Arbitration Award Vacated -- Court Holds that MVAIC Was Not Obligated to Investigate Whether Claimant Was a "Qualified Person" & Deny Coverage Until It Was Clear that Adverse Vehicle Was Uninsured

NO-FAULT – MVAIC – "QUALIFIED PERSON" – TIMELY DISCLAIMER
Matter of MVAIC v. NYC East-West Acupuncture, P.C.
(Sup. Ct., New York Co., decided 10/31/2008)

In this case, MVAIC successfully moved pursuant to CPLR § 7511 to vacate an arbitration award of no-fault benefits to the respondent acupuncture provider based on MVAIC's argument that it had wrongly been denied the chance to establish that the claimant-assignor had her own auto insurance and, therefore, was not a "qualified person" entitled to no-fault benefits from MVAIC.

The subject motor vehicle-pedestrian accident occurred on September 21, 2003, and the license plate of the motor vehicle was traced to a car insured by GEICO.  The claimant treated with the respondent provider, which initially submitted is bills to GEICO, which denied coverage based on its investigation indicating that its insured was not involved in the loss.  The claimant then completed and submitted a Notice of Intention to Make Claim and Affidavit of No Insurance to MVAIC in December 2003. MVAIC denied no-fault benefits to the claimant and her assignee in January 2004, based on its position that there should be no-fault coverage available from GEICO.

The claimant commenced a personal injury action against GEICO's insured, but failed to respond to discovery demands, and her suit was dismissed.  In 2007, the respondent provider demanded arbitration against both MVAIC and GEICO and ultimately was awarded payment of its $4,302.79 in bills from MVAIC. 

During the course of the arbitration proceedings, when it became apparent that GEICO might be held not to be responsible for affording no-fault coverage, MVAIC began investigating whether the claimant had other auto insurance available to her and, therefore, would not be a "qualified person" under Insurance Law § 5202(b)(i).  MVAIC attempted but was denied the opportunity to present evidence of the claimant's insurance at an arbitration hearing, the original arbitrator ruling that MVAIC was under an obligation to investigate the claimant's insured status from first notice of her claim and failed to issue a denial of the claim within 30 days of receipt of the Notice of Claim, as required by 11 NYCRR § 65-3.8(a)( l), or failed to otherwise seek to toll the 30-day period by requesting verification.  The MAster Arbitrator upheld the award, and MVAIC commenced this special proceeding pursuant to CPLR §7511 to vacate the award.

In granting MVAIC's motion to vacate the award and finding that MVAIC has not violated the 30-day pay or deny rule, New York County Supreme Court Justice Joan Lobis held:

MVAIC was created by the Legislature, pursuant to Article 52 of the Insurance Law, to pay damages for bodily injuries to innocent victims of of motor vehicle accidents caused by uninsured motorists. To recover MVAlC benefits, the injured individual must be eligible for MVAIC benefits.  Insurance Law § 5202(b) defines a "qualified person" as “a resident of this state, other than an insured or the owner of an uninsured motor vehicle and his spouse when a passenger in such vehicle.” (Emphasis added.) If in fact Ms. Li had valid insurance coverage at the time of the accident, she is not a "qualified person."  Univeral Acupuncture Pain Services P.C. v. MVAIC, 13 Misc. 3d 1244(A) (Table), 2006 WL 35 10617 (Dist. Ct., Nassau Co. 2000).  Until it was clear that GEICO was not responsible, MVAIC had no responsibility to investigate whether Chun Hong Li may have given false information on the MVAIC forms as to whether or not she was insured.  The essence of MVAIC's argument is that this is a "lack of coverage", since Ms. Li would not be covered by MVAIC if she has other insurance.

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Therefore, since lack of coverage goes to the heart of whether the claim is legitimate, the issue of lack of coverage may be raised at any time. Under these unique circumstances, the arbitrator’s failure to grant MVAlC’s request is deemed to constitute "an abuse of discretion consitituting misconduct within the meaning of CPLR 7511(b)(1)(i)", since it resulted in "the foreclosure of the presentation of pertinent and material evidience. " (Citations omitted.)