The New Jersey Arbitration Act Does Not Require That Arbitration Proceedings Be Conducted in Person

State Farm Guaranty Ins. Co. v. Hereford Ins. Co., ___ N.J. Super. ___ (App. Div. 2018).  Following an auto accident, the two insurance company parties to this appeal had a dispute about the reimbursement of personal injury protection (“PIP”) benefits.  State Farm had paid PIP benefits to its insured and then sued Hereford for reimbursement.  State Farm demanded arbitration of the dispute.  State Farm had a contract with Arbitration Forums, Inc. (“AF”) to conduct PIP arbitrations, and State Farm’s motion sought to use AF to deal with this dispute.  Hereford did not object to AF or suggest another arbitrator, and the Law Division granted State Farm’s motion to compel arbitration through AF.

When that order was entered, AF was providing in-person arbitration hearings in New Jersey.  Thereafter,  however, AF switched to telephonic hearings.  Hereford, however, demanded an in-person arbitration hearing and eventually moved to compel such a hearing.  Hereford asserted that the New Jersey Uniform Arbitration Act, N.J.S.A. 2A:23B-1 to -32, required in-person hearings.  State Farm took no position.  The Law Division denied Hereford’s motion, concluding that the Act did not mandate in-person hearings, and that Hereford would not be deprived of due process by a telephonic proceeding.  Hereford appealed, and today the Appellate Division affirmed in an opinion by Judge Gilson.

This was a pure legal issue, so de novo review applied.  Judge Gilson observed that arbitrations are governed by statute and by the parties’ contracts.  The Act affords arbitrators broad discretion as to how to conduct an arbitration, stating that the arbitrator “may conduct an arbitration in such a manner as the arbitrator considers appropriate for a fair and expeditious disposition of the proceeding.”  Judge Gilson stated that the Act thus “does not specify that an arbitration hearing must be ‘in-person” and it does not define whether ‘in-person’ means at a physical location, telephonically, or otherwise.”  Accordingly, the panel rejected Hereford’s argument that the Act required an in-person arbitration proceeding.

Nor did any contract require in-person arbitration.  Thus, Judge Gilson said, “absent a contract or a specialized showing,” which Hereford did not make, telephonic hearings are permissible” under the Act.  A telephonic hearing would provide the parties with all the process that is due or would have been afforded in person.

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