By: Thomas Paschos, Esq.
Thomas Paschos & Associates, P.C.
Haddonfield, New Jersey
In Armstrong World Industries Inc. v. Travelers Indemnity Co. et al., 2015 PA Super 109; 2015 Pa. Super. LEXIS 244 (May 6, 2015), the case was initiated by Travelers' denial of insurance coverage for environmental damage allegedly caused by the release of polychlorinated biphenyls (PCBs) to the site of Armstrong's manufacturing facility in Macon, Georgia (Macon Site). In denying coverage, Travelers reasoned that Armstrong had released the environmental claim at issue under a settlement agreement executed by the parties on May 20, 1998.
In June 2012, Armstrong filed suit against Travelers, alleging breach of contract and bad faith. Travelers filed preliminary objections to the complaint in August 2012, arguing that the underlying dispute is governed by the alternative dispute resolution provision of the settlement agreement. Travelers averred that under the plain language of the settlement agreement, the parties were required to submit the dispute at issue to the alternative dispute resolution process laid out in the settlement agreement. The settlement agreement incorporated alternative dispute resolution procedures from a 1985 agreement over asbestos claims.
Armstrong filed an answer and new matter alleging the environmental claim at issue was not subject to the settlement agreement. The trial court overruled Travelers' preliminary objections. Travelers appealed to the Superior Court, arguing that it had jurisdiction over the appeal through Rule 311 and the Uniform Arbitration Act.
Travelers claimed that, under Rule 311(a)(8), the order is appealable by Sections 7320(a)(1) and 7342(a) of the Uniform Arbitration Act. Section 7320(a)(1) of the Act provides that "[a]n appeal may be taken from . . . [a] court order denying an application to compel arbitration made under section 7304 (relating to proceedings to compel or stay arbitration)." Section 7342(a), relating to common law arbitration, provides that Section 7320(a) of the Act, except subsection (a)(4), is applicable also to common law arbitration. In support of their claim, Travelers relied on arbitration cases where the Superior Court held that appellate review of a trial court's order denying a motion to compel arbitration is permissible under Rule 311(a)(8). Travelers cited Midomo Co., Inc. v. Presbyterian Hous. Dev. Co., 1999 PA Super 233, 739 A.2d 180, 184 (Pa. Super. 1999) which held that ‘[w]hile an order denying preliminary objections is generally not appealable, there exists a narrow exception to this oft-stated rule for cases in which the appeal is taken from an order denying a petition to compel arbitration."
The Superior Court disagreed. The court provided “[t]o render an order overruling preliminary objections seeking to compel arbitration appealable under the act, a party must prove that the dispute is bound by an arbitration agreement, which calls for either statutory or common-law arbitration." The court said the instant case was distinguishable from Midomo because the settlement agreement contained an ADR provision. The court agreed with Armstrong that ADR is not synonymous with arbitration. The court held that the statute allowing appeal of orders on the application of arbitration provisions does not govern all ADR. As such, the Superior Court held that an order over the application of an alternative dispute resolution provision is not immediately appealable as of right.
The Court held that while a litigant may immediately appeal an order denying a request to compel arbitration, a litigant may not immediately appeal, as of right, an order refusing to compel other types of ADR such as mediation and negotiation. Since the settlement agreement in this case broadly provided for a range of ADR options, the appeal was quashed.
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