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.

New York Supreme Finds That Insurer Did Not Timely Commence Special Proceeding to Stay Arbitration of UM Claim from Mexico Motor Vehicle Accident

UM – CPLR § 7503(C) – 20-DAY LIMITATION FOR COMMENCING SPECIAL PROCEEDING TO STAY ARBITRATION
Matter of Allstate Ins. Co. v. LeGrand
(Sup. Ct., New York Co., decided 2/3/2010)

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.

Allstate's insured, Jose LeGrand allegedly was injured when the rental car he was driving was rear-ended by a drunk driver in Cancun, Mexico.  On September 22, 2009, LeGrand gave Allstate written notice, via facsimile and regular and certified mail, of his intention to assert an uninsured motorist (UM) coverage claim.  Allstate acknowledged receipt of that notice the same day, but did not commence this special proceeding to permanently stay the arbitration of LeGrand's UM claim until November 2009, well more than 20 days after Allstate had received LeGrand's notice of intention to make a UM claim.  In its petition, Allstate asserted that LeGrand's accident was not a "covered event" because his policy's UM/SUM endorsement provided UM/SUM coverage "only to accidents that occur during the policy period shown in the Declarations, and in the United States, its territories or possessions, or Canada.”  As Mexico fell outside the coverage territory for UM/SUM coverage, Allstate argued that LeGrand's UM claim was not arbitrable. 

LeGrand opposed Allstate's petition on the ground that Allstate had failed to commence this special proceeding within 20 days of its receipt of LeGrand's notice of intention to make a UM claim, as required by CPLR § 7503(c).  In response, Allstate argued that since LeGrand's accident had occurred outside of the UM/SUM coverage territory, there was no coverage and, therefore, no agreement to arbitrate. 

New York County Supreme Court Justice Alice Schlesinger disagreed with Allstate's position, finding that the 20-day deadline of CPLR § 7503(c) to commence the special proceeding did apply to Allstate's non-coverage defense:

However, citing to In re Matarasso v. Continental Casualty Co., 56 NY2d 264 (1982), Allstate insists that the twenty-day period does not apply here because of the coverage limitation in the SUM Endorsement.  In Matarasso, the Court of Appeals carved out a limited exception to the twenty-day rule with respect to applications under CPLR §7503(c) where no agreement to arbitrate exists.  Allstate here contends that because the parties never agreed to arbitrate claims regarding accidents in Mexico, the Matarasso exception
applies and its application is timely.

Allstate’s reliance on Matarasso is misplaced, as the holding is limited to situations where no agreement to arbitrate exists, as opposed to situations like the case at bar where the dispute is whether the arbitration clause applies.  The limitation on the Matarasso exception is clear based on the Court‘s discussion of the facts, as well as its unambiguous holding.

* * * * *

Counsel necessarily agree that LeGrand’s policy contains an arbitration clause applicable to uninsured motorist claims.  Their dispute is whether LeGrand’s injuries are covered because the accident took place in Mexico and the SUM Endorsement does not include Mexico in the territory covered.  The issue relates to the scope of coverage, not to the existence of the arbitration agreement itself.  Thus, the Matarasso exception to the twenty-day rule does not apply.

The courts have no discretion to extend the twenty-day rule to permit consideration of an untimely application such as this one. Matarasso, 56 NY2d at 267; State Farm v. Kankam, 3 AD3d 418 (1st Dep't 2004) (petition dismissed as untimely where arbitration agreement existed and the dispute was whether the conditions had been satisfied).  Allstate cites Zappone v. Home Ins. Co., 55 NY2d 131 (1982) for the proposition that the courts cannot create coverage where none exists. However, Zappone is wholly inapposite, as there the patty was seeking coverage from Home Insurance Company for a car insured by Aetna, and the issue was what steps, if any, Home Insurance was required to take under the Insurance Law to deny coverage. Neither CPLR §7503(c), nor the issue of timeliness, was even involved.

With due respect to Justice Schlesinger, I believe she's wrong on this one.  The UM/SUM endorsement's requirement that an accident take place within the policy period and coverage territory is not akin to a condition precedent or subsequent to coverage, the asserted breach of which would be governed by the 20-day SOL of CPLR § 7503(c).  Instead, to me that issue is more like the question of whether someone qualifies as an "insured" under the UM/SUM endorsement's Insuring Agreement, a coverage issue and "Matarasso exception" the New York courts repeatedly have held is not subject to the 20-day SOL of CPLR § 7503(c).  See, e.g., Matter of Aetna Cas. & Sur. Co. v. Cartigliano, 178 A.D.2d 472 (2nd Dept. 1991).

Turnabout Is Fair Play -- Court Finds Disclaimer Ineffective Against Injured Party

AUTO – UM – INEFFECTIVE DISCLAIMER – CIRUCCI DEFECT
Tri-State Ins. Co. v. Salguero
(Sup. Ct., Queens Co., decided 5/26/2009)

Salguero was injured in an 2004 auto accident with Frempong. Tri-City insured Salguero; State Farm insured Frempong. When negotiations with State Farm became unsuccessful, Salguero's attorney commenced a personal injury action against Frempong but did not notify State Farm of either the action or Frempong's default in that action. After obtaining a $33,173.98 default judgment against Frempong in 2007, Salguero commenced an Insurance Law § 3420(b)(1) action against State Farm in January 2008.

In response to the 3420(b)(1) action, State Farm issued a disclaimer letter to Frempong, its insured, advising her that "[y]our failure to send us copies of any notices or legal papers received is in violation of your policy's provision regarding the reported claims. As such State Farm Mutual Automobile Insurance Company disclaims coverage for any and all claims resulting from this loss". A copy of that letter went to Salguero's attorney. On the same day, State Farm send a separate letter to Salguero's attorney, advising him that "[o]ur Insured failed to forward the Summons & Complaint for the law suit filed against her to State Farm Insurance. This is in violation of our insured's policy provision regarding the duties after an accident or loss. You received an order of judgment entered on September 5, 2007 that allegedly was served on the insured, Sherina Frempong. Again our insured has not forwarded us the court's order of default. Accordingly, we decline to afford coverage for the above date of loss due to our insured's failure to forward suit papers."

Based on State Farm's disclaimer, Salguero then filed and demanded arbitration of a uninsured motorists (UM) coverage claim made to Tri-City. Tri-City then commenced this special proceeding pursuant to CPLR 7503 to stay arbitration of Salguero's UM claim, and the court added Frempong and State Farm as respondents and directed a hearing on the issue of whether coverage for the accident was available from State Farm. The parties agreed that the sole question for determination was whether State Farm's disclaimer letters -- to Frempong and Salguero's attorney -- were ineffective as to Salguero for having not disclaimed coverage on the separate ground that Salguero had also failed to provide timely notice of his underlying personal injury to State Farm.

In finding in favor of Tri-City and declaring that State Farm was obligated to defend and indemnify Frempong for her accident with Salguero, Queens County Supreme Court Justice Jaime Rios rejected State Farm's reliance on a First Department decision, holding that Second Department case law controlled and required the finding that State Farm's disclaimers were ineffective as against Salguero for having said nothing about Salguero's late notification of the underlying personal injury action:

In support, State Farm relies on the holding in Schlott v Transcon. Ins. Co., Inc., (41 AD3d 339 [2007]), wherein the Appellate Division, First Department determined that the insurer complied with the mandates of Insurance Law § 3420(d) when it gave notice of disclaimer to the insured and sent a copy to the injured party, despite its omission of any specific reference to the injured party's failure to timely notify it of the accident.

Salguero maintains that State Farms's disclaimers are not effective against him, since they failed to include his alleged failure to timely notify State Farm of the lawsuit as a basis for disclaiming and only referred to its insured's failure. /div>

Insurance Law §3420(d) provides that an insurer shall give written notice of a disclaimer of liability or denial of coverage to the insured and injured party or any other claimant as soon as is reasonably possible (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64 [2003]; Hereford Ins. Co. v Mohammod, 7 AD3d 490 [2004]; State Farm Ins. Co. v Cooper, 303 AD2d 414 [2003]).

The notice of disclaimer must address with a high degree of specificity the grounds upon which it is based (see General Acc. Ins. Group v Cirucci, 46 NY2d 862 [1979]; State Farm Mut. Auto. Ins. Co. v Cooper, 303 AD2d 414, supra; State Farm Mut. Auto. Ins. Co. v Joseph, 287 AD2d 724 [2001]). An insurer's justification for denying coverage is limited to the ground(s) stated in the disclaimer and waives any ground for denying coverage that is not specifically asserted in its disclaimer, regardless of merit (see General Acc. Ins. Group v Cirucci, 46 NY2d 862, supra; Adames v Nationwide Mut. Fire Ins. Co., 55 AD3d 513 [2008]; Vacca v State Farm Ins. Co., 15 AD3d 473 [2005]).

Additionally, contrary to the holding in Schlott v Transcon. Ins. Co., Inc., (41 AD3d 339, supra), the Second Department has consistently held that in order for a disclaimer to be valid against an injured party, the notice of disclaimer must advise the claimant that his or her notice was not timely (see State Farm Mut. Auto. Ins. Co. v Cooper, 303 AD2d 414, supra; State Farm Mut. Auto. Ins. Co. v Joseph, 287 AD2d 724, supra).

Here, the sole basis of State Farm's disclaimer notices was Frempong's failure to notify it of the lawsuit. The disclaimer notices are thus, ineffective against Salguero, despite his failure to provide State Farm with notice of the lawsuit. As such, State Farm is estopped from raising his failure as a ground to disclaim coverage, despite the questionable practices of respondent's attorney (see Vacca v State Farm Ins. Co., 15 AD3d 473, supra; Gov. Empl. Ins. Co. v Jones, 6 AD3d 534 [2004]; Hazen v Otsego Mut. Fire. Ins. Co., 286 AD2d 708 [2001]; Legion Ins. Co. v Weiss, 282 AD2d 576 [2001]; Eagle Ins. Co. v Ortega, 251 AD2d 282 [1998]).

In State Farm v. Cooper, a CPLR 7503 proceeding to stay a UM claim, State Farm had made precisely the same argument against Zurich -- that Zurich's disclaimer was ineffective vis-à-vis Cooper, State Farm's insured (the UM claimant) because Zurich's disclaimer had said nothing about Cooper's failure to give timely notice to Zurich of the underlying lawsuit. Both Nassau Supreme and the Second Department agreed, staying Cooper's UM claim against State Farm. The other Second Department decision Justice Rios cited and relied upon -- State Farm v. Joseph -- involved an insured's late notice of the accident, not of the subsequent personal injury lawsuit.

Liability coverage disclaimers and denials can both be untimely and defective. What is sometimes called a "Cirucci defect", based on the New York Court of Appeals' 1979 decision in General Acc. Ins. Group v. Cirucci, 46 NY2d 862, relates to a disclaimer letter's omission of any reference to an injured party's late notice as a separate ground for denying coverage.

Although Justice Rios properly followed the binding precedent of State Farm v. Cooper, since Queens County falls within the Second Judicial Department, the Second Department erroneously decided that case. Cirucci and its progeny apply only to the defense of an insured's or injured party's late notice of an accident, not late notice of the subsequent personal injury lawsuit:

The only other ground stated in the insurance company's notice of disclaimer, the "insured's failure to report this accident to us", was likewise not effective against the third-party claimants. As noted by the Appellate Division, an injured third party may seek recovery from an insured's carrier despite the failure of the insured to provide timely notice of the accident ( Lauritan v American Fid. Fire Ins. Co., 3 AD2d 564, affd 4 NY2d 1028). Although, under the facts of this case a disclaimer might have been premised on the late notice furnished by the third parties themselves to the insurer, since this ground was not raised in the letter of disclaimer, it may not be asserted now. General Acc. Ins. Group v. Cirucci, 46 NY2d 862, 863.

The First Department's 2007 decision in Schlott v Transcon. Ins. Co., Inc. states what I believe is the correct interpretation of Insurance Law §§ 3420(a)(3) and 3420(d) with respect to late notice of lawsuits: "The fact that defendant [insurer] omitted from that notice any specific reference to the injured party's own failure to afford the insurer timely notice [of the underlying lawsuit] did not prejudice plaintiffs." Absent prejudice to the injured party from such an omission -- which in Salguero's case could not have existed or even been argued given his attorney's "questionable practices" of suing and taking a default judment against State Farm's insured without having notified State Farm, which whom that attorney had been negotiating -- a Cirucci defect is immaterial provided the injured party received a copy of the disclaimer letter.

With "only" $33,000 and change at stake, it remains to be seen whether State Farm will appeal this decision to the Second Department (which it likely will lose) and then put the conflict between the First and Second Departments before the Court of Appeals for determination.

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.

Carolina In Their Mind

AUTO – UM – TIMELY APPLICATION TO STAY OF ARBITRATION – CHOICE OF LAW – FRAMED ISSUE HEARING
Matter of Government Employees Insurance Co. v. Integon National Ins. Co.
(Sup. Ct., Richmond Co., decided 8/12/2008)

GEICO commenced this special proceeding to stay arbitration of the UM claim of its insured, Nadirah Shakoor, who allegedly was injured in a rear end collision on November 4, 2006. The police report listed the other driver as Jose Manuel Salas Oleda of 207 Vance Street, Wilson, North Carolina 27093 (maybe he lived above the beauty salon? and there is no such zip code), who produced an insurance ID card bearing an Integon National Insurance Company policy number. By letter dated January 29, 2007, Integon indicated that it received notice of an accident having occurred on November 17, 2006, and disclaimed coverage based on Mr. Oleda's failure to cooperate in its accident investigation.

CPLR § 7503(c) 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, or he shall be so precluded." Although GEICO filed this special proceeding 21 days after receiving Shakoor's arbitration demand, the 20th day fell on a Sunday, so GEICO's application for a stay was timely under New York General Construction Law § 25(a)(1).

With respect to the validity of Integon's disclaimer, Integon argued that because Oledo purchased his insurance policy in North Carolina for an automobile registered in North Carolina, that North Carolina law should apply in this matter. Richmond County Supreme Court Justice Joseph Maltese agreed, citing the Second Department's decision in Matter of Eagle Insurance Company v. Singletary, holding that insurance contracts are governed by the law of the state where the principal parties understood to be the “. . . principal location of the insured risk[.]" Under North Carolina law, an insured's breach of a policy's cooperation clause must be "material and prejudicial", ordinarily questions of fact for a jury.

In granting GEICO's motion for a temporary stay of arbitration pending a framed issue hearing to determine whether the Oleda vehicle was uninsured at the time of the alleged accident, the court found:

Based on the factual landscape currently before this court, it is impossible to hold as a matter of law that Integon’s disclaimer of coverage based breach of the cooperation clause is lawful under the laws of the state of North Carolina.

Clothing + Toothbrush + Joint Custody Arrangement = Resident for UM Coverage Under Father's Fiance's Auto Policy

AUTO – UM – RESIDENT OF HOUSEHOLD – INFANT CLAIMANT OF DIVORCED PARENTS – SPECIAL PROCEEDING TO STAY UM ARBITRATION – CPLR § 7503
Matter of Allstate Ins. Co. v. Moreno
(Sup. Ct., Suffolk Co., decided 6/5/2008)

While riding his bicycle, Robert Giffone, Jr. was hit by an uninsured motor vehicle and injured. His divorced parents Catherine and Robert Sr., who lived separately, made a claim for UM coverage and then demanded arbitration of that claim under a personal auto policy Allstate had issued to Robert Sr.'s fiance, Nancy Moreno, who married Robert Sr. seven weeks after the accident.

The Allstate SUM policy endorsement (which included UM coverage) defined the term "insured" as "the named insured and, while residents of the same household, your spouse and the relatives of either you or your spouse."

Allstate commenced this special proceeding for a permanent stay of the UM arbitration, contending: (1) that Robert Sr. was not an "insured" under the Moreno policy; and (2) that even if he were, Robert Jr. was not a resident of his household.

At a hearing of this matter, counsel for all parties stipulated that at the time of the accident, the Allstate policy named Robert A Giffone, Sr. as an insured driver. Additionally, the respondents introduced a copy of a New York State Insurance Identification Card issued by Allstate to Mr. Giffone under the Moreno policy for his 1995 Jeep Cherokee. That ID card specifically stated that "An authorized NEW YORK insurer [Allstate] has issued an Owner's policy of Liability Insurance . . . to: Giffone, Robert A." The hearing evidence also included a copy of the Allstate Auto Policy Declarations, which confirmed that the policy for Mr. Giffone's Jeep Cherokee included UM/SUM coverage.

Based on that evidence, Suffolk County Supreme Court Justice Peter Mayer ruled that "the respondents * * * established that respondent Robert A. Giffone, Sr. was, himself, an insured under the subject Allstate policy at the time of Robert Jr.'s accident[.]" Justice Mayer also found that Robert Jr. was a resident of both his parents' households:

The evidence has also established that although Robert Jr. resided with his mother, Catherine Giffone, at the time of the accident, he also resided with his father under a joint custody arrangement. It is well settled that a person may have more than one residence for purposes of insurance coverage (Hochhauser v. Elec. Ins. Co., 46 AD3d 174, 844 NYS2d 374 [2d Dept 2007]; Dutkanych v United States Fid. & Guar. Co., 252 AD2d 537, 675 NYS2d 623 [2d Dept 1998]). Whether a person is a resident of an insured's household requires something more than temporary or physical presence and requires at least some degree of permanence and intention to remain (Hochhauser v. Elec. Ins. Co., supra; New York Cent. Mut. Fire Ins. Co. v Bonilla, 269 AD2d 599, 704 NYS2d 819 [2d Dept 2000]; Allstate Ins. Co. v Rapp, 7 AD3d 302, 776 NYS2d 285 [1st Dept 2004]).

In opposition to Allstate's petition, the respondents submit affidavits from both of Robert Jr.'s parents, respondent Mr. Giffione and Catherine Giffone. The sworn affidavits establish that at the time of the May 8, 2006 accident, both parents shared joint custody of Robert Jr., and that Robert Jr. resided with his father on alternate weekends and during summers. More specifically, Robert Jr. had his own bedroom and kept clothing and a toothbrush at his father's house on a year-round basis. These facts sufficiently establish that as a child of divorced parents, Robert Jr. was, in fact, a resident of both parents' households on the date of his accident (citations omitted).

UM coverage applied, Allstate's application for a stay of arbitration was denied, and the parties were directed to proceed to arbitration pursuant to the applicable policy provisions.

DJ Action Doesn't Trump Untimely Commenced CPLR Article 75 Special Proceeding

AUTO – SUM – CPLR § 7503(C) – 20-DAY SOL TO COMMENCE SPECIAL PROCEEDING FOR STAY
State Farm Ins. Cos. v. DeSarbo
(3rd Dept., decided 6/5/2008)

File this in the "nice try but no cigar" category.

State Farm commenced a special proceeding to stay DeSarbo's SUM arbitration. The motion court granted State Farm's petition for a permanent stay and the claimant appealed. During the pendency of that appeal, State Farm commenced this DJ action, contending that DeSarbo breached the policy and voided SUM coverage by having failed to cooperate and provided false information to State Farm.

State Farm moved for summary judgment in this DJ action. While that motion was pending, the Third Department reversed the stay of arbitration that had been granted to State Farm in the special proceeding on the ground that State Farm's application for the stay had been untimely (not commenced within 20 days as required by CPLR § 7503[c]). Supreme Court, noting that the Third Department's decision did not address the issues raised in plaintiff's motion for summary judgment in the declaratory judgment action, granted State Farm's motion.

The Third Department REVERSED, holding:

Here, a valid agreement to arbitrate underinsurance claims exists under the policy. The issue of defendant's compliance with terms of that agreement had to be raised by seeking a stay within 20 days of service of the intent to arbitrate. We have previously held that plaintiff failed to properly seek a stay within 20 days. Plaintiff cannot now circumvent the arbitration requirements by asserting in a declaratory judgment action an issue it failed to assert in a timely fashion when faced with a demand for arbitration.

20-Day SOL for Commencing Special Proceeding to Stay UM Arbitration Held Not Applicable to Question of Whether Claimant Qualifies as "Insured"

AUTO – UM – CPLR § 7503(C) – 20-DAY SOL TO COMMENCE SPECIAL PROCEEDING FOR STAY – RESIDENCY ISSUE
Matter of Interboro Ins. Co. v. Maragh
(2nd Dept., decided 5/27/2008)

In what sometimes is called the shortest SOL in New York, CPLR § 7503(c) provides that a UM insurer which fails to commence a special proceeding to stay arbitration within 20 days after being served with a notice of intention or demand to arbitrate is generally precluded from objecting to the arbitration thereafter. The New York courts have held that an otherwise untimely petition to stay arbitration may be entertained, however, when its basis is that the parties never agreed to arbitrate the dispute in the first place or that a condition precedent to arbitration has not been met.

In this case, Interboro Insurance Company, which had comenced this special proceeding more than 20 days after being served with a demand to arbitrate, contended that the claimaint did not qualify as an "insured" under the UM provisions of the policy because he did not reside with the named insured, his mother, at the time of his accident.

In REVERSING the lower court's dismissal of the petition as untimely and remitting the matter back to Supreme Court for a hearing on the claimant's residency issue, the Second Department held:

In this case, Interboro raised a factual issue through sworn statements of Chouquette, its named insured, who denied that Maragh, her son, was a resident of her household at the time of the accident. * * * The provision of the subject policy for uninsured motorists coverage defines an "insured" as the named insured or any "family member," the latter being defined as "a person related to [a named insured] by blood . . . who is a resident of [the named insured's] household." Resolution of the factual issue as to whether Maragh was an insured under the subject policy is a condition precedent to arbitration (citations omitted). Further, if Maragh was not an insured under the subject policy, then no agreement to arbitrate existed between him and Interboro, and the 20-day time limit set forth in CPLR 7503(c) is inapplicable[.]