Chubb Insurance Company v. Geico Insurance

Full title: CHUBB INSURANCE COMPANY, Plaintiff v. GEICO INSURANCE COMPANY, Defendant

Court: Supreme Court of the State of New York, New York County

Date published: Jul 20, 2007

2007 N.Y. Slip Op. 32356 (N.Y. Sup. Ct. 2007)

Opinion

0105012/2007.

July 20, 2007.

[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] MARCY L. KAHN, J.

By notice of petition and petition dated April 4, 2007, and the exhibits annexed thereto, petitioner Chubb Insurance Company ("Chubb" or "petitioner"), moves for an order pursuant to CPLR § 7511(b)(1)(iii) vacating the amended award of the arbitrator, dated January 17, 2007, in the arbitration proceeding between petitioner and respondent, GEICO Insurance Company ("respondent" or "GEICO") on the ground that the arbitrator exceeded her powers, and seeks to reinstate the original award issued by the arbitrator on November 3, 2006. For the reasons stated, and in the absence of opposition from respondent, petitioner's motion to vacate the amended arbitration award is granted on default and the original award is reinstated.

I. FACTUAL AND PROCEDURAL BACKGROUND

On January 22, 2003, Chenille Bonner ("Bonner"), a New York City Transit Authority ("NYCTA") bus driver, was on duty in her bus when it became involved in a three-vehicle accident. As the NYCTA workers' compensation insurer, Chubb paid $42,065.56 in benefits to and on behalf of Bonner as a result of the accident. (Pet. Exh. B).

In accordance with Insurance Law § 5105, Chubb filed an inter-company arbitration demand against GEICO and Statewide Insurance Company ("Statewide"), the insurers of the other two vehicles, seeking reimbursement of the first-party benefits it had paid to its insured. As one of the vehicles involved in the accident was a NYCTA bus weighing in excess of 6500 pounds unloaded and constituting a vehicle for hire (see Pet. Exh. A), the jurisdictional requirements of 5105(a) were satisfied. The case was then submitted to arbitration with Arbitration Forums Inc. ("AFI") pursuant to Section 5105(b) and 11 NYCRR § 65.10 of the no-fault regulations on September 19, 2005. (Pet. Exh. C).

On October 31, 2006, the arbitration was held before the AFI arbitrator, Sabrina Owens ("Owens" or the "arbitrator"). On November 3, 2006, Owens issued her decision in the matter under AFI Docket No. I068-07725-05-00 (the "original award"), finding each of the respondents to be fifty per cent liable, and awarding Chubb a total of $42,065.56. (Pet. Exh. D).

Thereafter, by letter to the arbitrator dated November 22, 2006, respondent GEICO requested that the award against it be vacated due to an "incorrect application of New York regulations regarding PIP loss transfer requirements. . . ." (Pet. Exh. E). In essence, GEICO argued that because GEICO provided motor vehicle insurance coverage for the bus to the NYCTA, it was "united in interest" with Chubb and recovery by Chubb against it was barred. On January 17, 2007, the arbitrator issued an amended decision and award ("amended award"), in which she determined that Statewide bore fifty per cent of the liability and that GEICO bore no liability in the case. (Pet. Exh. F). The amended award reduced Chubb's recovery to $21,032.78. Thereafter, petitioner commenced the instant proceeding in this court.

II. PETITIONER'S CONTENTIONS

Petitioner makes arguments in support of its application to vacate the amended award based upon statutory grounds and upon the rules of AFI (see "Personal Injury Protection Rules Regulations," [Arbitration Forums, Inc. June 1, 2005], Pet. Exh. G [the "AFI Rules"]). It argues that the amended award must be vacated because the arbitrator exceeded her powers in issuing the award in that the amended award constituted a change in the substance of the original award in violation of CPLR §§ 7509 and 7511(c). (Pet. ¶¶ 23, 24, 25). Petitioner also argues that such modification of the merits of the original award violated the AFI Rules prohibiting modification of arbitral awards for other than clerical or administrative reasons. (Pet. ¶¶ 14, 18). Chubb further maintains that GEICO's request for modification of the award was untimely under both CPLR § 7509 and the AFI rules. (Pet. ¶¶ 22, 14, 16).

Because of the conclusion I reach with respect to petitioner's statutory claims, it is unnecessary to address the claims based upon the AFI Rules.

III. DISCUSSION

Under CPLR § 7511(b)(1), the court may vacate an arbitration award if the party's rights were prejudiced by:

i) corruption, fraud or misconduct in procuring the award;

ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession; or

iii) an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter was not made; or

iv) failure to follow the procedure of this article, unless the party applying to vacate the award continued with the arbitration with no notice of the defect and without objection.

(CPLR § 7511[b][1]). Judicial interference with arbitral awards should be avoided, except where the award "is violative of a strong public policy, totally irrational or in excess of a specifically enumerated limitation upon arbitral authority." (Matter of the Board of Educ. of the Dover Union Free School Dist. v. Dover-Wingdale Teachers' Ass'n, 61 NY2d 913, 915; Matter of Silverman v. Cooper, 61 NY2d 299, 308). Section 7511 provides the exclusive grounds for vacation by the court of an arbitration award, and the party seeking vacation must have been prejudiced by the arbitrator's conduct in violation of one of the four grounds enumerated in the statute. (Silber v. Silber, 204 AD2d 527, 528 [2^nd Dept. 1994]).

At common law, an arbitrator lacked the power to modify an arbitration award previously issued. (See Herbst v. Hagenaers, 137 NY 290;Matter of New Paltz Central School Dist. [New Paltz United Teachers], 99 AD2d 907 [3^rd Dept. 1984]; Matter of Mole [Queen Ins, Co.], 14 AD2d 1, 2 [4^th 1961]). Once the award had been rendered, the arbitrator was prohibited from re-opening the case and modifying or setting aside the award, whether at his own instance or on the motion of the parties, and regardless of the grounds urged in support. (Id.).

Section 7509 of the CPLR creates a narrow exception to the common law rule, providing that "[o]n written application of a party to the arbitrators within twenty days after delivery of the award to the applicant, the arbitrators may modify the award upon the grounds stated in subdivision c of section 7511." The latter section permits modification of an award on grounds that:

1. there was a miscalculation of figures or a mistake in the description of any person, thing or property referred to in the award; or

2. the arbitrators have awarded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted; or

3. the award is imperfect in a matter of form, not affecting the merits of the controversy.

(CPLR § 7511[c]).

As the statutory scheme is in derogation of the common law rule, an arbitrator is authorized to modify an award only in conformity with the requirements of section 7509. (New Paltz Central School Dist., supra). Any modification of an award not undertaken in strict compliance with the terms of the statute is unauthorized, and constitutes action in excess of the arbitrator's jurisdiction. (Id.). Thus, when an arbitrator alters the substance of an award, the modified arbitration award is subject to vacation pursuant to CPLR § 7511(b)(1)(iii). (Id.; see Wolf Munier, Inc. v. Diesel Constr. Co., 41 AD2d 618 (1^st Dept. 1973).

Furthermore, CPLR § 7509 expressly requires that any party seeking modification of an arbitration award do so "[o]n written application . . . to the arbitrators within twenty days after delivery of the award to the applicant. . . . "Absent compliance with the procedural requirements of the statute, an arbitrator is without authority to vacate an award. (See Matter of Aetna Cas, Surety Co. V. Vigilant Ins. Co., 241 AD2d 451 [2^nd Dept. 1997]). Accordingly, any request for modification in an award must be made during the twenty days following the delivery of the award in question to the party contesting the award.

In the present case, the arbitrator modified the award to eliminate any liability on the part of respondent GEICO, apparently¹ based upon GEICO's contention in its November 22, 2006 letter to AFI that the award was a misapplication of New York law. (Pet. Exh. F). There can be no doubt that the change in the award prejudiced the petitioner, who was then left with an award for relief which had been diminished by fifty per cent. Nor can it be disputed that the amended award effected a substantive change in the arbitrator's original ruling on the parties' liability. This ground is not among those listed in CPLR § 7511(c), and, as such, exceeded the arbitrator's authority to award.(Matter of New Paltz Central School Dist., supra; Wolff Munier, Inc. v. Diesel Constr. Co., supra).

1 The amended award does not state the grounds for the modification of the decision and award. (Pet. Exh. F).

Chubb's untimeliness claim, however, is not sufficiently well-pleaded to entitle it to relief. The petition contains self-contradictory claims as to the date of issuance of the original award (Pet. ¶¶ 9, 16), erroneously calculates the elapsed time between the publication of the award and the mailing of GEICO's letter (Pet. ¶¶ 16, 22), and nowhere mentions the date of delivery of the award to the applicant, which is the operative date for purposes of section 7509. For these reasons, the court rejects this argument.

Accordingly, because the arbitrator exceeded her authority under CPLR §§ 7509 and 7511(c) in modifying the original award, the amended award issued on January 17, 2007 must be vacated, leaving the original award extant. (Matter of New Paltz Central School Dist., supra). IV. CONCLUSION

For all the foregoing reasons, petitioner's application to vacate the amended arbitration award issued on January 17, 2007 is granted, and the amended award is vacated. The arbitration award of November 3, 2006 is hereby reinstated.

The foregoing constitutes the decision, order and judgment of this court.