Sunday, May 18, 2008

No Do-Overs in Intercompany Arbitration

Matter of Progressive N. Ins. Co. v. Sentry Ins. A Mut. Co.
(2nd Dept., decided 5/13/2008)

Progressive paid no-fault benefits to its insured for injuries she sustained in a motor vehicle accident with Sentry's insured, and then commenced an intercompany arbitration proceeding against Sentry, seeking reimbursement under the priority-of-payment section of Regulation 68 (11 NYCRR § 65-3.12[b]; 65-4.11). In that first arbitration proceeding, the arbitrator ruled against Progressive and denied reimbursement.

Progressive commenced a second intercompany arbitration proceeding against Sentry, this time asserting a loss-transfer claim under Insurance Law § 5105. Sentry argued that Progressive was barred by res judicata from re-arbitrating its reimbursement claim, and the arbitrator agreed, denying Progressive's loss-transfer claim on that basis.

Progressive then commenced this CPLR article 75 special proceeding to vacate the second arbitration decision. In AFFIRMING the lower court's denial of Progressive's petition, the Second Department held that the arbitrator did not exceed its authority by rendering an award in favor of Sentry:

[I]t is clear that the instant claim made by Progressive arose out of the same transaction as the prior claim that was denied in the prior arbitration (citations omitted). While Progressive now alleges different facts regarding how the accident occurred, and a different theory upon which reimbursement is sought, the instant arbitration and the instant claim involve the same accident and the same parties, while Progressive seeks reimbursement of the same payments, albeit on a different legal theory (citations omitted).

Based on res judicata, the denial of Progressive's petition to vacate the second arbitration decision was upheld.

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