Monday, November 7, 2011

A De Novo Action is Not the Same as a Special Proceeding to Vacate a Master Arbitration Award of New York No-Fault Benefits

Allstate Ins. Co. v Nalbandian

(2nd Dept., decided 11/1/2011) 

After receiving a no-fault master arbitration award for more than $5,000, Allstate commenced this action for a de novo determination of the defendant's PIP claim pursuant to New York Insurance Law § 5106(c), which provides in pertinent part:
where the amount of such master arbitrator's award is five thousand dollars or greater, exclusive of interest and attorney's fees, the insurer or the claimant may institute a court action to adjudicate the dispute de novo.
De novo means from the beginning, and a de novo action relitigates all issues relevant to the disputed no-fault claim.  Believing that Allstate was seeking instead to vacate the master arbitration award, defendant counterclaimed to confirm the award and cross-moved for summary judgment, contending that the master arbitrator's award was not arbitrary and capricious.  Supreme Court, Kings County (Schack, J.), granted defendant's cross motion and Allstate appealed.

In REVERSING the lower court's order, the Appellate Division, Second Department, noted the important difference between a special proceeding to vacate an arbitration award and a de novo action to determine one's entitlement to no-fault benefits, finding that the lower court erred in overlooking or misapprehending that difference:
The Supreme Court erred in denying the plaintiff's motion for summary judgment on the complaint solely on the basis that the award of the master arbitrator was not arbitrary and capricious. The plaintiff did not seek to vacate the award of the master arbitrator, and, once the plaintiff properly invoked its right to de novo review, the issue of whether the award was arbitrary and capricious was rendered academic. For the same reason, the Supreme Court also erred in granting the defendant's cross motion to confirm the award of the master arbitrator and for summary judgment dismissing the complaint and on his counterclaims, based on the conclusion that the award was not arbitrary and capricious (see Progressive Ins. Co. v Strough, 55 AD3d 1402; Matter of Capuano v Allstate Ins. Co., 122 AD2d 138; see also Matter of Gerstein v American Tr. Ins. Co., 161 Misc 2d 57).

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