Wednesday, July 2, 2008

2 ( Special Proceedings) + 2 (UM Arbitrations) = Almost 8 (Years)

Montoya v. Lumbermens Mut. Cas. Co./Kemper Ins. Co.
(Sup. Ct., Queens Co., decided 6/23/2008)

This matter has more twists and turns than a Grand Prix racecourse. And it took a lot longer to conclude, as well.

Montoya and Perez were passengers in a vehicle insured by Lumbermens/Kemper, which was involved in a January 2001 accident with an uninsured motor vehicle. As a result of the accident, petitioners allegedly sustained personal injuries and demanded arbitration of their UM (uninsured motorist) coverage claim against Kemper.

Special Proceeding # 1 -- Kemper commenced a special proceeding to stay that UM arbitration in 2002. After a framed hearing in April, 2004, Queens Supreme denied Kemper's petition for a stay and directed the parties to proceed with the UM arbitration.

Arbitration Hearing # 1 -- The arbitration was held in April 2005, and the arbitrator found that Montoya and Perez had "failed to establish a prima facie case of negligence against the operator of an uninsured motor vehicle", dismissing their claims against Kemper.

Special Proceeding # 2 -- In October 2005, Montoya and Perez then brought this special proceeding by order to show cause to vacate the arbitrator's award, contending that the arbitrator's finding of no liability was inconsistent with the parties' concession of liability. Kemper did not oppose that order to show cause, and the court granted the petitioners' motion to vacate the arbitration award. By order and judgment dated July 2006, the court vacated the arbitration award of April 2005 and directed American Arbitration Association to schedule a new arbitration before a new arbitrator.

Kemper then moved to vacate the July 2006 order and judgment, arguing that it had a reasonable excuse for not opposing the petitioner's order to show cause, and a meritorious defense to their arbitration demand. Kemper contended that its prior counsel's lack of permission to enter into an agreement conceding liability, which it first learned of after the order to show cause was granted, constituted a reasonable excuse for its default. In addition, Kemper claimed that the arbitrator's finding that petitioners "failed to establish a prima facie case of negligence against the operator of an uninsured motor vehicle" constituted a meritorious defense to their UM claim and arbitration demand.

In denying Kemper's motion to vacate the July 2006 order and judgment directing that a second UM arbitration be scheduled and conducted, Queens County Supreme Court Justice Jaime Rios held:
Pursuant to CPLR 5015: Relief from judgment or order

(a) On motion. The court which rendered a judgment or order may relieve a party from it upon such terms as may be just, on motion of any interested person with such notice as the court may direct, upon the ground of: 1. excusable default, if such motion is made within one year after service of a copy of the judgment or order with written notice of its entry upon the moving party, or, if the moving party has entered the judgment or order, within one year after such entry.

It is well settled that to vacate an order entered upon default, the moving party is obligated to establish both a reasonable excuse for the default and the existence of a meritorious cause of action (citations omitted). The determination of what constitutes a reasonable excuse lies within the court's discretion (citation omitted).

Here, Kemper's excuse that it first learned about its prior counsel's agreement to concede liability and the underlying order to show cause to vacate the arbitration award upon receipt of the court's order, is devoid of any detail. The date and circumstances of its alleged receipt of the July 31, 2006 order is unspecified. Despite the passage of almost two years, Kemper fails to explain its delay in making this motion. Moreover, there is no affidavit of merit from the attorney who allegedly exceeded his authority in support of the motion.
Seven and a half years later, the matter is heading back for Arbitration Hearing # 2.

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