Special Proceedings to Stay Uninsured Motorist Claim Arbitration Dismissed as Untimely Commenced

UM – UNTIMELY SPECIAL PROCEEDING TO STAY ARBITRATION – NOTICE OF INTENTION TO ARBITRATE – CPLR 7503(C)
Matter of Allstate Ins. Co. v. Raynor
(2nd Dept., decided 11/30/2010)

Twenty days.  That's how long a party has to commence a special proceeding under CPLR 7503(c) to stay an arbitration after receiving a notice of intention to arbitrate.

Allstate waited more than five months after receiving its insured's notice of intention to arbitrate her uninsured motorist coverage claim to commence this special proceeding to stay that arbitration.  In REVERSING the order of Nassau County Supreme Court (Feinman, J.) which had denied the insured's cross motion to dismiss the proceeding as time-barred, the Second Department, Appellate Division, held:

The Supreme Court should have granted the appellant's cross motion to dismiss the proceeding as time-barred, as the proceeding was not commenced within 20 days of the June 12, 2009, notice of intention to arbitrate (see CPLR 7503[c]; Matter of Liberty Mut. Ins. Co. v Zacharoudis, 65 AD3d 1353, 1354; Matter of Goverment Empls. Ins. Co. v Castillo-Gomez, 34 AD3d 477, 478; Matter of CNA [Pough], 99 AD2d 510).

Matter of State Farm Mut. Auto. Ins. Co. v. Urban
(2nd Dept., decided 11/23/2010)

The Second Department reached the same determination in this matter.  As had Allstate in the Raynor matter, State Farm argued unsuccessfully that its subsequent receipt of a "Request for Arbitration" filed with the American Arbitration Association is what triggered the 20-day deadline to commence a special proceeding to stay arbitration pursuant to CPLR 7503(c).  The appellate court disagreed, holding:

"CPLR 7503(c) requires that an application to stay arbitration be made within 20 days after service of a notice of intention to arbitrate" (Matter of Liberty Mut. Ins. Co. v Zacharoudis, 65 AD3d 1353, 1353-1354; see Matter of Fiveco, Inc. v Haber, 11 NY3d 140, 144; Matter of Land of the Free v Unique Sanitation, 93 NY2d 942, 943; Matter of Steck [State Farm Ins. Co.], 89 NY2d 1082, 1084). To be considered a valid notice of the intention to arbitrate, the notice must identify the agreement under which arbitration is sought and the name and address of the person serving the notice in addition to containing the statutory 20-day warning that failure to commence a proceeding to stay arbitration will preclude an objection to arbitration (see CPLR 7503[c]; Matter of Blamowski [Munson Transp.], 91 NY2d 190, 195; State Farm Mut. Auto. Ins. Co. v Szwec, 36 AD2d 863).

The failure to move for a stay of arbitration within the statutory period will generally preclude objections to the arbitration after the expiration of that 20-day period (see Matter of Fiveco, Inc. v Haber, 11 NY3d at 144; Matter of Land of the Free v Unique Sanitation, 93 NY2d at 943; Matter of Steck [State Farm Ins. Co.], 89 NY2d at 1084; Matter of Liberty Mut. Ins. Co. v Zacharoudis, 65 AD3d at 1354; Matter of Hermitage Ins. Co. v Escobar, 61 AD3d 869; Matter of State Farm Ins. Co. v Williams, 50 AD3d 807, 809).

Here, once Urban served his notice of intention to arbitrate upon State Farm on December 26, 2008, the 20-day period for State Farm to move for a stay of the arbitration started to run and the subsequent service of the "Request for Arbitration" filed with the AAA did not reset the 20-day period (see Matter of Government Empls. Ins. Co. v Castillo-Gomez, 34 AD3d 477). Consequently, the Supreme Court should have granted Urban's cross motion, regardless of State Farm's contention that there was insurance coverage for the adverse motor vehicle (see Matter of State Farm Ins. Co. v Williams, 50 AD3d at 809) or the Supreme Court's determination that an issue existed with respect to whether there was contact between Urban's vehicle and the motor vehicle which left the scene (see Matter of AIU Ins. Co. v Orellana, 18 AD3d 652; Matter of Merchants Mut. Ins. Co. v Anemone, 271 AD2d 690). Thus, the proceeding should have been dismissed as time-barred (see Matter of Liberty Mut. Ins. Co. v Zacharoudis, 65 AD3d at 1354; Matter of Hermitage Ins. Co. v Escobar, 61 AD3d at 869).

The Second Department also held that the lower court erred in directing discovery in the event the matter proceeded to arbitration because "a failure to move to stay arbitration within the applicable 20-day time period is a bar to judicial intrusion into the arbitration proceedings[.]"  The court also reasoned that because State Farm had repudiated its liability for Urban's claim in an earlier disclaimer letter, it could not thereafter insist upon adherence to the terms of its policy.