STATE FARM MUTUAL AUTOMOBILE INSURANCE v. GEICO GENERAL INSURANCE COMPANY

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STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANYaso Adelfa Lugo, Petitioner v. GEICO GENERAL INSURANCE COMPANY, Respondent.

No. CV–004410–17/NA.

Decided: December 05, 2017

Nicolini, Paradise, Ferretti & Sabella, Country Road, for Petitioner. Law Office of Printz & Goldstein, Woodbury, for Respondent.

The following named papers numbered 1 to 3 submitted on this Motion and Cross Motion on September 6, 2017

papers numbered

Notice of Motion and Supporting Documents 1

Notice of Cross Motion and Supporting Documents 2

Opposition to Cross Motion & Reply Affirmation 3

On November 12, 2015, a vehicle owned by Adelfa Lugo, and insured by petitioner State Farm, was involved in a motor vehicle accident with a vehicle allegedly insured by respondent GEICO. As a result of the accident, and pursuant to its insurance contract with Ms. Lugo, State Farm paid her claim in the amount of $11,705.51. Thereafter, on May 25, 2016, petitioner filed an application for arbitration with Arbitration Forums, Inc. (“Arbitration Forums”), seeking reimbursement from respondent for damages to its subrogor's vehicle. Following a hearing, on August 3, 2016, Arbitrator Glenn Bachmann rendered a decision granting petitioner the claimed amount. Petitioner now moves under CPLR 7510, for an order confirming the arbitration award and granting counsel fees in the amount of $1,875.00. Respondent opposes and cross-petitions to vacate the award on the grounds that the arbitrator committed “misconduct” under CPLR 7511(b)(1)(i), and that he exceeded his authority in rendering the award under CPLR 7511(b)(1)(iii), as he lacked jurisdiction over the claim. The petitions are decided as follows.

New York public policy strongly favors arbitration (Hackett v. Milbank, Tweed, Hadley & McCloy, 86 N.Y.2d 146, 155 [1995]; Maross Constr., Inc. v. Central New York Regional Transp. Authority, 66 N.Y.2d 341, 346 [1985] ). The purpose of arbitration is to allow a final, binding resolution of parties' claims without resorting to the courts. Therefore, judicial review of arbitration decisions is extremely limited, and great deference is given to the determination of the arbitrator (State Farm Mut. Auto. Ins. Co. v. Fiduciary Ins. Co. of America, 2012 WL 6964858 [Sup Ct, N.Y. County 2012]; Matter of New York City Tr. Auth. v. Transport Workers' Union of Am., Local 100, AFL–CIO, 6 NY3d 332, 336 [2005] ).

A court, however, may vacate an arbitration award if it finds that the rights of a party that participated in the arbitration were prejudiced by some misconduct in procuring the award or by the arbitrator having exceeded his power (CPLR 7511[b][1][i] ), CPLR 7511[b][1][iii] ). An “excess of power occurs only where the arbitrator's award violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on an arbitrator's power” as set forth in CPLR 7511(b) (Matter of New York City Tr. Auth. v. Transport Workers' Union of Am., Local 100, AFL–CIO, 6 NY3d at 336). It is the burden of the party seeking vacatur of an award to demonstrate such prejudice (see North Syracuse Cent. School Dist. V North Syracuse Ed. Ass'n, 45 N.Y.2d 195, 199 [1978] ).

In bringing its cross-petition to vacate the arbitration award, respondent argues that Arbitrator Bachmann exceeded his authority by proceeding with the arbitration of petitioner's claim and rendering an award in petitioner's favor despite respondent having raised a lack of coverage affirmative defense. While respondent acknowledges that Arbitration Forums has jurisdiction in certain circumstances to hear claims between parties such as State Farm and Geico that are signatories to the Automobile Subrogation Arbitration Agreement, respondent contends that the assertion of coverage defense divests both Arbitration Forums and the arbitrator of such jurisdiction, and ripens the claim for judicial intervention. Respondent, however, overlooks an essential component of raising such a defense—namely, that a coverage defense must be accompanied by proof of the denial.

Section 2–4 of the Arbitration Forums, Inc. Rules (“Rules”), in relevant part, states:

“[t]he parties must raise and support affirmative ․ defenses in the Affirmative Pleadings/Defenses section or they are waived. If a denial/disclaimer of coverage is being pled ․ the case will be administratively closed as lacking jurisdiction so long as a copy of the denial/disclaimer of coverage letter to the party seeking coverage for the loss ․ is provided as part of the evidentiary material submitted. If no such letter is provided ․ the case will be heard and the arbitrator(s) will consider and rule on the coverage defense” (see plaintiff's Notice of Petition) (emphasis added).

According to the Automobile Decision published on August 4, 2016, Arbitrator Bachmann found that the evidence presented to him, which included a police report, a recorded statement, and damage photos, supported a determination that respondent was liable for the accident. He also noted that respondent had raised an affirmative defense that the policy had been cancelled for non-payment and re-instated after the date of loss. Respondent, however, never submitted any support of its defense. Arbitrator Bachmann further noted that respondent was going to submit a denial letter with policy evidence but that it was never received.

Respondent does not dispute that it never submitted supporting documentation of its affirmative defense. Rather, respondent makes the baseless argument that the arbitrator committed “misconduct” under CPLR 7511(b)(1)(i), by not allowing it to supplement its papers to demonstrate lack of coverage. The court flatly rejects this argument, as nothing in the Rules obligates an arbitrator to allow the submission of supplemental papers, and respondent has not cited any authority whatsoever for said proposition. Moreover, respondent had an opportunity to proffer evidentiary support of its coverage defense in the underlying arbitration, but failed to do so. As such, respondent cannot now claim that it was denied a full and fair opportunity to contest the coverage issue.

Based upon all of the foregoing, this court finds no basis for respondent's claim that the arbitrator either committed misconduct or exceeded his power in making the subject award under CPLR 7511(b)(1)(i) or CPLR 7511(b)(1)(iii), respectively. Accordingly, respondent's cross-petition to vacate the arbitration award is denied, in its entirety, and petitioner's application to confirm the award is granted.

Finally, petitioner's request for attorney's fees pursuant to Section 5–2 of the Rules, is granted to the extent that a hearing will be conducted on January 25, 2018, at 10 a.m., before this court, to determine the reasonableness of the fees incurred in pursuing collection of underlying arbitration award.

This constitutes the decision and order of the court.

So Ordered

SCOTT FAIRGRIEVE, J.

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