Key Takeaway
Voluntary inter-company arbitration case where insurer exceeded policy limits in award, highlighting importance of rejecting arbitration when limits may be surpassed.
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 ).”
(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.
