Court refuses to sanction insurer that filed frivolous defense against mandatory arbitration

Joseph Nickola assumed the role of plaintiff in his parents' no fault underinsured motorist action against MIC General.  The parents had been injured by a driver who had only $20,000.00 in liability coverage.  With MIC's consent, they settled the liability claim and then sought Underinsured Motorist Coverage (UIM) from their own company--a coverage they had paid for.  MIC not only denied responsibility, it claimed that the Nickola family could not demand arbitration--even though the policy language plainly allowed either party to demand it.

The Nickolas both died while the dispute was pending, in large measure because after the Court ordered arbitration, the parties could not agree on a third, neutral arbitrator, and ultimately six years elapsed.  When it occurred, the arbitrator awarded Mr. Nickola the full amount of his UIM coverage, $80,000.00 and Mrs. Nickola $33,000.00.  Their Personal Representative then sought sanctions against MIC for its frivolous denial of the right to arbitration.  The Court held that because the family did not adequately, timely,  and precisely document the expenses it incurred because of MIC's original denial of the right to arbitration, the family could not collect any sanctions for the frivolous defense.