Fisher v. USAA Cas. Ins. Co. – 8/7/2018

August 20, 2018

Arizona Court of Appeals Division One holds that a party who has reason to know of an arbitrator’s possible bias but fails to object during arbitration waives the objection.

A dispute between a motorist and her insurance company was submitted to arbitration.  Before the arbitration hearing, the motorist’s attorney warned her that the arbitrator had previously served as arbitrator for the law firm representing the insurance company and therefore might be biased.  The motorist chose to proceed with arbitration anyway.

The arbitrator awarded nothing to the motorist.  The motorist moved for reconsideration, citing bias.  The arbitrator did not rule on the motion.  The motorist then filed a motion in superior court to vacate the award, citing bias.  The court deemed the motorist’s objection waived.

The Court of Appeals affirmed that the motorist waived her objection.  Under Arizona law, a court may vacate an arbitration award if the arbitrator fails to disclose a relationship with a party or counsel and a party makes a “timely objection.”  A.R.S. § 12-3012(D).  The timely objection requirement means that a party who knows or has reason to know of an arbitrator’s possible bias must object during the arbitration.  To allow a party to withhold the objection until after an unfavorable award would defeat the purpose of arbitration—fast, cheap dispute resolution.

There may be an exception to waiver if the arbitrator fails to disclose a “known, direct and material interest in the outcome” or a “known, existing and substantial relationship with a party.”  In those cases, the arbitrator is presumed biased.  A.R.S. § 12-3012(E).  But that is not this case.

Presiding Judge Morse Jr. delivered the opinion; Judges Cattani and Winthrop joined.