Lack of personal jurisdiction for an out of state insurance carrier

Pavlova v American Ind. Ins. Co., 2018 NY Slip Op 50943(U)(App. Term 2d Dept. 2018)

To me, this is the ultimate fight.  The accident occurred in New York and putting aside whether the deemer applies, you cannot drag the carrier into a NY Court.

“In this action by a provider to recover assigned first-party no-fault benefits, defendant moved to dismiss the complaint, pursuant to CPLR 3211 (a) (8), on the ground that the Civil Court lacked personal jurisdiction over defendant. In several affidavits in support of the motion, defendant’s employees asserted that defendant is a Pennsylvania company, which is not licensed to do business in New York, maintains no offices in New York, has no agents operating out of, or representatives soliciting business in, New York, and does not own, use or possess any real property in New York. Furthermore, defendant argued that it had been held in prior cases that the courts in the State of New York cannot exercise personal jurisdiction over this defendant. Plaintiff opposed the motion with an affirmation by its counsel, who made unsupported assertions that defendant had transacted business in New York by knowingly issuing policies to New York drivers, and that defendant had established an ongoing relationship with defense counsel in New York, thereby subjecting defendant to jurisdiction in New York. Defendant’s attorney asserted in a reply affirmation that the arguments raised by plaintiff had been rejected by this court in Compas Med., P.C. v American Ind. Ins. Co. (47 Misc 3d 134[A], 2015 NY Slip Op 50481[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2015]). Defendant appeals from an order of the Civil Court entered August 11, 2016 denying defendant’s motion to dismiss the complaint.

Defendant made a prima facie showing that personal jurisdiction had not been obtained over it. “In opposing a motion to dismiss pursuant to CPLR 3211 (a) (8) on the ground of lack of personal jurisdiction, ‘a plaintiff need only make a prima facie showing that such jurisdiction exists’ ” (Hopstein v Cohen, 143 AD3d 859, 860 [2016], quoting Lang v Wycoff Hgts. Med. Ctr.[*2]55 AD3d 793, 798 [2008]). In the case at bar, the affirmation of plaintiff’s attorney was insufficient to demonstrate that personal jurisdiction over defendant existed under the Civil Court’s long-arm statute (see CCA 404 [a]), as plaintiff’s counsel failed to establish that he possessed personal knowledge of the facts”

I hate ending a post with a categorical statement that does not complete the story.  Assume Plaintiff filed an arbitration?

“While personal jurisdiction is required for the exercise of the state’s judicial power over a party, arbitration is a form of dispute resolution almost wholly independent of the court system (see Siegel, NY Prac § 586 at 1050 [5th ed 2011]). “Except for a few basic guarantees, such as the right to be heard and to be represented by counsel at the arbitration, the procedural law of the state is also inapplicable to arbitration, including the rules of  [***5] evidence” (id. at 1052). In short, personal jurisdiction is not required for arbitration that is controlled by the parties’ agreement. Therefore, the Supreme Court erred in granting the petition to permanently stay arbitration on the ground that there was no personal jurisdiction over AIIC.”  American Ind. Ins. Co. v Art of Healing Medicine, P.C., 104 A.D.3d 761, 763 (2d Dept. 2014)
And then, the Court held:  “Although this Court has held, HN5 in the context of claims for uninsured or supplemental underinsured motorist benefits, that ” ‘[a] party will not be compelled to arbitrate absent evidence affirmatively establishing that the parties expressly agreed to arbitrate their disputes’ ” (Matter of Progressive Specialty Ins. Co. v Louis, 122 AD3d 637, 638, 996 NYS2d 89 [2014], quoting Matter of State Farm Mut. Auto. Ins. Co. v Juma, 44 AD3d 963, 963, 844 NYS2d 364 [2007]; see Matter of State Farm Mut. Auto. Ins. Co. v Torcivia, 277 AD2d 321, 715 NYS2d 75 [2000]), those cases do not apply to claims for the payment of first-party benefits, ostensibly because Insurance Law § 5106 (b) mandates every insurer to provide a claimant with the option to arbitrate disputes concerning first-party benefits. Indeed, the obligation to arbitrate is not found in the policies but is imposed upon the policies by the No-Fault Law”  Matter of American Ind. Ins. Co. v Nova Acupuncture, P.C., 137 A.D.3d 1270, 1272 (2d Dep,. 2018)
I guess Oleg should put on his Arbitration hat and leave Room 809 in Civil Court, Kings County for this one.

Infants compromise order not needed to proceed in arbitration in assignee case

Matter of Fast Care Med. Diagnostics, PLLC/PV v Government Employees Ins. Co., 2018 NY Slip Op 03831 (2d Dept. 2018)

“We agree with the Supreme Court that the arbitrator’s award was irrational and in conflict with CPLR 1209, which applies “only where an infant is a party” to an arbitration proceeding (Goldenberg v Goldenberg, 25 AD2d 670, 670, affd 19 NY2d 759; see Schneider v Schneider, 17 NY2d 123, 127). The infant patient was not a party to the arbitration; rather, Fast Care, as the infant’s assignee, was the party that brought the arbitration (see 11 NYCRR 65-3.11[a]). Therefore, we agree with the court that the arbitrator disregarded established law in determining that the requirements of CPLR 1209 applied here (Schneider v Schneider, 17 NY2d at 127; see Goldenberg v Goldenberg, 25 AD2d at 670). Furthermore, the master arbitrator’s determination that the assignment of benefits was not effective was not based on any requirement set forth in established law or regulations (see generally 11 NYCRR 65-2.4[c]).”

Bonus attorney fees: “Fast Care did not demonstrate its entitlement to an award of an attorney’s fee, as the arbitrator did not reach the issue of whether the subject claims were “overdue””

What is substantial evidence?

Matter of Marine Holdings, LLC v New York City Commn. on Human Rights, 2018 NY Slip Op 03303 (2018)

Every Article 75 compulsory arbitration case involving legal insufficiency or credibility of evidence claims is subjected to a substantial evidence review.  The term is a misnomer as we learned this week from the Court of Appeals:

“”Quite often there is substantial evidence on both sides” of an issue disputed before an administrative agency (Matter of Ridge Rd. Fire Dist. v Schiano, 16 NY3d 494, 500 [2011]), and the substantial evidence test “demands only that a given inference is reasonable and plausible, not necessarily the most probable” (id. at 499 [internal quotation marks and citation omitted]). Applying this standard, “[c]ourts may not weigh the evidence or reject [a] determination where the evidence is conflicting and room for choice exists” (Matter of State Div. of Human Rights (Granelle), 70 NY2d 100, 106 [1987]). Instead, “when a rational basis for the conclusion adopted by the [agency] is found, the judicial function is exhausted. The question, thus, is not whether [the reviewing court] find[s] the proof . . . convincing, but whether the [agency] could do so” (id. [citations omitted]).”

The Court’s abdication of the ability to review administrative awards that are inherently questionable but not “off the charts wrong” is improper.  We have three levels here.  The first is that the award has support.  The second is the award smells bad.  The third is the award is “off the charts wrong”.

We all agree the Courts have no business addressing level 1 and must address level 3.  It is level 2 that forms the basis of so many appeals.  I only suggest that a deeper look at level 2 cases is warranted.  The dissent (I did not publish it) did just that.

Arbitration is waivable

In my other life, I represent all sorts of people who have been wronged.  One of the worst things I encounter when advocating for people who have had their insurance coverage wrongfully disclaimed is the arbitration clause.  Imagine having to travel to California to file an arbitration when an insurance carrier abandons you prior to trial in NY  because you allegedly violated a condition of the medical malpractice policy?  It is reality, and the FAA will not protect you.

This case involves arbitration under Article 75 and a more reasonable standard in deciding whether the arbitration clause may be bypassed.  This is a good case – although it has so little to do with no-fault here in NY.  But, it is interesting.

Adams v Kent Sec. of N.Y., Inc., 2017 NY Slip Op 09274 (1st Dept. 2017)

“Applying the foregoing standard, we hold that plaintiff has made a preliminary showing that the fee sharing and venue provisions in the arbitration agreement have the effect of precluding him from pursuing his statutory wage claim in arbitration. We remand for further proceedings, consistent with Brady, which, at a minimum, would include proof of plaintiff’s income and assets, as well as proof of the expected costs and fees to arbitrate this dispute in Florida. Because the parties’ arbitration agreements contains a severability clause, in the event plaintiff prevails on his claim that the aforementioned fee sharing and venue provisions should be held unenforceable under Brady, the matter should proceed to arbitration in New York, with defendant to bear the costs of the arbitration.”

This time Country-Wide gets the Appellate Division to reverse AAA

Country-Wide Ins. Co. v Radiology of Westchester, P.C., 2017 NY Slip Op 01461 (1st Dept. 2017)

“The master arbitrator’s award was arbitrary because it irrationally ignored petitioner’s uncontroverted evidence establishing that the assignor failed to appear at the three scheduled examinations under oath (cf. Hertz Corp. v Active Care Med. Supply Corp., 124 AD3d 411 [1st Dept 2015]; Easy Care Acupuncture P.C. v Praetorian Ins. Co., 49 Misc 3d 137[A], 2015 NY Slip Op 51524[U] [App Term, 1st Dept 2015]).”

Again, the blame on this goes to the master arbitration system that rubber stamps the awards of the lower arbitrators.  I never read Petrofsky to require a master arbitrator to ignore evidence that proves a factual proposition or a well known legal principle.  These master arbitration awards (and I master arbitrate a lot of cases) usually affirm arbitrator awards because they believe that most review is out of their hands.  Read this case, Hillside, Professional Chiro and understand that legal challenges to lower arbitration awards are fair game. Factual challenges when there are no facts to support a key proposition of fact are fair game for review, but a closer call for affirmance than legal challenges.  There are other cases that are escaping me – but those involve MVAIC.

As an aside,  I have 7 masters on IME no shows (same date of loss and assignor/assignee) where the lower arbitrator misconstrued an IME letter and affidavit.  The error is as clear as the day is long.  That said, I am not going to blame the lower arbitrator because there was a lot going on in the file and he probably missed it.  Mistakes happen and that is why we have appellate courts and a master arbitration tribunal.  I have a feeling the master is going to affirm because of “Petrofsky” and it will take Supreme Court  to vacate the awards.

 

Rocket Docket – to the moon

Matter of Global Liberty Ins. Co. v Coastal Anesthesia Servs., LLC, 2016 NY Slip Op 08964 (1st Dept. 2016)

What’s interesting about this case is that the submissions were five days late (accompanied by a showing of law office failure in the moving memorandum of law) and Respondent provider did not object to the tardy submissions.  Rather, Respondent provider sought time to put in a rebuttal.   The arbitration was held 6 months following the uploading of the evidence.

Lower arbitrator Ann Lorraine Russo decided that rocket docket preclusion was proper and Master Arbitrator Donald DeCarlo gave his “Petrofsky” stamp of approval.  Clearly, I was displeased by what I sensed as a complete perversion of the regulation.

Supreme Court without directly saying it wrote that it did not agree with the rulings of the lower arbitrator but would not disturb what amounted to a broken arbitration system on this issue.  The Appellate Division did not want to get involved.   “The decision of the Master Arbitrator in affirming the arbitration award had evidentiary support, a rational basis, and was not arbitrary and capricious (see Matter of Petrofsky [Allstate Ins. Co.], 54 NY2d 207, 211 [1981]). The original arbitrator properly acted within her discretionary authority to refuse to entertain any late submissions proffered by petitioner (see 11 NYCRR 65-4.2[b][3]; Matter of Mercury Cas. Co. v Healthmakers Med. Group, P.C., 67 AD3d 1017 [2d Dept 2009]).”

At the end of the day, AAA and DFS needs to take a hard look (and I have sources who have said they will) at the application of 11 NYCRR 65-4.2.  This was the prototypical example of AAA just does not getting it and the courts turning a blind eye to a real problem.  I sense needed regulatory change is on the horizon.

Also remember that you (the participant) have the right to rate the performance of an arbitrator.  I just wish we could rate the performance of the master arbitrators.   But does anyone read what I wrote after I get a decision like this one?  smh.

 

 

Voluntary inter-company arbitration

Nationwide Mut. Ins. Co. v Geico Cas., 2016 NY Slip Op 51700(U)(App. Term 2d Dept. 2016)

(1) “Geico further stated, among its contentions, that Nationwide was aware of the policy’s $25,000 property damage limit, that the amount of damage to the three vehicles involved in the accident exceeded the property damage limit in the policy, and “is pending signed releases to issue all parties a pro rata amount for reimbursement.”

(2) “In its petition to confirm, Nationwide conceded that it had received $17,399.95 from Geico, but stated that it was still owed the remaining unpaid balance of $4,437.33.”

(3) The arbitrator, in a decision published on September 10, 2013, noted that Geico had not submitted a declarations page from the policy to confirm the policy limits, and awarded Nationwide the total sum of $22,337.28 ($21,837.28 plus a $500 deductible).

(4) Nationwide sought the remainder, which was granted.  Geico objected but lost.

(5) “Furthermore, where the arbitration agreement provides that the arbitrator may not make an award in an amount beyond the policy’s limits, an award in excess of those limits is subject to vacatur, pursuant to CPLR 7511 (b) (1) (iii), as an award in excess of the arbitrator’s power (see Matter of Brijmohan v State Farm Ins. Co., 92 NY2d 821 [1998]).”

(6) “The provision upon which Geico relies, however, is not a specific limitation on the power and authority of the arbitrator to make an award in excess of the policy’s limits. Instead, the provision affords Geico the option to reject arbitration, but Geico did not exercise that option.”

(7) Geico loses.

The lesson – reject voluntary arbitration when you sense the policy limits are going to be exceeded.

Loss transfer

Matter of DTG Operations v AutoOne Ins. Co., 2016 NY Slip Op 07133

For all that has been written in assigned first-party litigation, there has been an equal dearth of writing on loss transfer issues.  There are plenty of loss transfer cases; just very few of them make it passed Arb forums.

This case was interesting because it involved a loss transfer case brought due to the cv vehicle being insured a passenger policy of insurance yet being used as livery vehicle.  While the cv insurance vehicle carrier had the right to disclaim, I am left to assume that knowledge of the true use of the vehicle came after payments were made or denials issued on grounds other than fraudulent procurement.  Like many things in life, this leads the carriers into the murky area of intercompany arbitration.

CV insurance carrier notwithstanding insuring vehicle as a passenger vehicle filed (it appears) a demand for loss tranfer on the grounds that it was a for hire vehicle.  Without reading the record and looking at the decision from the Court, the Adverse vehicle argued that CV vehicle was a passenger vehicle and had no right to engage in inter-company arbitration.  DTG struck out at arb forums, Supreme Court and now at the Appellate Division.

“The AutoOne vehicle had been registered as a livery vehicle for the five years prior to the accident, and the change of registration — just five days prior to the date of loss — was orchestrated by an insurance agent who was illegally insuring “dollar vans” as personal use vehicles. All four of the injured passengers confirmed that the AutoOne vehicle was being used as a vehicle for hire and for commercial purposes on the accident date, and the registration on the AutoOne vehicle was switched back to a “livery” vehicle shortly following the accident. Thus, there was adequate support for the arbitrator’s finding that the AutoOne vehicle was being used, “principally,” for the “transportation of persons or property for hire,” and loss transfer applied (Matter of State Farm Mut. Auto. Ins. Co. v Aetna Cas. & Surety Co., 132 AD2d 930 [4th Dept 1987], affd 71 NY2d 1013 [1988]; Matter of 20th Century Ins. Co. [Lumberman’s Mut. Cas. Co.], 80 AD2d 288, 290 [4th Dept 1981]).”

IME no show not upheld

Matter of Unitrin Advantage Ins. Co. Kemper A. Unitrin Bus. v Professional Health Radiology, 2016 NY Slip Op 06767 (1st Dept. 2016)

I read through this case.  The carrier left out page two of one of the letters (that contain the reimbursement language) and, after the arbitration, sought to include it in its Petition to set aside the arbitration award.  The Supreme Court was not impressed and neither was the Appellate Division.  But had Unitrin (or counsel) not committed as many errors, the rocket docket rule appeared to be malleable upon a finding of law office failure.  I am looking to see how this concept plays out in future cases.

” The no-fault regulations include mandatory notice requirements governing insurer requests for both IMEs and examinations under oath (11 NYCRR 65-3.5[e]). The regulations expressly provide that the insurer “shall inform the applicant at the time the examination is scheduled that the applicant will be reimbursed for any loss of earnings and reasonable transportation expenses incurred in complying with the request” (id.). Unitrin failed to establish that the requisite regulatory language was contained within its November 30, 2011 letters sent to the assignors, and, based on the multiple errors committed by Unitrin, it failed to establish inadvertent law office error, or that the cases should be remanded, in the interest of justice, for a new arbitration hearing.”

In addition, the Court correctly held that: “In a proceeding for judicial review of an award by a master arbitrator, an attorney’s fee shall be fixed by the court adjudicating the matter” (Matter of GEICO Ins. Co. v AAAMG Leasing Corp., 139 AD3d 947, 948 [2d Dept 2016]; see 11 NYCRR 65-4.10[j][4])”

Unfortunately for the provider, AAMG limits reimbursement to $70 an hour.

 

Snooze and lose rule – Tremendous consequences

Matter of Allstate Ins. Co. (Cappadonia), 2016 NY Slip Op 06584 (4th Dept. 2016)

This is every Plaintiff personal injury attorney’s dream.  Surprisingly, it happens all the time.

(1) “Respondent obtained an automobile liability insurance policy from petitioner for a pickup truck and two passenger vehicles. The policy provided SUM coverage to respondent, and also included an arbitration clause. While the policy was in effect, respondent sustained personal injuries when a motorcycle he was operating was struck by an allegedly underinsured vehicle. Although the motorcycle was not covered under the policy issued to him by petitioner, respondent made a claim with petitioner for SUM coverage. Petitioner disclaimed coverage on the ground that the motorcycle was not covered under the policy, prompting respondent to demand arbitration pursuant to CPLR 7503 (c). More than five months after respondent’s demand, petitioner commenced this proceeding to stay arbitration, asserting, as it did in the disclaimer letter, that no SUM coverage existed in connection with the accident because the motorcycle on which petitioner was riding was not a covered vehicle under the policy.”

(2) “We agree with respondent that the petition to stay arbitration is time-barred because it was not filed within 20 days of respondent’s formal arbitration demand”

New York’s 20-day rule to stay an arbitration when there is palpably no coverage is just brutal at times.  You snooze, you lose.