COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 61075 CINCINNATI INSURANCE CO. : : : PLAINTIFF-APPELLANT : JOURNAL ENTRY : v. : AND : JEFFREY APISDORF : OPINION : : DEFENDANT-APPELLEE : DATE OF ANNOUNCEMENT OF DECISION: NOVEMBER 12, 1992 CHARACTER OF PROCEEDING: Civil appeal from Common Pleas Court, No. CP-185814. JUDGMENT: AFFIRMED. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-Appellant: James J. Dyson, Esq. 29001 Cedar Road Lyndhurst, OH 44124 For Defendant-Appellee: Michael R. Bencivenni, Esq. 1460 Illuminating Building Cleveland, OH 44113 -2- DAVID T. MATIA, C.J.: Plaintiff-appellant Cincinnati Insurance Co. appeals from the judgment of the trial court which granted defendant- appellee's motion to dismiss appellant's complaint for declaratory judgment. Appellant Insurance Co. argues that the trial court abused its discretion by dismissing its complaint and in determining that an arbitration clause was unconscionable and therefore void. On review, based on the reasons adduced below, we find no error and therefore affirm the judgment of the trial court. STATEMENT OF THE CASE The facts in this case are not in dispute. On March 25, 1988, defendant-appellee Jeffrey Apisdorf was involved in an accident with an uninsured motorist. Appellee Apisdorf was insured by plaintiff-appellant, Cincinnati Insurance Co. Pursuant to that insurance policy, the uninsured motorist claim was arbitrated. On December 15, 1989, two of the three panel arbitrators found in favor of appellee in the amount of Forty- Seven Thousand Dollars ($47,000.00). Pursuant to a dispute between appellee Apisdorf and appellant Cincinnati Insurance Co. in regards to the arbitration award, on March 5, 1990, appellant Cincinnati Insurance Co. filed a complaint for declaratory judgment in the Court of Common Pleas. Appellant asked the court to make a judicial determination that pursuant to a clause in the insurance policy a jury had the right to declare the reasonable value of appellee's damages. -3- Appellee Apisdorf filed an answer to appellant's amended complaint and then filed a motion to dismiss the complaint. Appellant filed a brief in opposition to the motion, alleging that appellee's motion to dismiss was improper because the motion was filed subsequent to appellee's answer. Appellee Apisdorf then filed papers requesting the court to convert his motion to dismiss into a motion for judgment on the pleading. Finally, appellee filed a motion for summary judgment. On November 13, 1990, the court heard the arguments of counsel. On December 11, 1990, the court granted appellee's motion to dismiss and found the arbitration clause void and unconscionable. Appellant Cincinnati Insurance now timely appeals the court's judgment. Appellant's Assignments of Error I and II relate to similar issues of law and fact and therefore will be discussed concurrently. ASSIGNMENTS OF ERROR I. THE TRIAL COURT ERRED AND ABUSED ITS DISCRETION IN GRANTING DEFENDANT-APPELLEE'S MOTION TO DISMISS WHERE THE PLAINTIFF- APPELLANT'S COMPLAINT FOR DECLARATORY JUDGMENT WAS LEGALLY SUFFICIENT AND PLEADED OPERATIVE GROUNDS CREATING A CLAIM. II. THE TRIAL COURT ERRED AND ABUSED ITS DISCRETION IN DETERMINING THAT AN ARBITRATION CLAUSE THAT ALLOWED EITHER PARTY TO APPEAL DE NOVO IN THE EVENT THE ARBITRATION AWARD EXCEEDED THE MINIMUM LIMIT FOR BODILY INJURY SPECIFIED BY THE FINANCIAL RESPONSIBILITY LAW OF -4- OHIO WAS UNCONSCIONABLE, VOID, AND COULD NOT BE ENFORCED BY EITHER PARTY. Appellant Insurance Co. argues in Assignments of Error I and II that the trial court erred and abused its discretion. Specifically, appellant argues that its complaint for declaratory judgment was legally sufficient because an arbitration clause in the insurance policy was not unconscionable or void. These assignments of error are not well taken. ISSUE: WHETHER THE ARBITRATION CLAUSE IS UNCONSCIONABLE, VOID AND CONTRARY TO PUBLIC POLICY The trial court dismissed appellant Cincinnati Insurance Co.'s complaint for declaratory judgment pursuant to appellee Apisdorf's motion to dismiss for failure to state a claim upon which relief could be granted. Additionally, the trial court rendered an opinion in which it held that the arbitration provision in the insurance policy was unconscionable, unreasonable, void and contrary to the state's public policy in favor of binding arbitration. We are inclined to agree with the trial court and therefore affirm its judgment. A. THE ARBITRATION PROVISION The relevant portion of the policy provides as follows: If we and a covered person does not agree: 1. Whether that person is legally entitled to recover damages under this part; or 2. As to the amount of damages; -5- Either party may make a written demand for arbitration. In this event, each party will select an arbitrator. The two arbitrators will select a third. If they cannot agree within 30 days, either party may request that selection be made by a judge of a court having jurisdiction. Each party will: 1. Pay the expense it incurs; and 2. Bear the expense of the third arbitrator equally. Unless both parties agree otherwise, arbitration will take place in the county in which the covered person lives. Local rules of law as to procedure and evidence will apply. A decision agreed to by two of the arbitrators will be binding as to: 1. Whether the covered personal is legally entitled to recover damages; and, 2. The amount of damages. This applies only if the amount does not exceed the minimum limit for bodily injury liability specified by the financial responsibility law of the state in which your covered auto is principally garaged. If the amount exceeds that limit, either party may demand the right to a trial. (Emphasis added.) Our state court in National Mutual Ins. Co. v. Marsh (1984), 15 Ohio St.3d 107, (Sweeney, J., concurring), stated that such provisions in an arbitration clause contravene public policy. Although Judge Sweeney's concurring opinion was not incorporated into the majority's holding, and is merely dicta, the reasonableness of such a provision has been addressed by several Ohio appellate courts, with the appellate courts going both ways, -6- some upholding the provision, e.g. Motorist Mutual Insurance Co. v. Badr Said (1987), Cuyahoga App. No. 52700, unreported; Roen v. State Farm Mutual Insurance Co. (1989), Portage App. No. 1988, unreported; Preferred Mutual Insurance Co. v. Robert Olgin (1992), Cuyahoga App. No. 62274, and others declaring the provision to be void, e.g. Trupp v. State Farm Mutual Automobile Insurance Co. (1988), Montgomery App. No. 11129, unreported, and Wagle v. J. C. Penney Casualty Ins. Co. (1989), Clark App. No. 2518, unreported. In National Mutual Ins. Co., Justice Sweeney, with Justices Brown and Celebrezze joining in the concurring opinion, reasoned that such an insurance provision is unconscionable and contrary to Ohio's strong public policy favoring final and binding dispute resolution. Justice Sweeney wrote in regards to the applicability of a similar clause. The effect of Endorsement 1604 is to create binding arbitration for awards below the $12,500/$25,000 statutory coverage minimums and to create non-binding arbitration for awards in excess of those minimums. Nationwide asserts that the foregoing arbitration agreement is entirely fair because both the insured and Nationwide have the right to avoid an arbitration award in excess of $12,500/$25,000. This "facial equality" is not a true equality, however, because both parties are bound only by low awards, which are likely to be in Nationwide's favor. High awards can be avoided by either the insured or Nationwide, but it is unlikely that an insured would ever seek to avoid a high award, even if he was unsatisfied with it, because by avoiding the award and seeking a trial the insured would incur additional legal expense while also -7- placing at risk the entire award that he already has received. Thus, the real impact and effect of Endorsement 1604 is to give Nationwide the power to avoid high arbitration awards, regardless of whether those awards are fair and just. It would appear, therefore, that Endorsement 1604 makes known to insureds or claimants that Nationwide has "a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration." Nationwide at 111. Although the majority failed to address the issue, Judge Sweeney pointed out that the issue was properly before the court as raised on cross-appeal by the appellees. Judge Sweeney opined that although the majority "declines to address "[c]ertain other propositions of law" presented by this appeal. I strongly believe, however, that one of these is, in fact, the central issue before us in this case; ***." In Trupp, the district appellate court subsequently followed Justice Sweeney's opinion. The Trupp court found that [such] provision is unconscionable because, situations in which the insured's realistic expectation is an award in excess of the financial responsibility law limits, but the insurer's realistic expectation is an award below these limits, a victory for the insurer will be conclusive, but a victory for the insured will be subject to an appeal de novo. Trupp, at 1-2; see also, Wagle v. J. C. Penny Casualty Insurance Co. (1989), Clark App. No. 2518, unreported. (Such an outcome is so one-sided in favor of the insurer that it is evident that the -8- terms and conditions of such agreement were not the result of equal bargaining power.) Our court, however, in Motorists Mutual Insurance Co. found to the contrary. The Motorists court reasoned: Moreover, the arbitration clause is not unconscionable. Either party can seek a trial when the arbitrator's award exceeds the minimum limit under the financial responsibility law. A dissatisfied insured might well avoid such an award to obtain a greater sum. The insured would not need to re-prove the insurer's liability in such a trial, because the contract makes the arbitrator's decision final for that issue. Cf. Nationwide Mut. Ins. Co. v. Marsh (1984), 15 Ohio St. 3d 107, 110 (Sweeney, J., concurring). Because both parties can benefit from the non-binding effect of an arbitration decision, that aspect of the arbitration clause is not one-sided or unfair. Although the Motorist Mutual opinion cites to Nationwide, it is difficult to perceive how that court deduced from that opinion that the arbitration clause was not one sided or unfair simply because both sides could appeal the over limit award. Similarly, our court recently in Preferred Mutual Insurance Co. v. Robert Olgin, again found the arbitration clause to be clear, unambiguous, and not so offensive as to be unconscionable. The court found "[t]his clause merely serves to make binding an arbitration panel's award in the smaller insurance claim cases, while allowing litigants in more serious cases to take full advantage of the judicial system." We find that this result like the Motorist Mutual decision fails to consider the concern that the litigant in the small claim may likewise desire his day in -9- court. For that reason, today, our court is persuaded to overrule that line of reasoning found in Motorist Mutual and Preferred Mutual. We find a more reasonable conclusion is that both sides should be allowed to appeal arbitration awards above and below the state's required financial responsibility law limits. This conclusion resolves the unequal bargaining position or "facial equality" that so concerned Justice Sweeney in Nationwide. By allowing appeal de novo from both high and low awards, an insured is able possibly to avoid a low award, just as an insurer can possibly avoid a high award. This in essence equalizes the bargaining positions. B. BINDING ARBITRATION More significantly, however, is the issue of binding arbitration. Ordinarily, agreements to arbitrate contemplate a final and binding decision, subject to vacation or modification only for the reasons stated in R.C. 2711.10 and 2711.11. Ohio Council F, AFSCME v. Ohio Dept. of Mental Health (1984), 9 Ohio St.3d 139, 143; Huffman v. Valletto (1984), 15 Ohio App.3d 61, 63; State, ex rel. Internatl. Union of Operating Engineers v. Simmons (1991), 58 Ohio St.3d 247. In Internatl. Union of Operating Engineers, the state court reasoned: Local 18 concedes that the arbitrator's decision was not procured by corruption or fraud, but even if the arbitrator's award were factually or legally incorrect, it was binding unless modified, corrected or vacated as provided by statute. R.C. 2711.10, 2711.11 and 2711.13. -10- The Court of Appeals for Cuyahoga County analyzed the applicable statutes correctly in Huffman v. Valleto (1984), 15 Ohio App. 3d 61, 63, 15 OBR 90, 92, 472 N.E. 2d 740, 743, holding: "That result may seem inequitable, but any different result would destroy the integrity of binding arbitration. When disputing parties agree to submit their controversy to binding arbitration, they agree to accept the result, even if it is legally or factually wrong. *** If the parties could challenge an arbitration decision on the ground that the arbitrators erroneously decided legal or factual issues, no arbitration would be binding. Binding arbitration precludes judicial review unless the arbitrators were corrupt or committed gross procedural improprieties. R.C. 2711.10." (Citations omitted.) The syllabus in Hillsboro v. Fraternal Order of Police, Ohio Labor Council, Inc. (1990), 52 Ohio St. 3d 174, 556 N.E. 2d 1186, states: "When a provision in a collective bargaining agreement is subject to more than one reasonable interpretation and the parties to the contract have agreed to submit their contract interpretation disputes to final and binding arbitration, the arbitrator's interpretation of the contract, and not the interpretation of the reviewing court, governs the rights of the parties thereto. ***" Internatl. Union of Operating Engineers, at 248, 249; Sandora v. State Farm Mutual Auto Insurance Co. (1991), Cuyahoga App. No. 60337. This line of reasoning establishes that public policy and concerns of judicial economy mandates the court's enforceability of binding arbitration. It is well established, however, that -11- parties to a contract can agree not to be bound by the arbitrator's decision. See, e.g., AFSCME v. Dept. of Mental Health (1984), 9 Ohio St.3d 139. It is also well established, however, that parties to a contract should be in equal bargaining positions. When an insured contracts for liability coverage up to an expected amount of $100,000 as appellee Apisdorf did herein, he does not expect an arbitration award of $47,000 to be automatically appealed by the insurer because it exceeds the minimum liability amount. Given the presumed validity of an arbitrator's award, a reviewing court's inquiry into whether the arbitrator exceeded his authority, within the meaning of R.C. 2711.10 is limited. Findlay City School Dist. Bd. of Edn. v. Findlay Edn. Assn., (1990), 49 Ohio St.3d 129. In conclusion, we hold that the trial court made no error in its determination that the arbitration provision in appellant Cincinnati Insurance Co.'s policy is unconscionable and therefore void and contrary to the state's public policy in favor of binding arbitration. We further find that the unconscionability in the clause could be corrected by the provision stating that either party could appeal de novo an award below $12,500.00 or exceeding $12,500.00, thus equalizing the bargaining positions. Finally, the trial court properly granted appellee's motion to dismiss pursuant to Civ. R. 12(H) and the reasons adduced above. Accordingly, the trial court's judgment is affirmed. -12- It is ordered that appellee recover of appellant its costs herein taxed. The court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions. JOHN F. CORRIGAN, J., CONCURS; FRANCIS E. SWEENEY, J., DISSENTS. DAVID T. MATIA CHIEF JUSTICE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof this document will be stamped to indicate journalization, at which time it will become the judgment and order of the court and time period for review will begin to run. .