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The Rogak Report: 29 May 2009 *No Fault - Arbitration - Statute of Limitations*

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  • insurancelawyer
    ARBITRATOR PROPERLY DISMISSED NO-FAULT ARB BASED ON STATUTE OF LIMITATIONS Edited by Lawrence N. Rogak Matter of Giampaola v. Allstate Insurance Company, 2009
    Message 1 of 1 , May 29, 2009

      ARBITRATOR PROPERLY DISMISSED NO-FAULT ARB BASED ON STATUTE OF LIMITATIONS

      Edited by Lawrence N. Rogak

      Matter of Giampaola v. Allstate Insurance Company,

      2009 NY Slip Op 31151(U) (Supreme Court, New York County) (Judge: Shirley Werner Kornreich)

      In this petition, Giampaola moved for an Order vacating the Decision of the Master Arbitrator and the Arbitration Award in a dispute over no-fault benefits.  Allstate sought to affirm the arbitration decision.

      This No-Fault arbitration arose from a January 26, 1990 accident in which petitioner allegedly was hurt. After Allstate denied petitioner's claims for $56,000 in lost earnings and $43,195.26 in medical bills spanning a four-year period from December 1990 through January 1994, petitioner submitted a Demand for Arbitration on or about October 21, 1996.

      In an Arbitration Award dated January 30,2001 (the first Award), Arbitrator Kurz dismissed the application "without prejudice to renew following the parties' failure to provide the Arbitrator with the necessary documentation to fully and fairly adjudicate the claim."

      "Petitioner filed a new Demand for Arbitration dated February 1, 2006. After a hearing held on May 19, 2006 and declared closed by the Arbitrator on September 11, 2006, Arbitrator Horowitz issued an Award, dated September 12,2006 (2006 Award), which held that petitioner's claim was barred by a breach of contract's six-year statute of limitations. The Arbitrator further found that the new Demand barred by CPLR 205(a) because it was filed more than six months after the first arbitration had been dismissed. And he found that the statute of limitations was not tolled during the four years it took the first Arbitrator to render an Award.

      Petitioner appealed the 2006 Award to a Master Arbitrator (MA), who affirmed it on December 28,2006.  The MA Award decision was delivered to Allstate on January 1 1,2007.

      The Court stated first that "an arbitration award made after all parties have participated will not be overturned merely because the arbitrator committed an error of fact or of law.   The issues before this Court are based entirely on statutory interpretation, which removes any assessment of evidentiary support from the analysis. Thus, if the MA's Award was rational, that is if it constitutcd a rational construction of the applicable statutes, then it must be upheld."

      "It was not error for the MA to consider Allstate's limitations argument because failing to apply for a judicial stay prior to arbitration waives only the right to bring a subsequent application for a stay in court. The MA concluded that under CPLR 7502(b), an arbitrator retains the power to apply a limitations bar even if no application to stay arbitration on that basis has been brought. This exact argument was made in Motor Vehicle Accident Indemnifiation Corp. v. Aetna Cas. & Sur.89 N.Y.2d at 222-223, where the Court of Appeals found:  'In asserting its Statute of Limitations defense, Aetna failed to avail itself of its opportunity to have the issue of timeliness decided judicially pursuant to CPLR 7503 (b), which permits an application to stay arbitration on the grounds that the claim sought to be arbitrated is time-barred. CPLR 7502 (b) further provides that the failure to assert the limitations bar shall not preclude its assertion before the arbitrators and, except as provided in subdivision (b) of section 7511, such exercise of discretion by the arbitrators shall not be subject to review by a court on an application to confirm, vacate or modify the award."

      "Thus, while CPLR 7502 (b) states that the arbitrators' decision to apply the Statute of Limitations is generally insulated from judicial review, the phrase 'except as provided in subdivision b of section 7511" makes it clear that our review is not completely foreclosed."

      "The Court of Appeals reasoned that the issue was whether the arbitrator had made a rational, albeit erroneous, decision on which statute of limitations applied. In upholding the award, the Court of Appeals stated that because the issue of the accrual of the limitations period was judicially unsettled at the time the award was rendered, the award was rational."

      "Here, the MA rationally concluded that Allstate's time to move for a stay because petitioner never presented proof of service of the demand, that more than six years had passed since Allstate refused to pay petitioner's claims, and that there was no applicable tolling provision."

      "However, the MA also based its award on the conclusion that there was no error of law in the Lower Arbitrator's Award. In that Award, the Lower Arbitrator concluded that petitioner was procedurally barred under CPLR 205(A) because he renewed the arbitration demand more than six months after the dismissal of his earlier claim. CPLR 205(A) provides, in pertinent part, if an action is timely commenced and is terminated in any other manner than by a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant, a dismissal of the complaint for neglect to prosecute the action, or a final judgment on the merits, the plaintiff ... may commence a new action upon the same transaction or occurrence ... within six months after the termination ...."

      "Here petitioner waited five years. On this basis, the MA's and the Lower Arbitrator's Awards were rational and should be upheld. The Court need not address petitioner's additional grounds."

      Comment: I don't recall seeing CPLR 205(a) applied by an arbitrator before, which makes this Court's upholding of the dismissal of the claim even more interesting.  One would have thought that the "equities" of the case would be seen sympathetically by the Court in favor of the claimant, in light of the fact that the first Arbitrator took four years to render a decision in which she merely ruled that she did not have enough evidence.   Still, once that decision was rendered, the claimant waited five more years before re-filing.  That was dumb.  And he paid the price.  Or, if it was his attorney's fault, the attorney may end up paying the price.

      Larry Rogak

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