Court of Appeals Declines to Disturb SUM Arbitration Award Despite Arbitrator's Refusal to Give Collateral Estoppel Effect to Prior No-Fault Arbitration Award

SUM – NO-FAULT – COLLATERAL ESTOPPEL – VACATING ARBITRATION AWARD
Matter of Falzone v. New York Cent. Mut. Fire Ins. Co.
(Ct. Apps., decided 10/21/2010)

Falzone arbitrated New York Central Mutual's denial of no-fault benefits and won.  She then arbitrated her related SUM claim against NYCM before a different arbitrator and lost on the ground that her injuries were not caused by the accident.  Contending that the second arbitration decision was inconsistent from the first, and that NYCM was collaterally estopped in the SUM arbitration from relitigating the issue of causation with respect to her injuries, Falzone commenced this CPLR article 75 special proceeding to vacate or modify the SUM arbitration award.  Supreme Erie granted petitioner's motion to vacate the SUM award and NYCM appealed.

In a 3-2 split decision, the Fourth Department, Appellate Division, reversed the order and confirmed the SUM arbitration award, the three-justice majority noting that "[t]he fact that a prior arbitration award is inconsistent with a subsequent award is not an enumerated ground in either subdivision (b) or (c) of CPLR 7511 for vacating or modifying the subsequent award[.]"

In 6-1 split decision, the New York Court of Appeals AFFIRMED the Appellate Division's decision, the six-judge majority holding: 

It is well settled that a court may vacate an arbitration award only if it violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator's power (see Matter of New York City Tr. Auth. v Transport Workers' Union of Am., Local 100, AFL-CIO, 6 NY3d 332, 336 [2005]; Matter of United Fedn. of Teachers, Local 2, AFT, AFL-CIO v Board of Educ. of City School Dist. of City of N.Y., 1 NY3d 72, 79 [2003]; CPLR 7511 [b] [1] [iii]).  Even where an arbitrator has made an error of law or fact, courts generally may not disturb the arbitrator's decision (see Transport Workers' Union of Am., Local 100, AFL-CIO, 6 NY3d at 336 ["[C]ourts are obligated to give deference to the decision of the arbitrator.  This is true even if the arbitrator misapplied the substantive law in the area of the contract (citations omitted)."]).  Here, petitioner's claim —- that the arbitrator erred in failing to apply collateral estoppel to preclude litigation of the causation issue in the SUM arbitration — falls squarely within the category of claims of legal error courts generally cannot review.

* * * * *

Here, the prior (no-fault) arbitration award involved the same parties, the same accident, the same injuries, and resolution of the same issue (causation) as the subsequent (SUM) arbitration award. Respondent insurer, a party to the prior arbitration, lost on the causation issue. Petitioner, the prevailing party on that issue in the prior arbitration, reasonably argued that collateral estoppel should apply to bar relitigation of the causation issue in the subsequent SUM arbitration. The SUM arbitrator rejected petitioner's argument, had the parties relitigate the causation issue and, contrary to the no-fault arbitrator's determination, found in respondent insurer's favor on the causation issue.

It is not for us to decide whether the SUM arbitrator erred in not applying collateral estoppel (i.e., not giving preclusive effect to the no-fault arbitrator's determination on the issue of causation). Because the SUM arbitration award was not patently irrational or so egregious as to violate public policy, the instant SUM arbitration award (and whether the SUM arbitrator erred or exceeded his authority) is beyond this Court's review powers.

As I observed when posting about the Fourth Department's decision, although some practitioners may regard this decision as standing for the proposition that collateral estoppel no longer attaches to no-fault arbitration awards in New York, the ruling is much more narrow than that.  The Fourth Department's majority reversed the trial judge and confirmed the award not because they believed collateral estoppel could or did not apply to preclude NYCM from relitigating injury causality, but because they (and the dissent) adhered to the rule that collateral estoppel is not a basis on which Supreme Court may, under CPLR 7511, vacate an arbitration award.  On that procedural basis the Court of Appeals agreed and declined to disturb the arbitrator's award. 

Master No-Fault Arbitration Award Not Vacated

NO-FAULT – GROUNDS FOR VACATING MASTER ARBITRATION AWARD – CPLR ARTICLE 75 PROCEEDING
Matter of Travelers Indem. Co. v. United Diagnostic Imaging, P.C.
(2nd Dept., decided 2/23/2010)

New York Civil Practice Law and Rules section 7511(b) sets forth the grounds upon which a court may vacate an arbitration award:

(b) Grounds for vacating. 

1. The award shall be vacated on the application of a party who either participated in the arbitration or was served with a notice of intention to arbitrate if the court finds that the rights of that party were prejudiced by: 

(i) corruption, fraud or misconduct in procuring the award; or 

(ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession; or 

(iii) an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or

(iv) failure to follow the procedure of this article, unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection.

Case law makes it clear that New York courts apply these four grounds narrowly, declining more times than not to vacate arbitration awards.   This case is no different, the Second Department affirming the lower court's denial of Travelers' petition to vacate the master arbitration award, with costs.

In support of its petition to vacate, Travelers argued that the arbitration award should be vacated pursuant to CPLR 7511(b)(1)(iii) because the master arbitrator had exceeded his power in confirming the award.  Travelers also contended that both the arbitrator and master arbitrator "acted in a manner that was arbitrary, capricious, irrational, and without a plausible basis."  Both the Supreme Court and Second Department disagreed, the appellate court holding:

"Consistent with the public policy in favor of arbitration, the grounds specified in CPLR 7511 for vacating or modifying a no-fault arbitration award are few in number and narrowly applied" (Matter of Mercury Cas. Co. v Healthmakers Med. Group, P.C., 67 AD3d 1017, 1017).  * * * * *

"An arbitration award in a mandatory arbitration proceeding will be upheld if it is supported by the evidence and is not arbitrary and capricious" (Matter of State Farm Mut. Auto. Ins. Co. v City of Yonkers, 21 AD3d 1110, 1111). "On review, an award may be found to be rational if any basis for such a conclusion is apparent to the court based upon a reading of the record" (id.; see Caso v Coffey, 41 NY2d 153, 158).

Here, the petitioner failed to demonstrate that the master arbitrator's award should have been vacated pursuant to CPLR 7511(b)(1)(iii) (see generally Matter of New York City Tr. Auth. v Transport Workers' Union of Am., Local 100, AFL-CIO, 6 NY3d 332, 336). Moreover, the determination of the master arbitrator confirming the original arbitration award had evidentiary support and a rational basis, and was not arbitrary and capricious. Accordingly, the Supreme Court properly denied the petition to vacate the award.

Remember that pursuant to New York Insurance Law § 5106(c) and 11 NYCRR § 65-4.10(h)(1)(ii), if the master arbitrator's award is $5,000 or more, exclusive of interest and attorney’s fees, either party may, in lieu of commencing a CPLR article 75 proceeding, institute a court action to adjudicate the dispute de novo.  Can't do both, however.  It's either commence a special proceeding to vacate the award pursuant to CPLR 7511(b) or commence an action to adjudicate the disputed claim de novo.  Pursuant to 11 NYCRR § 65-4.10(h)(2) and CPLR 7511(a), the deadline for commencing either a special proceeding or de novo action is 90 days after delivery of the master arbitrator's award to that party.  "Delivery" has been held to mean receipt for purposes of CPLR 7511(a)'s 90-day statute of limitations.  Matter of Lowe v. Erie Ins. Co., 56 AD3d 130 (4th Dept. 2008).

Uninsured Motorist Arbitrator Did Not Exceed His Authority by Placing Monetary Value on Claimant's Injuries in Excess of Policy Limit

UM – SERIOUS INJURY – CPLR 7511 PROCEEDING TO VACATE ARBITRATION AWARD – GROUNDS TO VACATE AWARD
Safeco Prop. & Cas. Ins. Cos. v. Dye
(Sup. Ct., Queens Co., decided 11/18/2009)

On August 27, 2006, a vehicle owned and operated by Safeco's insured, Roshaun Dye, was struck by a hit-and-run motor vehicle. By demand dated December 3, 2007, Dye sought arbitration of his claim for uninsured motorist (UM) benefits from Safeco on the basis that the accident involved a hit-and-run vehicle.

The arbitration was held on April 20, 2009. Upon completion of the arbitration of this matter, the arbitrator, in his award dated May 15, 2009 determined that "the compensatory value of the injuries sustained by the Claimant RD to be $100,000.00. However, I also find that the Claimant RD was 75% comparatively negligent in causing this accident and therefore his award is reduced and he is entitled to $25,000.00".

Safeco commenced this special proceeding pursuant to CPLR § 7511 to vacate the arbitration award, contending that: (1) the arbitrator exceeded his authority by awarding benefits in excess of applicable policy limits; (2) there was no evidence in the record to support that the claimant sustained a serious injury; and (3) the arbitrator's exclusion of pertinent evidence constituted misconduct.

In denying Safeco's petition and confirming the award, Queens County Supreme Court Justice Jaime Rios noted that judicial review of compulsory arbitration, such as UM arbitration, is more limited than for voluntary arbitration, and that to be upheld, the arbitrator's award must only have evidentiary support and not be arbitrary and capricious.  Justice Rios then held:

An arbitrator is not required to justify his award, it must merely be evident that there exists a rational basis for it upon a reading of the record (see Block v St. Paul Fire & Marine Ins. Co., 137 AD2d 475 [1988]; Dahn v Luchs, 92 AD2d 537 [1983]).

Here, the arbitrator's decision was based upon Dye's testimony, police report, photos of the accident scene and Dye's vehicle, MRI reports of Dr. Shapiro and Dr. Rothpearl; hospital and medical records submitted by Dye and Safeco; a copy of Safeco's insurance policy, and examination under oath of Dye. The MRI report of the right knee by Dr. Shapiro revealed "abnormal signal in the posterior horn of the medial meniscus without articular extension" and "joint effusion"; the MRI of the right knee by Dr. Rothpearl revealed "medial, supra patellar plicai", "thickening and increased signal associated with the medial collateral ligament, consistent with a low-grade partial tear", "lateral patellar tilt", "suboptimal visualization of the anterior cruciate ligament. A tear of this ligament cannot be excluded and clinical correlation is recommended", and the MRI report of the lumbar spine revealed "right foraminal herniation at L5-S1. According to the records of Lutheran Medical Center, on November 29, 2007, Dye underwent arthroscopic surgery to the right knee, which revealed "medial meniscal tear of the medial and lateral side", "synovitis of the medial compartment" and "cartilage abrasion on the medial femoral condyle".

Judicial review of an arbitrator's award is very limited (see Pearlman v Pearlman, 169 AD2d 825 [1990]) and the fact findings of the arbitrator may not be second guessed by a reviewing court (see Liberty Mut. Ins. Co. v Sedgewick of New York, 2007 NY Slip Op 6882). The question of whether a claimant has sustained a serious injury is a matter within the province of the arbitrator not the courts (see Aetna Cas. & Sur. Co. v Cochrane, 64 NY2d 796 [1985]). Based upon the present record, the arbitrator's award has ample evidentiary support and is thus, rationally based. Additionally, even if the arbitrator failed to consider certain evidence, vacatur of the award would not be warranted (see American Express Prop. & Cas. Co. v Vinci, 63 AD3d 1055 [20009]).

Moreover, while an arbitration award may be vacated upon the ground that the arbitrator exceeded his authority by making an award in excess of the policy limits, here, the arbitrator made an award within the policy limits. 

The decision does not reveal what the UM policy limit was, but presumably it was at least $25,000.  As reduced by the claimant's percentage of comparative negligence or culpable conduct, the arbitration award did not exceed the policy's UM coverage limit.

SUM Arbitration Award Confirmed -- Inconsistency of Prior No-Fault Arbitration Award Not Given Preclusive Effect

SUM – NO-FAULT – COLLATERAL ESTOPPEL – VACATING ARBITRATION AWARD
Matter of Falzone v. New York Cent. Mut. Fire Ins. Co.
(4th Dept., decided 7/2/2009)

Falzone arbitrated New York Central Mutual's denial of no-fault benefits and won.  She then arbitrated her related SUM claim against NYCM before a different arbitrator and lost on the ground that her injuries were not caused by the accident.  Contending that the second arbitration decision was inconsistent from the first, and that NYCM was collaterally estopped in the SUM arbitration from relitigating the issue of causation with respect to her injuries, Falzone commenced this CPLR article 75 special proceeding to vacate or modify the SUM arbitration award.  Supreme Erie granted petitioner's motion to vacate the SUM award and NYCM appealed.

In a 3-2 split decision, the Fourth Department, Appellate Division, REVERSED the order and confirmed the SUM arbitration award, holding:

The fact that a prior arbitration award is inconsistent with a subsequent award is not an enumerated ground in either subdivision (b) or (c) of CPLR 7511 for vacating or modifying the subsequent award (see Matter of City School Dist. of City of Tonawanda v Tonawanda Educ. Assn., 63 NY2d 846, 848). As the court properly recognized, "[i]t was within the [SUM] arbitrator's authority to determine the preclusive effect of the prior arbitration on the instant arbitration" (Matter of Progressive N. Ins. Co. v Sentry Ins. A Mut. Co., 51 AD3d 800, 801). The court erred in noting, however, that it was unable to determine whether the SUM arbitrator even considered claimant's contention with respect to collateral estoppel. Arbitrators are not required to provide reasons for their decisions (see Matter of Solow Bldg. Co. v Morgan Guar. Trust Co. of N.Y., 6 AD3d 356, 356-357, lv denied 3 NY3d 605, cert denied 543 US 1148; Matter of Guetta [Raxon Fabrics Corp.], 123 AD2d 40, 41), and thus the SUM arbitrator was not required to state that he had considered that contention.

Two justices dissented and voted to affirm the award.  While acknowledging that collateral estoppel "is not a basis on which [Supreme C]ourt may, under CPLR 7511, vacate an arbitration award," the dissent nevertheless noted that

vacatur is permitted where the award 'violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on the arbitrator's power' " (Matter of Mays-Carr [State Farm Ins. Co.], 43 AD3d 1439, 1439, quoting Matter of New York City Tr. Auth. v Transport Workers' Union of Am., Local 100, AFL-CIO, 6 NY3d 332, 336; see generally CPLR 7511 [b] [1] [iii]). In our view, the arbitrator who issued the award with respect to supplemental uninsured motorist (SUM) benefits exceeded his power by disregarding the preclusive effect of a prior arbitration award and instead issuing a different determination with respect to causation, involving the same parties and based upon the same facts (see Matter of American Honda Motor Co. v Dennis, 259 AD2d 613; Motor Veh. Acc. Indem. Corp. v Travelers Ins. Co., 246 AD2d 420, 422).

The dissent further observed that in this matter there were no factual issues regarding whether the no-fault arbitration award should be given preclusive effect.  "The SUM arbitrator was thus barred from relitigating the issue of causation between the identical parties, inasmuch as it was 'actually contested and therefore determined by the [prior] award' ", reasoned the dissent. 

Although some practitioners may regard the majority's decision as standing for the proposition that collateral estoppel no longer attaches to no-fault arbitration awards in the Fourth Department, the majority's ruling is much more narrow than that.  The majority reversed the trial judge and confirmed the award not because they believed collateral estoppel could or did not apply to preclude NYCM from relitigating injury causality, but because they (and the dissent) adhered to the rule that collateral estoppel is not a basis on which Supreme Court may, under CPLR 7511, vacate an arbitration award.

Editor's Note ~~ The New York Court of Appeals AFFIRMED this decision on October 21, 2010.  The Court's 6-1 opinion is here.  

Court Denies Motion to Vacate Arbitration Award of DME Cost Despite Evidence of Fraud

NO-FAULT – DMEs – MEDICAL NECESSITY – FRAUD
Matter of Travelers Indem. Co. v. Tri Borough Medical Supply, Inc. a/a/o Clarence Beckles
(Sup. Ct., New York Co., decided 10/24/2008)

There were two things working against Travelers in this case: (1) the limited scope of judicial review of an arbitration award; and (2) an affidavit of the prescribing physician which said that "most" but not all durable medical equipment items (DMEs) he had prescribed while working at Sunset General Medicine & Rehabilitation, PC, in Brooklyn were not medically necessary.

Based on a negative peer-review report, Travelers timely denied payment of DMEs prescribed by the subsequently de-licensed Dr. Melchias Mukendi of Sunset General Medicine & Rehabilition, PC. Respondent DME provider filed for arbitration of that denial and was awarded $850.62 by the arbitrator, despite Traveler's submission of:

• the negative peer-review report, opining that the prescribed DMEs were not medically necessary;
• an affidavit from Dr. Mukendi, in which he averred that: “While at Sunset, [a manager and a representative of a DME supplier] gave me a list of DME that I was told to prescribe to rnost patients. I was required to prescribe these items even if there was no medical necessity to support the prescriptions. In addition, I was told that I should make referrals for consultants to other medical providers whose specialties appeared on the initial evaluation form. These referrals . . . were made regardless of medical necessity”; and
• copies of correspondence sent to a federal magistrate judge related to fraud in the no-fault DME industry that related to a RICO suit in which one of the defendants was thc wholesaler that provided the DME in this case.

Based on the submitted initial medical evaluation of Dr. Mukendi, which “specifically include[d] the medical equipment here in question in its 'Treatment Plan' and g[ave] as its reason for same ‘to alleviate pain and muscle spasm, to prevent stiffness, to improve blood circulation, to promote healing and restore normal joint mobility", the no-fault arbitrator concluded that Triborough "met its burden to present a prima facie case of medical necessity for the equipment here in question and has adequately refuted [Travelers'] peer review."

Travelers appealed the arbitration decision to a master arbitrator and lost, based on the mater arbitrator's conclusion that the original arbitrator had shown a "rational basis" for the award. Traveler's then commenced this special proceeding purusuant to CPLR 7511 to vacate the arbitration award as "arbitrary, irrational, contrary to applicable law and so imperfectly executed as to warrant vacatur and reversal."

In concluding that Travelers had not met its burden of establishing its entitlement to vacatur of the award, given the court's limited scope of review of arbitration awards, New York County Supreme Court Justice Eileen Bransten held:

Here, the evidence was sufficient. It was not irrational for the arbitrator, after holding a hearing, listening to the arguments of all counsel and reviewing the parties’submissions, to conclude that based on the medical evaluation, the DME was medically necessary. Dr. Mukendi's affidavit, while acknowledging that he was told to prescribe DME in "most" cases while working at Sunset, did not address the particular facts related to Mr. Beckles. The physician performing peer review on behalf of Travelers, moreover, never personally saw Mr. Beckles.

Additionally, there is absolutely no indication that the master arbitrator did not examine the sufficiency of the evidence. Indeed, the [master arbitration award] sets forth that it was within the arbitrator's province to “deterniine what cvidence or testimony to accept or reject, and what inferences should be drawn as supported by the evidence” and that the master arbitrator could not substitute his “interpretation of the evidence or [] judgment in place of the arbitrator.”

Regardless of what you may think about the outcome of this matter, this case points up the difficulty parties generally experience when asking courts to overrule and vacate arbitration awards. At each step of the appeal process, the scope of review becomes narrower and, consequently, it becomes more difficult to gain a reversal.

What's In an Affirmation? -- Appellate Term Confirms Master Arbitration Award Due to Legally Insufficient Attorney's Affirmation

NO-FAULT – FORM OF ATTORNEY'S AFFIRMATION – CPLR ARTICLE 75 SPECIAL PROCEEDING TO VACATE MASTER ARBITRATION AWARD
Valentin Avanessov, Physician, PC a/a/o Azra Sabovic v. State-Wide Ins. Co.
(App. Term, 2nd Dept., decided 10/27/2008)

The no-fault litigation arena is littered with dismissals and defeats that have little or nothing to do with substance and everything to do with form, or defective form, as the case may be. Here lies another carcass.

CPLR Rule 2106, entitled, "Affirmation of truth of statement by attorney, physician, osteopath or dentist", provides:

The statement of an attorney admitted to practice in the courts of the state, or of a physician, osteopath or dentist, authorized by law to practice in the state, who is not a party to an action, when subscribed and affirmed by him to be true under the penalties of perjury, may be served or filed in the action in lieu of and with the same force and effect as an affidavit.

Because affirmations do not need to be notarized, some litigation counsel, such as myself, prefer affirmations to affidavits. If an attorney's affirmation does not state that it is "affirmed to be true under the penalties of perjury", but only "states as follows", it is legally insufficient, so reminds the Appellate Term, Second Department, in this case.

Petitioner medical provider commenced a special proceeding pursuant to CPLR § 7511 to vacate a master arbitration award that had upheld State-Wide's denial of the provider's assigned no-fault benefits. Kings Civil granted the petition and State-Wide appealed.

In REVERSING the civil court's order and instead confirming the master arbitration award, the Appellate Term held:

The papers submitted by petitioner to the Civil Court were insufficient on their face to warrant the granting of any relief (see SP Medical, P.C. v Country-Wide Ins. Co., 20 Misc 3d 126[A], 2008 NY Slip Op 51230[U] [App Term, 2d & 11th Jud Dists 2008]). Petitioner submitted a document that was denominated an "Affirmation in Support." The only document submitted in support of the petition was one which was not affirmed "to be true under the penalties of perjury" (CPLR 2106). Indeed, the attorney who signed the document merely indicates that he "states as follows," which is insufficient under the law (see Puntino v Chin, 288 AD2d 202 [2001]; Jones v Schmitt, 7 Misc 3d 47 [App Term, 2d & 11th Jud Dists 2005]; see also A.B. Med. Servs. PLLC v Prudential Prop. & Cas. Ins. Co., 11 Misc 3d 137[A], 2006 NY Slip Op 50504[U] [App Term, 2d & 11th Jud Dists 2006]). Accordingly, the document is insufficient as an affirmation (see SP Medical, P.C., 20 Misc 3d 126[A], 2008 NY Slip Op 51230[U]).

In view of the foregoing, the petition to vacate the master arbitrator's award should have been denied. Furthermore, upon denying the petition, the court is required, pursuant to CPLR 7511 (e), to confirm the award (see Matter of Exclusive Med. & Diagnostic v Government Empls. Ins. Co., 306 AD2d 476 [2003]). While we do not reach the remaining contentions, we note that a special proceeding should terminate in a judgment, not an order (see CPLR 411).

"Delivery" Found to Mean Receipt for Purposes of CPLR 7511's 90-Day SOL

NO-FAULT – MASTER ARBITRATION AWARD – CPLR ARTICLE 75 SPECIAL PROCEEDING – STATUTE OF LIMITATIONS – "DELIVERY"
Matter of Lowe v. Erie Ins. Co.
(4th Dept., decided 10/10/2008)

CPLR 7511 requires that a special proceeding to vacate or modify an arbitration award must be made "within ninety days after its delivery" to the petitioner. The CPLR does not define "delivery," but CPLR 7507 provides that the arbitrator "shall deliver a copy of the award to each party in the manner provided in the agreement, or, if no provision is so made, personally or by registered or certified mail, return receipt requested." Regulation 68 concerning no-fault master arbitration procedures provides that "[t]he parties shall accept as delivery of the award the placing of the award or a true copy thereof in the mail, addressed to the parties or their designated representatives at their last known addresses, or by any other form of service permitted by law" (11 NYCRR § 65-4.10[e][3]).

Lowe commenced this special proceeding to vacate a no-fault master arbitration award 91 days after the American Arbitration Association mailed it to the parties, but 86 days after counsel for the petitioner received it. Erie Insurance Company moved to dismiss the petition based on CPLR 7511's 90-day statute of limitations, and Supreme Erie granted that motion.

In a case of first impression and relying on case law concerning labor arbitration awards, the Fourth Department REVERSED and held that, for purposes of 7511's use of the term "delivery", the 90-day limitations period runs from the petitioner's receipt of the no-fault master arbitration award, not its mailing. The Fourth Department noted that other New York courts had explicitly used the terms "receipt" and "received" in discussing the 90-day period set forth in CPLR 7511(a):

In attempting to distinguish the cases that use the word "received," respondent contends that those cases involved labor arbitration awards rather than no-fault master arbitration awards and thus are not governed by Insurance Department Regulation (11 NYCRR) § 65-4.10. We reject that contention, for two reasons. First, 11 NYCRR 65-4.10 (e) (3) simply sets forth the method of the delivery of the award to the parties. It does not define "delivery" as it is used in CPLR 7511 (a). Second, we agree with petitioner that, once a party commences a proceeding pursuant to CPLR article 75, the procedures set forth in that article control over those set forth in the Insurance Department Regulations. Thus, even if 11 NYCRR 65-4.10 (e) (3) constitutes an attempt to define "delivery" under CPLR 7511 (a), such an attempt would be improper. Were we to accept respondent's contention, the 90-day statute of limitations under CPLR 7511 (a) would have different measuring dates, depending on what type of arbitration was sought to be reviewed, and that would be an untenable distinction.

Back to court we go.

UM Arbitration Award of No Serious Injury Upheld

UM – SERIOUS INJURY THRESHOLD – REVIEW OF ARBITRATION AWARD
Matter of the Arbitration Between Reyes v. Liberty Mut. Ins. Co.
(App. Term, 2nd Dept., decided 7/10/2008)

Petitioners were involved in a motor vehicle accident with an uninsured vehicle owned and operated by Anthony Manuele. They commenced a personal injury action against Mr. Manuele and, upon his default, an inquest was conducted and default judgments were entered in their favor against Mr. Manuele. Petitioners then served Liberty Mutual with a demand for arbitration of their claims for uninsured motorist (UM) coverage. An arbitration hearing was held, and petitioners argued that the arbitrator was bound by the amount of the default judgments rendered in the personal injury action, and was obligated to render an award in the same amount of the judgments therein. Liberty argued that the arbitrator was not so bound, and offered a copy of the insurance policy which stated that any judgment for damages arising out of a lawsuit brought without its written consent was not binding upon the insurer. It was conceded that Liberty had not been aware of the default judgments rendered in the personal injury action until the date of the arbitration hearing. The arbitrator found that Liberty was not bound by the default judgments, and rendered an award in favor of Liberty, dismissing petitioners' claims based upon their failure to demonstrate that they sustained a serious injury within the meaning of Insurance Law § 5102 (d).

Petitioners then commenced this special proceeding to vacate the arbitrator's award pursuant to CPLR § 7511(b), arguing that it was irrational and that the arbitrator "exceeded his power". Although petitioners were unable to produce the UM or SUM endorsements under which they sought coverage, they claimed that their policy did not contain the language contained in the policy produced by Liberty. Petitioners argued that that it was irrational for the arbitrator to include such language as a provision in their policy. Moreover, even if such language was included in the applicable endorsement, the arbitrator exceeded his authority by determining an issue involving policy coverage rather than limiting himself solely to the issues of liability and damages. In opposition, Liberty argued that there were no grounds for vacatur of the award, since said provision was included in the policy. The arbitrator's award was neither irrational, nor did the arbitrator exceed his authority in determining petitioners' entitlement to benefits.

In AFFIRMING Queens Civil Court's denial of the petition to vacate the arbitrator's award, the Appellate Term held that the arbitrator did not exceed his authority in determining whether petitioners were entitled to benefits under their policy with Liberty, and that petitioners had failed to meet their burden of showing that the arbitrator's award was irrational or that it had no evidentiary support or was arbitrary and capricious.

UM Arbitration Award of $15,000 for Scalp Scar Confirmed Over Claims of Arbitrator Partiality, Bias, or Prejudice

AUTO – UM – CPLR 7511(B) APPLICATION TO VACATE ARBITRATION AWARD – PARTIALITY, BIAS AND PREJUDICE OF ARBITRATOR
Travelers Prop. Cas. Co. of Am. v. Swen
(Sup. Ct., Queens Co., decided 6/24/2008)

Swen arbitrated his hit-and-run UM claim against Travelers. After a hearing, the arbitrator found that that the accident was solely attributable to the negligence of the hit-and-run vehicle, the scar on Swen's scalp qualified as "a significant disfigurement" pursuant to Insurance Law §5102(d), and the value of that injury was $15,000. Swen brought this CPLR article 75 special proceeding to vacate the arbitrator's award pursuant to CPLR § 7511(b) based on the arbitrator's alleged partiality, bias and/or prejudice. Travelers cross moved to confirm the arbitration award.

Swen contended that the arbitrator and Traveler's defense attorney had worked together at The Robert Plan for many years. He alleged that "these critical facts" were never presented to him prior to the hearing, and that had he been aware of the close relationship between the arbitrator and Traveler's attorney, he would not have consented to the arbitrator's appointment. Additionally, he argued that the arbitrator has an unfavorable view of scarring injuries, relying on one other decision rendered by the arbitrator in a matter involving a scar.

Travelers opposed Swen's application and supported its cross motion with an affirmation of its counsel, who explained that although he and the arbitrator were employed by the same company for just over one year a decade earlier, at no time had he ever maintained a social relationship with the arbitrator. Travelers also pointed out the arbitrator had disclosed his employment history prior to the start of the arbitration, and both sides agreed to go forward.

In denying Swen's petition and granting Travelers' cross motion to confirm the award, Queens County Supreme Court Justice Jaime Rios held:

CPLR 7511(b) provides that an application to vacate an arbitration award by a party who has participated in the arbitration may only be granted upon the grounds that the rights of that party were prejudiced by corruption, fraud, or misconduct in procuring the award, partiality of the arbitrator, the arbitrator exceeded his powers or failed to make a final and definite award, or a procedural failure that was not waived (citations omitted).

* * * A party who proceeds with an arbitration with actual knowledge of a relationship between his adversary and the arbitrator, waives his objection to the arbitration (citations omitted). Furthermore, a party that has facts that would reasonably prompt further inquiry has a responsibility to ascertain the potentially disqualifying facts (citations omitted).

Swen waives any claim related to the bias or partiality of the arbitrator since he proceeded with the arbitration after learning of the prior relationship (citation omitted). His claim that he was not aware of the alleged relationship prior to attending the hearing is of no consequence, since it is undisputed that the arbitrator disclosed the prior employment relationship prior to the commencement of the arbitration and, although, he was given the opportunity to object, he chose to go forward.

An arbitrator is not required to justify his award, it must merely be evident that there exists a rational basis for it upon a reading of the record (citations omitted).

Here, the arbitrator's decision was based upon Swen's testimony, medical reports and records, his review of the scars and photographs taken. The arbitrator found that the scar on Swen's scalp, which he described as "clearly visible, as an extensive whitish discoloration" qualified as "a significant disfigurement". He concluded that "while the scarring on the knee and shoulder are also visible, they are on parts of the body that are generally concealed by clothing", and that Swen's other injuries were not based upon "competent medical proof".

Swen's allegation that he was prejudiced by the arbitrator's unfavorable view of "scarring injuries" is unsubstantiated.

What's In a Name? -- Appellate Term Rejects Affirmation of Unidentified Attorney

NO-FAULT – CPLR 7511 APPLICATION TO VACATE MASTER ARBITRATION AWARD – ATTORNEY AFFIRMATION
SP Med., P.C. a/a/o Dong Sheng Zheng v. Country-Wide Ins. Co.
(App. Term, 2nd Dept., decided 6/12/2008)

Various New York courts have previously held that attorney affidavits or affirmations may be used to sponsor or submit documents, transcripts, etc., which provide evidentiary proof in admissible form, even if the attorney lacks personal knowledge of the facts contained in those attachments. In this case, plaintiff's application to vacate a master arbitrator's award was supported by a petition and attorney's affirmation, with attached exhibits.

In REVERSING the Kings County Civil Court's order granting the medical provider's petition, the Appellate Term found that the papers submitted by petitioner to the Civil Court were insufficient on their face to warrant the granting of any relief:

Petitioner submitted a document that was denominated an "Affirmation in Support." Said document contained the following statements:

"The undersigned, an attorney duly admitted to practice law in the Courts of the State of New York, states as follows: Affirmant is associated with the firm of Gary Tsirelman P.C., the attorney of record for the Petitioner" (emphasis added).

The last page of the document contains the printed name of petitioner's law firm, Gary Tsirelman, P.C., as attorneys for petitioner. It also contains a signature line with an indecipherable pen marking, which purports to be a person's signature. Immediately below this "signature" is a listing of three printed names, each one next to a small box to be "checked off." However, not one of the three listed names has been "checked off" on this document. In addition, the document was not affirmed "to be true under the penalties of perjury" (CPLR 2106). Indeed, the attorney who signed the document, if that be the case, merely indicates that he or she "states as follows," which is insufficient under the law (citations omitted). Consequently, there is no proof of the name of the attorney who generated the document, and the document is insufficient as an affirmation.

Such are the perils of boilerplate form work. Check please.