CNA Global Resource Mgrs. v Berry

[*1] CNA Global Resource Mgrs. v Berry 2006 NY Slip Op 50069(U) [10 Misc 3d 1074(A)] Decided on January 20, 2006 Supreme Court, Kings County Schack, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 20, 2006
Supreme Court, Kings County

CNA Global Resource Managers and Custom Towing, Inc., Petitioners,

against

Christopher Berry, Respondent.



18847/05



Petitioner,

Delaney & O'Brien

NY NY

Respondent

Jacoby & Meyers LLP

Newburgh NY

Arthur M. Schack, J.

Petitioners CNA Global Resource Managers and Custom Towing, Inc. seek,

pursuant to CPLR 7511, to: vacate and set aside a $300,000.00 March 16, 2005 arbitration award to respondent Berry "for any and all injuries sustained as a result of the occurrence of April 15, 2002," issued in a supplemental uninsured motorist (SUM) arbitration between the parties, on the grounds that the arbitrator exceeded his powers by issuing an award that is arbitrary and capricious; or, in the alternative petition, to modify the $300,000.00 arbitration award on the grounds that the arbitrator miscalculated his [*2]award by his failure to reduce the award by workers' compensation benefits previously paid to respondent. Respondent Berry opposes the instant petitions on the grounds that: the arbitrator's award was not arbitrary and capricious, because a reasonable basis for such award existed in the record; and, petitioners waived any right to a workers' compensation offset when they failed to request such at the arbitration proceeding.

Underlying (SUM) claim

This SUM arbitration arose out of an accident, allegedly occurring on April 15, 2002, when respondent's tow truck was struck in the rear while stopped at the intersection of East 37th Street and Avenue I, in Brooklyn. According to the arbitration award, Mr. Berry testified that his vehicle was struck in the rear while stopped for a red light. The force of the collision purportedly caused the offending vehicle to be impaled upon the tow truck's rear metal lift. Subsequently, the operator of the offending vehicle fled the scene.

The police report of the accident states, in relevant part, that respondent's vehicle was struck while traveling at the above-named intersection by the offending vehicle, which left the location. After the accident, an ambulance responded to the scene and emergency medical personnel transported Mr. Berry to Kings County Hospital.

At the arbitration, Mr. Joseph Gulotta, an insurance investigator, testified on behalf of petitioners that he made a visit to the accident scene, in May 2002, and observed the absence of a traffic light at East 37th Street and Avenue I. Further, Mr. Gulotta stated that he did not have any photographs, memoranda, or documentation of his findings, but he testified rom memory. Moreover, Mr. Gulotta testified that he did not know if any traffic lights existed at the intersections of Avenue I with East 34th Street, or East 35th Street or East 36th Street.

During the arbitration proceeding, two workers' compensation applications with regard to the accident were proffered. The initial application, dated July 17, 2002, stated that the accident occurred at Avenue J and 23rd Street [I will take judicial notice that this intersection does not exist in Brooklyn]. The subsequent application, dated November 2, 2002, identified the accident location as Avenue I and East 37th Street.

In determining liability, the arbitrator noted that any denial of respondent's claim "would have to be based upon his total and complete responsibility for the happening of this occurrence." Moreover, the arbitrator made clear that "the question of whether or not there was a contact by [an] adverse vehicle into [respondent's] tow truck was not before [him]." Upon considering the "significant testimony" of respondent with regard to the happening of the accident and the location of its occurrence, the arbitrator determined that there was "no evidence" submitted which would allow him to find respondent solely responsible for the subject accident.

In the instant petition, petitioners contend that the arbitration award should be vacated because the arbitrator overlooked "strong evidence of fraud on the part of [respondent] regarding whether an accident ever even occurred at all." Specifically, petitioners argue that the arbitrator overlooked inconsistencies in respondent's workers' [*3]compensation applications with regard to where the accident actually took place. Further, petitioners argue that the arbitrator improperly overlooked or failed to credit evidence that a traffic control device did not exist at the intersection of East 37th Street and Avenue I. They also contend that the arbitrator erred in failing to provide an opportunity to the petitioners to submit additional definitive proof on the issue of the absence of a traffic light at the purported accident scene.

In response to the instant petitions, respondent contends that petitioners have not proffered any evidence that he was solely responsible for the alleged accident and, therefore, the arbitrator's liability determination was not arbitrary or capricious. Specifically, respondent contends that the arbitrator properly did not credit Mr. Gulotta's testimony regarding the absence of a traffic control device at the subject intersection because such testimony was not accompanied by any definitive proof, such as photographs or official transportation documents from the City of New York. Moreover, respondent argues that the absence of a traffic light at the subject intersection does not demonstrate that the accident did not occur or that respondent was solely responsible for the accident since, in any event, he claims that he was actually stopped at the intersection of East 37th Street and Avenue I at the time of the accident due to a red traffic light located approximately one block ahead of him.

Standard for judicial review of a compulsory arbitration

The Appellate Division, First Department, in Travelers Ins. Company v Job, 239 AD2d 289, 290 (1997), articulated the well-settled principal that "in the interest of preserving the independence of the arbitral process and conserving judicial resources, the courts have been assigned a minimal role in supervising arbitration practice." Even though the scope of judicial review of an award rendered after a compulsory arbitration, such as that undertaken pursuant to a SUM policy, is greater than that in the case of consensual arbitration such review is nonetheless limited to the statutory grounds delineated in CPLR 7511.

The Court, in American Transit Ins. Co. v Ebrahim, 236 AD2d 274, 275 (1st Dept 1997), stated that "[p]ursuant to CPLR 7511, on a motion to vacate an arbitration award, the burden is upon the movant to show the award was irrational, in violation of public policy or in excess of the arbitrator's powers." In Curley v State Farm Ins. Co., 269 AD2d 240, 241-242 (1st Dept 2000), the Court held that "[v]acatur of an arbitrator's award [pursuant to CPLR 7511 (b)] is statutorily limited to occasions involving fraud, corruption or bias . . . or occasions when the arbitrator exceeded his or her power, or so imperfectly executed it so that a final and definite award was not made." See State Farm Mut. Auto. Ins. Co. v Arabov, 2 AD3d 531, 532 (2d Dept 2003).

The Appellate Division, Second Department, has applied the CPLR Article 78 "arbitrary and capricious" standard of review to petitions to vacate compulsory arbitration awards. In State Farm Mut. Auto Ins. Co. v City of Yonkers, 21 AD3d 1110, 1111 (2005) the Court stated, that: [*4]

An arbitration award in a mandatory arbitration proceeding will be

upheld if it is supported by the evidence and is not arbitrary and capricious

(see Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co.,

89 NY2d 214, 223 [1996]; Matter of Kemper Ins. Co. v Westport Ins. Co.,

9 AD3d 431, 432 [2004]). On review, an award may be found to be rational

if any basis for such a conclusion is apparent to the court based upon a reading

of the record (see Caso v Coffey, 41 NY2d 153, 158 [1976], citing Matter of

Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale

& Mamaroneck, Westchester County, 34 NY2d 222, 231 [1974]; Dahan v

Luchs, 92 AD2d 537, 538 [1983]).

The Court, in Jenkins v Empire/Allcity Ins. Co., 289 AD2d 331, 332 (2d Dept 2001), instructed that "[a]n arbitration award in a mandatory arbitration proceeding, such as this one, may be upheld only if it is supported by the evidence and is not arbitrary and capricious (see, Matter of MVAIC v Aetna Cas. & Sur. Co., 89 NY2d 214; Matter of Brua Cab Corp. v Royal Indem. Co., 275 AD2d 778)."

In Scher v State Farm Ins. Co., 240 AD2d 415 (2d Dept 1997), the Court observed that, "[s]ince a claim by an insured against an insurance carrier under the uninsured motorists' endorsement is subject to compulsory arbitration, the scope of judicial review of an arbitrator's award includes whether the award is supported by evidence or has other basis in reason, as may be appropriate, and appearing in the record . . ." See Mount St. Mary's Hospital of Niagara Falls v Catherwood, 26 NY2d 493, 508 (1970); Rose v Travelers Insurance Co., 96 AD2d 551 (2d Dept 1983); Commercial Union Ins. Co., 168 AD2d 247, 249 (1st Dept 1990). The Court of Appeals, in Matter of Sprinzen, 46 NY2d 623, 629-630 (1979) held that:

An arbitrator's paramount responsibility is to reach an equitable result,

and the courts will not assume the role of overseers to mold the award

to conform to their sense of justice. Thus, an arbitrator's award will not

be vacated for errors of law and fact committed by the arbitrator (Rochester

City School Dist. v Rochester Teachers Assn., 41 NY2d 578,582; Garrity v

Lyle Stuart, Inc., 40 NY2d 354, 356-357; Matter of Raisler Corp. [NY

City Housing Auth.), 32 NY2d 274, 282, citing Matter of S & W Fine Foods

[Office Employees Int. Union], 8 AD2d 130, 131, affd 7 NY2d 1018), and

"[e]ven where the arbitrator states an intention to apply a law, and then

misapplies it, the award will not be set aside (Matter of Shine Enterprises

[Real Estate Portfolio of NY], 26 NY2d 799, 801)."

See State Farm Mut. Auto. Ins. Co. v Arabov, supra at 533; Gravenese v Allstate Ins. Co., [*5]

245 AD2d 507, 509 (2d Dept 1997).

Discussion

The liability determination in the instant arbitration award was not arbitrary and capricious. Therefore, this Court will not disturb the award with respect to the arbitrator's finding that respondent did not cause the accident. The arbitrator, in his award, stated:

[d]enial of [Mr. Berry's] claim on the question of liability would have

to be based upon his total and complete responsibility for the happening

of this occurrence. Karadhimis v Allstate, 9 AD3d 429, (Second Dept.

2004). There is no evdence submitted on behalf of [CNA and Custom Towing] that would allow me to make such a distinction on the question of liability.

The arbitrator based his decision upon respondent's testimony that he was struck from behind while his vehicle was stopped at the intersection of East 37th Street and Avenue I. The arbitrator gave no weight to Mr. Gulotta's testimony that no traffic light existed at the subject intersection, given that his testimony was not accompanied by any photographs or other documentary evidence. Moreover, even if some evidence existed that there was no traffic control device located at the subject intersection, such evidence would not prove that Mr. Berry was not stopped at the intersection at the time of the accident, was not struck in the rear by a vehicle whose driver fled the scene, and that Mr. Berry in any way contributed to the proximate cause of the occurrence.

The Court, in Gaeta v Carter, 6 AD3d 576 (2d Dept 2004), stated that "[a] rear-end collision with a stopped or stopping' vehicle creates a prima facie case of liability with respect to the operator of the rearmost vehicle, thereby requiring that operator to rebut the inference of negligence by providing a non-negligent explanation for the collision." See Leal v Wolff, 224 AD2d 392 (2d Dept 1996); Reid v Rayamajhi, 17 AD3d 557 (2d Dept 2005); Garces v Karabelas, 17 AD3d 633 (2d Dept 2005); Rainford v Han, 18 AD3d 638, 639 [2005]; David v New York City Bd. of Educ., 19 AD3d 639 (2d Dept 2005). In Gaeta v Carter, supra, at 576-577, the Court observed that "not every rear-end collision is the exclusive fault of the rearmost driver. The frontmost driver also has the duty not to stop suddenly or slow down without proper signaling so as to avoid a collision'(Chepel v Meyers, 306 AD2d 235, 236 [2003] quoting Purcell v Axelson, 286 AD2d 379, 380 [2001]; Vehicle and Traffic Law § 1163)." In the instant action, there is no evidence that respondent breached any such duty when he stopped at the subject intersection.

In addition, although petitioners argue that discrepancies in respondent's workers' compensation applications and the alleged nonexistence of a traffic control device at the subject intersection support a finding that no accident ever occurred, the arbitration award clearly, and correctly, states that the question of whether any contact ever occurred between respondent's vehicle and the alleged offending vehicle was not before the arbitrator. The Court, in Nationwide Ins. Co. v McDonnell, 272 AD2d 547, 548 (2d Dept 2000), held that "[i]t is well settled that a court, and not an arbitrator, must resolve the [*6]issue of whether there was actual contact with a hit-and-run vehicle." Accordingly, an arbitrator acts in excess of his or her powers when he or she considers the question of contact and reviews evidence that there may have been no contact between the allegedly offending vehicle and the vehicle operated by the claimant seeking uninsured motorist benefits. In his decision, the arbitrator correctly applied this doctrine in his citing of Karadhimis v Allstate, supra. Therefore, the arbitrator was constrained to find that there was no contact by the unidentified vehicle and respondent. The only basis upon which he could have dismissed the respondent Berry's claim was a finding that his negligence was the sole proximate cause of the accident. Since, as previously discussed, he found that respondent was not the cause of the accident, the arbitration award rendered in favor of respondent was not arbitrary and capricious.

Petitioners also argue that the arbitration award should be vacated because the arbitrator failed to grant them an adjournment to obtain and submit documentary evidence with respect to the nonexistence of a traffic light at the subject intersection. In Insurance Co. of North America v St. Paul Fire & Marine Ins. Co., 215 AD2d 386, 387 (2d Dept 1995), the Court held that "[t]he failure of an arbitrator to grant an adjournment is an abuse of discretion constituting misconduct within the meaning of CPLR 7511 (b) (1) (i) if it results in the foreclosure of the presentation of pertinent and material evidence." Further, in Marcano v Allstate Ins. Co., 309 AD2d 608 (1st Dept 2003), the Court held that an arbitrator did not abuse his discretion in declining to adjourn proceedings when the party requesting the adjournment had repeatedly received the benefit of past adjournments. In the instant matter, the arbitration hearing was apparently originally scheduled for March 25, 2004 and subsequently adjourned twice at petitioners' request. The hearing ultimately took place, approximately eight months after the hearing was initially scheduled, on November 22, 2004. Moreover, Mr. Gulotta allegedly first visited the accident site and learned of the absence of a traffic light at that location in May 2002. Thus, the Court finds that petitioners had more than enough time prior to the hearing to obtain any additional documentation regarding the subject intersection and the arbitrator was not required to grant any further adjournments of the hearing. Accordingly, no misconduct on the part of the arbitrator existed which would support the vacatur of the subject arbitration award.

However, with regard to petitioners' application to modify the arbitration award, the Court finds that it is appropriate to remand the proceeding to the arbitrator solely for a determination of the amount, if any, of a set-off based upon payment to respondent of workers' compensation benefits. In State Farm Mut. Auto. Ins. Co. v Gutkin, 9 Misc 3d 1103 (A) (Sup Ct, Richmond County 2005), the Court held that:

As a general rule, the extent of an insurer's liability and the availability

of offsets in a Supplemental Uninsured Motorist arbitration proceeding are

matters to be determined by the arbitrator (Matter of Liberty Mut Ins. Co v

Tettah, 277 AD2d 239 [2d Dept 2000]), whose decision will not be disturbed [*7]

so long as it is rational and not arbitrary or capricious (Matter of Selimis v

General Acc Ins Co, 264 AD2d 738 [2nd Dept 1999]).

In the instant matter, the relevant insurance policy contains a non-duplication clause which states that the uninsured motorist coverage provided pursuant to the policy shall not duplicate benefits payable pursuant to the workers' compensation law. Therefore, to the extent that any portion of the $300,000 award rendered in favor of respondent Berry compensates him for the same economic loss for which he has already received workers' compensation benefits, the award should be reduced by such benefits. The failure to reduce benefits would result in the duplication of compensation which the non-duplication clause seeks to avoid. Although an arbitration award is not rendered susceptible to vacatur or modification if the arbitrator has made a mistake of fact or law, the award may be set aside if the arbitrator excluded pertinent evidence from the hearing. In Gutkin, supra, the arbitrator made an error of law by his failure to allow any evidence of offsets.

In this matter, respondent apparently refused to produce any evidence of his receipt of workers' compensation benefits to petitioners. The arbitrator excluded such evidence from the hearing as "irrelevant." However, given the existence of the non-duplication clause in the subject insurance policy, as well as the fact that evidence as to respondent's economic loss was presented at the hearing (although an economist's report was apparently not credited by the arbitrator), the court finds that the arbitrator incorrectly excluded evidence of respondent's receipt of workers' compensation benefits from the hearing. Further, although respondent claims that such award solely reflects compensation for non-economic loss such as pain and suffering, the award itself states that it represents payment for "all injuries sustained as a result of the occurrence of April 15, 2002," and does not explicitly limit the award to injuries of a non-economic nature.

The court notes that by remanding the matter to the arbitrator, the arbitrator is not directed to modify the award to reflect workers' compensation benefits offsets, as requested by petitioners, but rather, the arbitrator is directed to consider any evidence of workers' compensation benefit payments with regard to his determination of the monetary award to be issued to respondent.

Conclusion

Accordingly, it is

ORDERED, that the petition to vacate the subject arbitration award is denied and that petition is dismissed; and it is further

ORDERED, that the petition seeking a modification of the award to reflect the claimed workers' compensation benefits offset is granted to the extent that the matter shall be remanded to the arbitrator for the sole purpose of determining whether such an offset is warranted and, if so, to modify the monetary award to reflect same; and it is further

ORDERED, that respondent Berry is to produce any and all documentation [*8]concerning his receipt of workers' compensation benefits with regard to the subject accident within 90 days of the date of the notice of entry of this decision and order; and it is further

ORDERED, that upon remand, the arbitrator shall consider such documentation in determining whether a workers' compensation offset to the award is appropriate.

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

E N T E R _________________________________

HON. ARTHUR M. SCHACK

J. S. C.