Saturday, May 31, 2008

20-Day SOL for Commencing Special Proceeding to Stay UM Arbitration Held Not Applicable to Question of Whether Claimant Qualifies as "Insured"

Matter of Interboro Ins. Co. v. Maragh
(2nd Dept., decided 5/27/2008)

In what sometimes is called the shortest SOL in New York, CPLR § 7503(c) provides that a UM insurer which fails to commence a special proceeding to stay arbitration within 20 days after being served with a notice of intention or demand to arbitrate is generally precluded from objecting to the arbitration thereafter. The New York courts have held that an otherwise untimely petition to stay arbitration may be entertained, however, when its basis is that the parties never agreed to arbitrate the dispute in the first place or that a condition precedent to arbitration has not been met.

In this case, Interboro Insurance Company, which had comenced this special proceeding more than 20 days after being served with a demand to arbitrate, contended that the claimaint did not qualify as an "insured" under the UM provisions of the policy because he did not reside with the named insured, his mother, at the time of his accident.

In REVERSING the lower court's dismissal of the petition as untimely and remitting the matter back to Supreme Court for a hearing on the claimant's residency issue, the Second Department held:
In this case, Interboro raised a factual issue through sworn statements of Chouquette, its named insured, who denied that Maragh, her son, was a resident of her household at the time of the accident. * * * The provision of the subject policy for uninsured motorists coverage defines an "insured" as the named insured or any "family member," the latter being defined as "a person related to [a named insured] by blood . . . who is a resident of [the named insured's] household." Resolution of the factual issue as to whether Maragh was an insured under the subject policy is a condition precedent to arbitration (citations omitted). Further, if Maragh was not an insured under the subject policy, then no agreement to arbitrate existed between him and Interboro, and the 20-day time limit set forth in CPLR 7503(c) is inapplicable[.]

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