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The Rogak Report: 07 Sept 2006 ** Arbitration - Stay **

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  • Lawrence Rogak
    ONCE INSURER PARTICIPATES IN ARBITRATION IT CANNOT MOVE FOR A STAY Allstate Ins. Co. v. Merrick, NYLJ 9/07/06 (Supreme Court, New York County) (Index no.
    Message 1 of 1 , Sep 7, 2006

      Allstate Ins. Co. v. Merrick, NYLJ 9/07/06 (Supreme Court, New York
      County) (Index no. 105241/06) (BRANSTEN, j)

      Allstate Insurance Company petitioned for a Judgment staying an
      arbitration commenced by respondent Sallie Merrick.

      By Denial of Claim form dated September 27, 1996, Allstate informed
      Ms. Merrick that "all no-fault claims benefits will be denied
      effective 10/04/96."

      Ms. Merrick contended that in April 2002, "within the six-year period
      of the statute of limitations," she "properly commenced" an
      arbitration before the American Arbitration Association contesting
      Allstate's denial of no-fault benefits. In May 2002, Ms. Merrick
      provided additional information responsive to an inquiry from AAA.

      On January 9, 2003, after receiving no further communications, a
      paralegal for Ms. Merrick's counsel contacted AAA to ascertain a date
      for arbitration proceedings. The paralegal swears that AAA advised
      her that "they were unable to locate the file" and that an
      Arbitration Request Form and check for $40 should be resubmitted.
      That very day, the paralegal resubmitted the materials. Id.

      Again, the paralegal contacted AAA inquiring about the status of Ms.
      Merrick's arbitration. She "continued to call every six months and
      received the same response that [Ms. Merrick] would be hearing by way
      of a letter indicating the name of the Arbitrator and the date of the
      arbitration." After "many calls," the paralegal was advised to
      resubmit yet another set of papers. On February 17, 2005, Ms.
      Merrick's attorney forwarded the papers to AAA, along with a new
      check and a letter indicating that "the enclosed request was
      previously submitted." AAA returned the arbitration request because
      it was incomplete.

      AAA received additional papers on June 8, 2005. On June 15, 2005, AAA
      confirmed "acceptance of an arbitration request."

      On September 19, 2005, in response to an email from the AAA no-fault
      conciliator assigned to the matter informing Allstate that there
      was "no record of receiving a submission from Allstate to date," a
      Staff Claim Adjuster explained that the company had "no notice of
      this arbitration * * * This case has never been assigned, we never
      [received AAA] notice." That very day, the conciliator offered to
      forward Allstate a copy of the filings and notices.

      Subsequently, in a September 26, 2005 email to the AAA no-fault
      conciliator, an Allstate Senior Staff Claim Service Representative
      noted that the file on the claim was old and stated: "I would suspect
      that there are some statute of limitations applicable here."

      On October 19, 2005, counsel for Ms. Merrick and Allstate were
      informed that an arbitrator had been appointed and that a hearing was
      scheduled for November 22, 2005. Counsel were advised to "attend
      promptly with * * * witnesses and be prepared to present * * *
      proofs." A few days before the hearing, on November 17, 2005,
      attorney Peter C. Merani wrote the AAA case manager assigned to Ms.
      Merrick's claim, advising that "the above captioned matter has been
      assigned to our office to appear as counsel to the insurer in the
      pending No-Fault arbitration. Please note your files accordingly,
      advise us of all scheduled hearing dates, adjourned dates, direct all
      correspondences and awards to our offices."

      Proceedings were conducted on November 22, 2005. "Briefs were
      submitted and testimony was taken on that day." Attorney Sammy
      Lesman, an associate in the office of Peter C. Merani, Esq.,
      delivered an opening statement and cross-examined Ms. Merrick.
      After "oral testimony was declared closed" by the arbitrator, Mr.
      Lesman requested to respond by producing Allstate's No-Fault records
      regarding Ms. Merrick's claim. On November 25, 2005, Mr. Lesman
      sent "a copy of [Allstate's] submissions for the No-Fault Matter" to
      the AAA, requesting that the materials be forwarded to the assigned
      arbitrator. Allstate's counsel made no mention of any statute of
      limitations defense at the hearing or in its post-hearing
      submissions. In late February, the Arbitrator requested production of
      Ms. Merrick's 1996-1997 tax returns and proof that she did not work
      following the accident. Ms. Merrick's attorney submitted the
      materials to AAA and Allstate's counsel on March 3, 2006. On March
      10, 2006, Ms. Merrick's attorney was notified that a further hearing
      was scheduled for April 18, 2006. He was subsequently advised,
      however, that the April 18, 2006 hearing was cancelled and "that
      there would be a decision fairly soon."

      On April 17, 2006, Allstate commenced this proceeding, seeking a
      Judgment staying Ms. Merrick's arbitration on the ground that more
      than six years passed since denial of no-fault benefits. Allstate
      contends that a "review of the Arbitration Request Forms of Sallie
      Merrick stamped by [AAA] as found on their website adr.org, and in
      her submission shows that the earliest possible receipt date of her
      application is February 22, 2005," which is beyond the statute of
      limitations. Allstate also requests an Order "staying the
      enforcement of any judgment" entered in accordance with the

      The following day, "an attorney from the Law Offices of Peter C.
      Merani appeared on behalf of [Allstate] for the hearing on April 18,
      2006." Ms. Merrick's counsel, believing that the session had been
      canceled, did not appear.

      On April 19, 2006, Ms. Merrick's attorney received Allstate's
      Verified Petition. Ms. Merrick opposed Allstate's application. She
      urged that she should not be prejudiced simply because her
      submissions were misfiled once in 2002, and again in 2003. Ms.
      Merrick pointed out that the initial April 2002 arbitration request
      was sent to Allstate's counsel; thus, Allstate had notice of the
      dispute and the AAA filing within the statute of limitations.

      The Court held, first, that "Because Allstate participated in the
      arbitration proceeding-Allstate's counsel made an opening statement,
      cross-examined Ms. Merrick and submitted evidence, it waived its
      rights to seek a judicial stay. CPLR 7503(b) provides that 'a party
      who has not participated in the arbitration * * * may apply to stay
      arbitration on the ground that * * * the claim sought to be
      arbitrated is barred' by the statute of limitations applicable to the
      same causes of action under New York law."

      "Allstate argues that because Ms. Merrick did not comply with the
      provisions of CPLR 7503(c), which provides that a 'party may serve
      upon another party a demand for arbitration or notice of intention to
      arbitrate' that must be served in a particular manner and must set
      forth specified information, it is still free to seek a stay
      notwithstanding its participation. Allstate is wrong."

      "CPLR 7503(c) affords a party desirous of arbitrating a claim with a
      mechanism to impose a very short and strict 20-day deadline for
      challenging arbitrability, including raising the argument that
      arbitration is time barred. Within 20 days of proper service of a
      valid CPLR 7503(c) notice or demand, a party seeking to avoid
      arbitration on statute-of-limitations grounds must apply to stay
      arbitration or suffer the consequences of being precluded from
      raising the argument in court at any time-before or after the
      arbitration-regardless of whether the party actually participates in
      the proceedings. See, CPLR 7503(c); CPLR 7511(b)(2)(iv)."

      "In contrast, when, as here, there has been no CPLR 7503(c) notice or
      demand to arbitrate, there is no strict 20-day limit for applying to
      stay arbitration and a party that did not participate in the
      proceedings retains the right to challenge the award because the
      arbitrated claim was time barred. CPLR 7503(c), however, does not in
      any way nullify the rule that a participant in the arbitration cannot
      subsequently seek a judicial stay based on passage of the statute of

      "That Allstate informed the AAA in an informal email that it
      suspected 'there are some statute of limitations' issues, is equally
      unavailing. To obtain a judicial stay on statute-of-limitations
      grounds, Allstate was required to commence a special proceeding
      before participating in the arbitration. It cannot make arguments
      before the arbitrator, conduct cross-examination and submit evidence-
      costing all of the parties time and money-and then, for the first
      time, argue to the Court that the matter should never have gone to
      arbitration in the first place because the claim is time barred."

      "Accordingly, it is ORDERED and ADJUDGED that the petition is denied
      and the proceeding is dismissed."

      Comment: One has to ask why Allstate's counsel did not move to stay
      the arbitration BEFORE participating in it, since the statute of
      limitations issue was evidently known to Allstate from the
      inception. However, even if Allstate had brought such a petition
      before the arbitation, they probably would not have been successful
      in light of the applicant's evidence that she submitted her request
      for arbitration on AAA two years earlier (with a copy to Allstate),
      but that AAA simply lost her papers.

      Larry Rogak
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