Special Proceeding to Stay UM Arbitration Dismissed as Untimely Commenced

UM – CPLR § 7503(C) – 20-DAY LIMITATION FOR COMMENCING SPECIAL PROCEEDING TO STAY ARBITRATION
Matter of Nova Cas. Co. v. Martin
(2nd Dept., decided 12/2/2008)

CPLR § 7503(c) has been called "The Shortest Statute of Limitations Known to the Law". Dachs, Norman and Dachs, Jonathan, NYLJ, June 12, 1990. It provides that "[a]n application to stay arbitration must be made by the party served within twenty days after service upon him of the notice or demand [for arbitration or intention to arbitrate], or he shall be so precluded." With respect to UM and SUM arbitration demands, the 20-day period accrues, or begins to run, from the insurer's receipt of the demand for arbitration and ends when the special proceeding is actually commenced by the filing of a petition for a stay. There are a number of exceptions to the 20-day rule that have received extensive treatment in the courts. See, generally, Dachs and Dachs, "Petitions to Stay Arbitration: Special Considerations for Special Proceedings", July 1997.

Nova Casualty commenced this special proceeding to stay the UM arbitration demanded by its insured, contending that the offending vehicle was insured by GMAC. Apparently, Nova did not commence this proceeding within 20 days of its receipt of its insured's demand for arbitration, but argued that the allegedly insured status of the offending vehicle was an issue falling outside of arbitration to which the 20-day SOL of CPLR § 7503(c) did not apply.

Kings Supreme agreed, but the Second Department didn't, REVERSING the lower court's order which had granted Nova a framed-issue hearing on the offending vehicle's insurance status and instead dismissing Nova's petition in its entirety:

The petitioner's contention that there is no coverage under its policy's uninsured motorist provisions because the offending vehicle was, in fact, insured, is irrelevant to the issue of whether the instant proceeding pursuant to CPLR article 75 was timely commenced (see Matter of Steck [State Farm Ins. Co.], 89 NY2d 1082; Matter of Travelers Indem. Co. v Castro, 40 AD3d 1005, 1006-1007; Matter of Hartford Ins. Co. v Buonocore, 252 AD2d 500, 501). Such contention "relates to whether certain conditions of the contract have been complied with and not whether the parties have agreed to arbitrate" and, thus, the petitioner's contention is outside the exception articulated by the Court of Appeals in Matter of Matarasso (Continental Cas. Co.) (56 NY2d 264) (Matter of Steck [State Farm Ins. Co.], 89 NY2d 1082, 1084; see Matter of Hartford Ins. Co. v Buonocore, 252 AD2d 500, 501).

Since the petition to stay arbitration of the demand was made well beyond the 20-day period set forth in CPLR 7503 (c), and the exception set forth in Matter of Matarasso does not apply, the Supreme Court should not have, in effect, granted that branch of the petition which was for a framed-issue hearing to determine whether there was insurance available through GMAC Insurance Company. Rather, the proceeding should have been dismissed in its entirety (see Matter of Travelers Indem. Co. v Castro, 40 AD3d 1005, 1007; Matter of Hartford Ins. Co. v Buonocore, 252 AD2d 500, 501).

Demands for UM or SUM arbitration should receive the highest claim processing priority and be forwarded to defense counsel immediately if the insurer has grounds and wishes to commence a special proceeding for a permanent stay of arbitration.