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.
