While delay was lengthy, the lack of prejudice excused it

Ava Acupuncture, P.C. v GEICO Gen. Ins. Co., 2012 NY Slip Op 50234(U)(App. Term 2d Dept. 2012)

“In this case, while the delay was lengthy, plaintiff does not deny that discovery and trial postponements intervened to delay the action and for reasons unrelated to the motion’s merits. Since the defenses address the effect of contractual terms on recovery and since plaintiff does not deny defendant’s claim that its NF-10 forms invoked a deductible, the claim of surprise or prejudice so great as to warrant the motion’s denial is not established.”

“Since plaintiff as assignee stands in the shoes of the insured, plaintiff cannot claim ignorance of the terms of the very contract under which it alleges entitlement to no-fault benefits compensation”

The Appellate Division grants an Article 75 petition and remands the matter back to AAA arbitration

Matter of Mvaic v Interboro Med. Care & Diagnostic PC, 2010 NY Slip Op 04522 (1st Dept. 2010)

“MVAIC defended the arbitration on the ground that the police accident report showed that the offending vehicle was registered out-of-state and was insured, but the arbitrator refused to consider that defense on the merits on the ground that MVAIC had failed to pay or deny the claim within 30 days of its submission, as required by the no-fault law (Insurance Law § 5106[a]; 11 NYCRR 65-3.8[a][1]; [c]). This was contrary to settled law (see generally Matter of State Farm Mut. Auto. Ins. Co. v Lumbermens Mut. Cas. Co., 18 AD3d 762, 763 [2005]) recognizing a narrow exception to the 30-day deadline for defenses based on lack of coverage (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 318 [2007]). New York Hosp. Med. Ctr. of Queens v MVAIC (12 AD3d 429 [2d Dept 2004], lv denied 4 NY3d 705 [2005]), relied on by the arbitrator, did not involve a lack of coverage issue.”

A few things should be observed.  First, note the special treatment the courts give MVAIC as opposed to that given the insurance carriers that my fellow brethren and I regulalry defend.  That being said, the Appellate Division correctly found the existence of a triable issue of fact as to coverage.  But note how the Appellate Division, Second Department has insulated most arbitration awards from judicial scrutiny, whereas the First Department appears willing to look at the merits of an arbitral dispute.

Good luck trying to vacate a no-fault arbitration award pursuant to Article 75

Matter of Chin v State Farm Ins. Co., 2010 NY Slip Op 04186 (2d Dept. 2010)

“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 can be vacated by a court pursuant to CPLR 7511(b) on only three narrow grounds: if it is clearly violative of a strong public policy, if it is totally or completely irrational, or if it manifestly exceeds a specific, enumerated limitation on the arbitrator’s power” (Matter of Erin Constr. & Dev. Co., Inc. v Meltzer, 58 AD3d 729, 729; see 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; Matter of Board of Educ. of Arlington Cent. School Dist. v Arlington Teachers Assn., 78 NY2d 33, 37; Cifuentes v Rose & Thistle, Ltd., 32 AD3d 816; Matter of Rockland County Bd. of Coop. Educ. Servs. v BOCES Staff Assn., 308 AD2d 452, 453). “An award is irrational if there is no proof whatever to justify the award'” (Matter of Erin Constr. & Dev. Co., Inc. v Meltzer, 58 AD3d at 730, quoting Matter of Peckerman v D & D Assoc., 165 AD2d 289, 296). “Even if the arbitrators misapply substantive rules of law or make an error of fact, unless one of the three narrow grounds applies in the particular case, the award will not be vacated” (Matter of Erin Constr. & Dev. Co., Inc. v Meltzer, 58 AD3d at 730; see Wien & Malkin LLP v Helmsley-Spear, Inc., 6 NY3d 471; Matter of Silverman [Benmor Coats], 61 NY2d 299, 308; Matter of Sprinzen [Nomberg], 46 NY2d 623, 629; Cifuentes v Rose & Thistle, Ltd., 32 AD3d at 821). “An arbitrator is not bound by principles of substantive law or rules of evidence, and may do justice and apply his or her own sense of law and equity to the facts as he or she finds them to be.”

If you think an arbitrator is going to be unfair, it is probably best to order a stenographer and obtain a transcript of the proceeding.  A proper record never lies.

EBT in aid of arbitration? No dice.

Matter of Travelers Indem. Co. v United Diagnostic Imaging, P.C., 2010 NY Slip Op 03944 (2d Dept. 2010)

“The test for ordering disclosure to aid in arbitration is “necessity,” as opposed to “convenience” (Hendler & Murray v Lambert, 147 AD2d 442, 443 [internal quotation marks omitted]). Thus, court-ordered disclosure to aid in arbitration is justified only where that relief is “absolutely necessary for the protection of the rights of a party” to the arbitration (Hendler & Murray v Lambert, 147 AD2d at 443 [internal quotation marks omitted]). [*2]

Here, the petitioner already has evidence sufficient to establish a potential defense in the arbitration proceedings (cf. 11 NYCRR 65-1.1[d], 65-3.2[c], 65-3.5[b], [c], [e]). Furthermore, the petitioner can potentially obtain the requested disclosure in the context of those proceedings (see 11 NYCRR 65-4.5[o][2]; cf. Matter of Katz [Burkin], 3 AD2d 238, 238-239). Finally, the record provides no indication that if a disclosure directive is made during those proceedings, the requested disclosure will, at that point, be unavailable (cf. Bergen Shipping Co., Ltd. v Japan Marine Servs., Ltd., 386 F Supp 430, 435 n 8). Under the circumstances, the petitioner failed to demonstrate the existence of extraordinary circumstances justifying court-ordered disclosure to aid in those proceedings. Accordingly, the Supreme Court improvidently exercised its discretion in granting the petition.”

The Appellate Division seems to be continuing its cruisade to insulate the arbitration forum from any collateral attack.  Travelers Indem. Co. v. United Diagnostic Imaging, P.C., 70 A.D.3d 1043 (2d Dept. 2010); Mercury Cas. Co. v. Healthmakers Medical Group, P.C., 67 A.D.3d 1017 (2d Dept. 2010).

Also, look at the the regulagtory provisions that were delimited by a “c.f.” cite: 65-3.2(c) “Do not demand verification of facts unless there are good reasons to do so. When verification of facts is necessary, it should be done as expeditiously as possible.”; 65-1.1(d) “[Claimant shall] provide any other pertinent information that may assist the Company in determining the amount due and payable.”; 65-3.5 (allowing verification via EUO under the tight claims determinative time frames).

It appears that this might have been a Mallela case, and the Court was not willing to allow the same type of discovery in arbitral proceedings that it would allow in plenary actions.  Compare, One Beacon Ins. Group, LLC v. Midland Medical Care, P.C., 54 A.D.3d 738 (2d Dept. 2008).

Also, note the purported ability to obtain discovery through the arbitration proceeding itself.  We saw this doctrine enunciated in another context a few years  ago.  In re Progressive Northeastern Ins. Co. (New York State Ins. Fund),  56 A.D.3d 1111 (3d Dept. 2008).  Yet, should the arbitrator refuse to grant you the sought after discovery, you are probably out of luck.  See, Mercury Cas. Co. v. Healthmakers Medical Group, P.C..

Finally, without knowing what the proofs were in this matter, I cannot say that I necessarily agree or disagree with the outcome of the ultimate disposition of the case.  I take issue, however, with the court denying discovery on the basis that the information could have been obtained during the claims determination phase, inasmuch as broad discovery is usually allowed where true coverage issues or non-precludable standing issues arise.

The failure to stay a compulsory arbitration on jurisdictional grounds precludes appellate review of the improperly arbitrated jurisdictional issue

In UM and SUM arbitration, it has been held that the failure to stay the arbitration within 20-days of the service of an intent to arbitrate waives the right to contest jurisdictional issues.  We learn today that a modified rule holds true for UM arbitrations.

State Farm Mut. Auto. Ins. Co. v Statewide Ins. Co., 2010 NY Slip Op 50588(U)(App. Term 2d Dept. 2010)

“Petitioner argued that the matter was not subject to mandatory arbitration since, although the application for arbitration alleged that its insured’s vehicle weighed over 6,500 pounds, its insured’s vehicle did not weigh more than 6,500 pounds (see Insurance Law § 5105 [a]). In a judgment entered January 14, 2009, the Civil Court denied the petition and dismissed the proceeding. The instant appeal by petitioner ensued.

Since petitioner failed to apply for a stay of arbitration prior to the arbitration, it waived its claim that the matter was not arbitrable under Insurance Law § 5105 (see Matter of Liberty Mut. Ins. Co. [Allstate Ins. Co.], 234 AD2d 901 [1996]; see also Matter of Silverman [Benmor Coats], 61 NY2d 299 [1984]; Matter of Utica Mut. Ins. Co. v Incorporated Vil. of Floral Park, 262 AD2d 565 [1999]). Consequently, the petition to vacate the arbitration award was properly denied.”

A default that is more than meets the eyes

The one thing that we can all say about Second Department practice, whether it be at the Appellate Term or the Appellate Division, is that the decision/orders of these courts never elucidate upon the facts of a given matter. This is not necessarily a bad thing, especially when you are on the losing side of a case. But when a case has lived an interesting life, it would be nice to know what happened.

While the Appellate Division’s decision tells a different story, a review of the record of appeal in Mercury Cas. Co. v. Surgical Center at Milburn, LLC, 2009 N.Y. Slip Op. 06516 (2d Dept. 2009), shows us that this is not your every day run of the mill “default” case.

This case started as a $12,000 no-fault AAA arbitration, where the Defendant sought to recover for surgery services performed on its Assignor. Plaintiff denied the claim on the basis that the surgery was not causally related to the motor vehicle accident. In support of this defense, Plaintiff presented the report of a radiologist who, upon a review of the applicable MRI films, found that the injuries were pre-existing, degenerative and not related to the underlying motor vehicle accident.

The lower arbitrator, upon a review of the record, did not find the Plaintiff’s proof convincing and awarded Defendant the principle sum of $12,000, along with interest, costs and attorney fees. It is not uncommon these days for an insurance carrier to lose in arbitration.

Plaintiff, as would be expected, filed a master arbitral demand and perfected its master arbitral brief. Similarly, Defendant proceeded to perfect his master arbitral brief. Following due deliberation, the master arbitrator upheld the award of the lower arbitrator, finding that the award was not defective as a matter of law. This decision was probably correct.

Since the amount in controversy, however, exceeded $5,000, Plaintiff sought a trial denovo. In this regard, a summons and complaint, fashioned as an action seeking a declaration that the surgery was not related to the motor vehicle accident, was filed with the Supreme Court and served upon Defendant. The action seeking a declaratory judgment spelled out the procedural history and the nature of the defense to the underlying no-fault claim.

Defendant failed to timely answer or move, and Plaintiff moved for leave to enter a default judgment against Defendant. Defendant opposed the motion, but failed to set forth a reasonable excuse or any evidence to support a potentially meritorious defense. All Defendant attached to his answering papers were the proofs he presented at the lower arbitration. In order to raise a potentially meritorious defense, Defendant would have had to obtain a radiology review that contradicted, point by point, Plaintiff’s own film review. As to the proof necessary to defeat a causation defense predicated upon a radiology review, please see my prior posts.

The Supreme Court denied Plaintiff’s motion. A notice of appeal was promptly filed. At the Appellate Division, Plaintiff moved to stay the Supreme Court case, pending the outcome and determination of the appeal. This motion was granted. The appeal was then perfected. Following due deliberation, the order of the Supreme Court was reversed and Plaintiff’s motion was granted. Consequently, the matter was remitted to the Supreme Court for the purpose of entering a judgment, declaring that the surgery was not causally related to the motor vehicle accident.

Here are a few thoughts. First, it would appear that the collateral estoppel consequences of this type of a decision are huge, as I have opined in previous posts. The second thing, and one of a practical matter, is that a demand for a trial denovo, in this type of proceeding, should be commenced as a declaratory judgment type of action. There are other ways to commence a trial de-novo, but these methods are not as effective or efficient as commencing it through a declaratory judgment action.

The failure to serve a demand for master arbitral review in the manner set forth in the regulations will foreclose review of the underlying award

Matter of Progressive Northeastern Ins. Co. v Seaport Orthopedic Assn. 2009 NY Slip Op 31915(U)(Sup Ct NY Co. 2009)

In this case, a master arbitrator failed to consider the merits of the insurance carrier’s appeal since there was insufficient proof as to whether the demand for master arbitral review was sent via certified mail, return receipt requested, in accordance with 65-4.10. Petitioner commenced an Article 75 proceeding in Supreme Court, New York County, to vacate the award of the master arbitrator.

The Supreme Court confirmed the award of the master arbitrator. The Court found the following:

“Courts are reluctant to disturb the decisions of arbitrators lest the value of this
method of resolving controversies be undermined.” Goldfinger v. Linger, 68 N.Y.2d 225,230 (1986)(citations omitted). The Notice failed to set forth compliance with 11 N.Y.C.R.R. 65-4.10(d)(3) in that it failed to set forth the manner of service. There is no basis to vacate the award under CPLR § 7511. From the face of the Notice, the Master Arbitrator was within his power to hold that service was improper, and refuse to reach the merits of the decision of the lower arbitrator.”

The above rationale appears to be based upon the more deferential standard that applies to non-compulsory arbitrations, as opposed to the Article 78 standard that applies to the review of PIP arbitrations. It also appears that the Appellate Division, First Department, in Travelers Indem. Co. v. Rapid Scan Radiology, P.C., 61 A.D.3d 466 (1st Dept. 2009), already held that the failure to comply with certain service provisions in 65-4.10, is deemed de minimus, as recognized below:

“The master arbitrator did not exceed his authority and his determination was not arbitrary or capricious. As to petitioner’s claim that respondent did not comply with the filing requirements of 11 NYCRR 65-4.10 (d) (2) because it failed to state the nature of the claim and grounds for review and failed to include a copy of the lower arbitrator’s award, this was not the basis of their challenge before the master arbitrator. Further, no prejudice has been shown since the parties submitted memoranda fully apprising the master arbitrator of the issues at hand and of the lower arbitrator’s decision

While it is conceded that Rapid Scan served its request by regular mail, not certified mail as required by 11 NYCRR 65- *467 4.10 (d) (3), as the Supreme Court found, petitioner participated in the master arbitrator’s review and recognized in its own submission that the defect could be viewed as “de minimus and/or harmless.”

Hopefully, Progressive preserved the argument set forth in Rapid Scan and will appeal this decision since it is contrary to established First Department precedent.

Causation – Be aware of seeking a trial de novo after a master arbitrator affirms an award

State Farm v. Stack
2008 NY Slip Op 07651 (2d Dept. 2008)

“A no-fault arbitration tribunal twice concluded that the defendant, James Stack, was entitled to benefits arising from an automobile accident. Subsequently, the plaintiff, State Farm Automobile Insurance Company (hereinafter State Farm), commenced a de novo plenary action seeking a determination that medical expenses for Stack’s hospitalization were for a condition unrelated to the accident and that Stack failed to demonstrate his entitlement to lost earnings.”

“An insurer seeking to deny no-fault benefits on the basis that a claimant’s condition is not causally related to an accident “has the burden to come forward with proof in admissible form to establish the . . . evidentiary foundation for its belief’ that the patient’s treated condition was unrelated to his or her automobile accident” (Mount Sinai Hosp. v Triboro Coach, 263 AD2d 11, 19-20). The testimony of State Farm’s expert witness, an anesthesiologist and pain management specialist, that his opinion was based solely upon a hospital discharge summary and insurance claim form, rendered his opinion speculative and of little probative value (see Gordon v Tibulcio, 50 AD3d 460).”

“In contrast, the testimony of Stack’s expert witness, a neurologist who based his opinion upon his examination of Stack and his review of Stack’s relevant medical records, including, inter alia, CT scans and magnetic resonance imaging, and determined that Stack’s symptoms first appeared within two weeks of the accident and progressively worsened, was sufficient to establish that Stack’s condition was causally related to the accident (see Scudera v Mahbubur, 299 AD2d 535, 536).”

Comment: Another case where the Appellate Courts are loathe to sustain an insurance carrier’s proof that a service is not causally related to a motor vehicle accident.