturers Ins. Group, New Jersey Manufacturers Insurance Group (NJM) rejected an arbitration award in favor of plaintiff in the amount of $29,148.62.  Under the specific language of NJM’s UM policy, it was permitted to reject an arbitration award that was more than $15,000.  However, because another insurer was also providing coverage for the claim, NJM was only obligated to pay half of the total award.  Both the trial court and the Appellate Division in the underlying matter (Badiali I) held that NJM was bound by the award and was therefore precluded from requesting a trial de novo in the matter because its share was within the $15,000 limits.

After a long appellate process, the Appellate Division issued this opinion in order to clarify “dueling unpublished opinions” and formally held that in both UIM and UM cases, if the amount an insurer is obligated to pay on an arbitration award is less than what is specified in the policy’s language, the insurer has no grounds to reject the arbitration award.  Whether or not the total award exceeds the limits is irrelevant, as is any liability finds.  If the amount that the insurer is actually required to pay is within the stated amount, then the arbitration award is binding.

Thanks to Christina Emerson for her contribution to this post.