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Because the arbitration record was "devoid of sufficient evidence" to establish an "identicality of issues," a federal court Massachusetts refused to give collateral estoppel effect to an arbitration award.
In O'Connell v. Federal Insurance Co., No. 06-10741-RWZ, 2007 WL 923406 (D. Mass. Mar. 27, 2007), O'Connell was injured in a car accident while riding in a friend's vehicle. Her friend's insurance policy limited O'Connell's recovery to $25,000; however, the driver of the other vehicle owned an insurance policy providing for $500,000 in underinsured motorist coverage through Federal Insurance.
O'Connell invited all parties to join in arbitration, but Federal refused to participate. The arbitrator awarded O'Connell just over $28,000. Federal agreed to pay only the difference between the amount awarded and the $25,000 paid by the primary insurance company. O'Connell sued Federal for over $25,000 in damages; Federal sought a ruling from the Court capping its liability at just over $3,000.
Federal argued that the arbitration award had an "issue preclusion" (collateral estoppel) effect, which prevents relitigation of an issue already decided. Although pointing out that the doctrine of issue preclusion may apply to arbitration proceedings, the Court noted that application of this doctrine is often problematic because "arbitrators are not required to provide an explanation for their decisions."
In this instance, the record did not provide the Court with sufficient information to determine if the issues were identical and whether O'Connell had a "full and fair opportunity" to litigate the question at the arbitration hearing. Essentially, the Court could not determine if the arbitrator's award or the O'Connell claim was affected by the limits to the primary insurance policy. Therefore, the Court ordered the case to proceed to trial.
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