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