Matter of Castle Oil Corp. (Reliance Ins. Co.)

[*1] Matter of Castle Oil Corp. (Reliance Ins. Co.) 2009 NY Slip Op 51621(U) [24 Misc 3d 1226(A)] Decided on July 24, 2009 Supreme Court, Westchester County Scheinkman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 24, 2009
Supreme Court, Westchester County

In the Matter of Castle Oil Corporation, Petitioner, and Reliance Insurance Company (IN LIQUIDATION), Respondent.



7812/09



APPEARANCES

Reed Smith LLP

By: John N. Ellison, Esq.

Timothy P. Law, Esq.

Attorneys for Petitioner Castle Oil Corporation

599 Lexington Avenue, 22nd Floor

New York, New York 10022

Duane Morris LLP

By: Kimball Ann Lane, Esq.

Christine Megna Van Gelder, Esq.

Attorneys for Respondent Reliance Insurance Company (In Liquidation)

1540 Broadway, Suite 1400

New York, New York 10036

Alan D. Scheinkman, J.

Petitioner Castle Oil Corporation ("Petitioner") moves pursuant to CPLR 7511(b) for an order vacating an arbitration award dated April 14, 2009 (the "award"), asserting that the award "violates public policy" and, therefore, the arbitration panel ("Panel") exceeded its power (Petition at ¶ 2). Respondent Reliance Insurance Company (in liquidation) ("Reliance" or "Respondent") opposes the motion and seeks an order from this Court confirming the award (CPLR 7511[e]) and awarding its attorneys' fees and costs associated with seeking such confirmation.

FACTUAL BACKGROUND

The facts relevant to this Court's determination are not in dispute. Between 1997 and November 1, 2000, Reliance issued four retrospectively rated [*2]workers' compensation insurance policies to Castle.[FN1] Reliance also contracted with Castle to provide Castle's automobile and general liability insurance. When Castle did not pay all premiums claimed to be owed, Reliance demanded arbitration in July 2004 and the dispute was submitted to arbitration. The arbitration panel issued its Decision dated October 22, 2007, and its Final award dated April 14, 2009, granted Reliance an award of $779,572, plus interest, for a total of $917,449.89.

During the arbitration, Castle made the same argument it makes in support of its motion to vacate the arbitration award — namely, that because the retrospective rating premium did not strictly comply with a New York Retrospective Rating Plan Large Risk Rating Option ("Rating Option") described in an October 4, 1996 New York Compensation Insurance Rating Board Bulletin (the "Bulletin"), Reliance was not entitled to recover its past due premiums from Castle. The Bulletin outlines how the Rating Option permits retrospective premiums only where the total estimated annual standard premium is in excess of $500,000. Since it was undisputed that the annual workers' compensation retrospective premium for Castle was less than $500,000, Castle argued that the entire insurance contract was unenforceable as violative of public policy. Castle also argued that the premium agreements were also unenforceable because they violated the Rating Option since Castle did not obtain Castle's signature on the Notices of Election of Retrospective Rating Program. Reliance countered by arguing (1) that it satisfied the regulatory requirement because, though the workers' compensation premium was under $500,000, the total premium for all the lines of insurance it provided to Castle exceeded $500,000; and (2) that the failure to obtain Castle's signatures on the Notices of Election was a mere clerical oversight (see Notices of Election, Petrilla Aff., Exs. B, K).

Declining to void the workers' compensation insurance agreements as violative of the Rating Option's regulations, the Panel held The standard premium for each of the workers' compensation policies at issue was less than [$500,000] ... The relationship between the parties here does not arise from any inequality of bargaining power or from a contract of adhesion. Reliance notes that Castle is a substantial fuel oil distributor with over $266 million in annual sales. Castle is a savvy purchaser of insurance, with ready access to sophisticated counsel. We also note that New York's [*3]regulatory scheme provides a penalty for an insurer's non-compliance with the minium premium and notice of election form requirements, a penalty to which Reliance may be subject for any violation. Finally, large retrospective premium plans, with less strict rate regulation, typically redound to the benefit of insured's, such as Castle by utilizing rating factors more competitive than those available under standard retrospective plans. Under all the circumstances, we conclude, notwithstanding Reliance's failure to adhere strictly to the New York regulatory scheme, that the better result is not to invalidate for that failure the contractual arrangement between the parties (Petrilla Aff., Ex. B at 6-7).

Although the panel stated that it found unpersuasive Reliance's argument concerning its clerical error in failing to obtain Castle's signatures on the Notices of Election as required by the regulations, the panel nevertheless upheld the enforceability of the workers' compensation retrospective premium policies despite Reliance's failure to fulfill this requirement (id. at 6).[FN2]

According to the New York Compensation Insurance Rating Board Bulletin dated October 4, 1996, the Rates Committee of the Board adopted, with the approval of the New York State Insurance Department, revisions to the New York Large Risk Rating Option so that the Rating Option was no longer limited to insureds who generated $500,00 in annual workers' compensation insurance premium by allowing the Rating Option to be available to insureds who had standard premiums "in excess of $500,000 individually, or in combination with General Liability, Commercial Automobile, Hospital Professional Liability, Crime, Glass or Workers Compensation" (New York Compensation Insurance Rating Board Bulletin dated October 4, 1996, Petrilla Aff., Ex. D at 112938 - 112939; see also New York Retrospective Rating Plan Manual dated issued January 1, 2000 at 5, 11 [Petrilla Aff., Ex. J] [The New York Large Risk Rating Option "is an available option for risks with an estimated annual standard premium in excess of $500,000 individually or in any combination with General Liability, Commercial Automobile, Hospital Professional Liability, Crime, Glass or Workers Compensation"]). "The revised rating option [was to] remain in effect for a three year period ending September 30, 1999 ..." (id. at 112939).

Petitioner's Contentions [*4]

In support of its effort to vacate the award, Petitioner submits its petition, an affidavit from its counsel, Bryan W. Petrilla, Esq., sworn to April 14, 2009, which attaches various exhibits including the premium agreements and renewal proposals, the Panel's October 22, 2007 Decision, the Final Award dated April 14, 2009, correspondence concerning Reliance's filings made with the New York State Insurance Department for approval of its independent large risk rating plan, the October 4, 1996 Bulletin, the New York Retrospective Rating Plan Manual issued January 1, 2000, and the Notices of Election of Retrospective Rating Plan (unsigned).

In its Petition and Memorandum of Law, Castle relies on New York's Insurance Law § 2301, which sets forth as the public policy behind New York's regulation of insurance rates as follows: to promote the public welfare by regulating insurance rates to the end that they not be excessive, inadequate or unfairly discriminatory ... to improve the availability and reliability of insurance and to authorize and regulate cooperative action among insurers .... (see Petition at ¶ 24; Petitioner's Mem. of Law at 6).

Petitioner also argues that the revision to the Rating Option in 1996 has no application to the policies issued to Castle since "Castle never entered into one of these multi-line agreements with Reliance ... [and] [t]he only risk that was retrospectively rated was the workers' compensation risk and the standard premium for that risk, as the Panel found, was less than $500,000" (Petition at ¶ 31; Petitioner's Mem. of Law at 8).

The Petition concludes by arguing that pursuant to CPLR 7511(b)(1)(iii), a court may vacate an arbitration award when it has been determined that the arbitrators exceeded their power, which occurs when an arbitration award violates a public policy of New York. Therefore, the award should be vacated since "[o]n its face, the Award violates the public policy of New York by enforcing retrospective insurance premium agreements that violate New York's regulatory scheme governing the sale of such agreements" (Petition at ¶ 35).

In its Memorandum of Law, Castle reiterates the arguments made in its Petition, the primary focus of which is that pursuant to CPLR 7511(b), this Court may vacate the award since it was rendered in excess of the arbitrators' power in violation of public policy. Castle argues "New York Compensation Insurance Rating Board regulations are not bothersome technicalities to be tossed aside to suit the convenience of a neglectful insurance company. To the contrary, because New York has a strong public policy of protecting insurance consumers to whom retrospective premium plans are being marketed, and because the contracts for retrospective premium at issue here are illegal and unenforceable the contracts containing the arbitration provisions in this case are null and void" (Petitioner's Mem. of Law at 3). Petitioner contends that the contracts at issue in the arbitration were unenforceable because they violated a [*5]"comprehensive regulatory scheme [which] is designed to protect the public health, safety or morals, or to prevent fraud ..." (Petitioner's Mem. of Law at 9). Petitioner asserts that "courts regularly vacate arbitration awards that violate a regulatory scheme ... designed to protect consumers or the public" (id at 10). Furthermore, according to Petitioner, the panel's reasoning concerning the sophistication of Castle was irrelevant because "the regulations contain no exception for sophisticated' consumers'" (id. at 13).

Respondent's Opposition

In Opposition, Respondent submits its answer to the petition, an affidavit from its counsel, Kimball Ann Lane, Esq., sworn to May 14, 2009 ["Lane Aff."], which annexes various relevant documents,[FN3] and a Memorandum of Law. In essence, Respondent argues that Petitioner made exactly the same arguments it makes here to the Panel which were flatly rejected and found not to constitute a violation of public policy. Reliance also espouses the policy of New York to encourage arbitration through the enforcement of the award; and that as a result of this broad policy, the grounds for vacating an award are narrow (Respondent's Mem. of Law at 4). In its answer, Respondent denies the material allegations of the Petition, and asserts as its own claim for relief that this Court dismiss Castle's petition, confirm the Panel's award, and award Reliance its attorneys' fees, court costs, and interest running from the date of the award to the entry of judgment.

Respondent argues that the contracts under which the Award was provided are not unenforceable because, according to New York Court of Appeals' precedent, "to void a contract, the public policy' consideration must explicitly prohibit, in an absolute sense,' the particular matter being decided or the relief being granted by an arbitrator" — i.e., the court must conclude that public policy precludes the contract's enforcement (id. at 5). Arguing that there can be no such conclusion drawn here, Respondent points out: (1) as insurance agreements covering workers' compensation benefits, these contracts have no unlawful purpose which would prohibit their enforcement; (2) there is no public policy against retrospective premium workers' compensation insurance and Castle fits the purpose of the Rating Option outlined in the Bulletin which is to "satisfy the needs of the more sophisticated insureds" who are paying large premiums and are seeking competitive alternative pricing (id. at 6); (3) that based on testimony provided at the arbitration hearing, when "all lines of coverage written by Reliance for Castle are combined ... the premium easily exceeds $500,000", which under Reliance's interpretation of the revision issued in 1996, means that there [*6]was no violation of the insurance regulation in issue (id.); (4) to the extent the Court were to agree with Castle that the revision to the Rating Option is limited only to "the annual retrospective premium charged by Reliance (and not any non-retrospective premium, i.e., not the automobile and general liability premiums charged by Reliance) such an infraction or failure to strictly comply' with the Rating Option is malum prohibitum, not malum in se, or evil in itself" and therefore does not meet the " prohibited, in an absolute sense' standard for setting aside arbitration awards on the grounds of public policy" (id. at 7-8) (emphasis in original); and (5) that arbitration panels are not bound by rules of law and may do justice as they see fit (id. at 9).

With regard to Reliance's failure to obtain Castle's signature on the Notice of Election forms, Reliance points to the findings of the Panel. Reliance states: "Castle accepted the terms of the Premium Agreements including the retrospective premium, intending to be bound, never asserting otherwise, and accepted all the benefits" and such failure is not "a violation of any New York public policy that requires voiding the Premium Agreements" (id. at 8)

Reliance cites a Court of Appeals decision, Lloyd Capital Corp. v Pat Hechar, Inc (80 NY2d 124, 128 [1992]) wherein the Court held that "[a]llowing parties to avoid their contractual obligation is especially inappropriate where there are regulatory sanction and penalties in place to redress violations of law." Reliance points out that the Panel relied on this very issue when it held that "New York's regulatory scheme provides a penalty for the insurer's non-compliance with the minium premium and notice of election form requirements" Lane Aff., Ex. 1A at 6).

Finally, Reliance requests that the award be confirmed and that it be awarded its Attorneys' Fees pursuant to the provision in the premium agreements which states that either party may "apply ... for an order confirming the award ... [and] [a] judgment of such Court shall thereupon be entered on the award. If such an award is issued, the attorneys' fees of the party so applying and the court costs will be paid by the party against whom the confirmation is sought" (id. at 10).

Castle's Reply

In its reply, Castle largely reiterates the arguments made in its initial moving papers, but relies on additional fact findings of the Panel to establish definitively that "[t]he only premiums that were retrospectively rated were for workers' compensation insurance" (Reply Mem. of Law at 2, citing October Decision at 1-2), and that the premium for that insurance was under $500,000. Furthermore, that the Panel rejected Reliance's interpretation of the revision and "it is beyond the Court's scope of review to reevaluate Reliance's assertion or modify he factual findings of the Panel" (Reply Mem. of Law at 3).

Castle further chastises Reliance in its attempt at minimizing its infraction [*7]of the Rating Option by showing, through Reliance's filings with the New York State Department of Insurance seeking approval of its proposed workers' compensation large risk alternative rating option with a threshold of $100,000, that Reliance knew full well that "the prohibition was not a mere inconvenient technicality, but rather, a substantive consumer protection" (id. at 4).

Responding to Reliance's claims that the contracts do not violate public policy, Petitioner states that it is "the act of selling those insurance premium plans in a manner prohibited by law which violates the public policy of this State. Therefore, the purpose of the regulation was subverted and this Court should enforce the State's interest in protecting policy holders by vacating the award. Furthermore, Reliance does not set forth the standard set by the Court of Appeals; rather, the standard for vacating the award is satisfied as long as the Court can examine the award and "conclude that it violates public policy without engaging in extending fact finding or legal analysis ...'" (id. at 7). Furthermore, even under Reliance's incorrect standard, its standard would be met since New York "absolutely prohibits the sale of retrospectively rated premium is less than $500,000; there are no exceptions" (id.).

Finally, responding to Reliance's request for an award of attorneys' fees and costs, Castle argues that this Court has discretion as to whether or not to award attorneys' fees and costs and further, that the language of the provision has no application here since Petitioner has not sought to confirm the award.

LEGAL ANALYSIS

The sole issue to be decided by this Court is whether the Panel exceeded its authority on the theory that the underlying Premium Agreements are unenforceable as violative of public policy.

"The purpose of arbitration is to allow final, binding resolution of parties' claims without resorting to the courts. The scope of review of an arbitration decision is extremely limited. As a result, great deference is given to any arbitration award" (In re Broadcast Music Inc, 2006 NY Slip Op 52043[U], 13 Misc 3d 1228 [A], 2006 WL 3026328 [2005]). The law is clear that an arbitration award may be vacated only if "it violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator's power" (Matter of Board of Educ. of Arlington Cent. School Dist. v Arlington Teachers Assn., 78 NY2d 33, 37 [1991]; see also Matter of IBK Enter., Inc. v Onekey, LLC, 2009 NY Slip Op 05776, 2009 WL 1959012 [2d Dept 2009]).

CPLR 7511(b)(1) provides for the vacatur of an arbitration award if "an arbitrator ...exceeded his power ...." , which "occurs only where the arbitrator's award (1) violates a strong public policy, (2) is irrational, or (3) clearly exceeds a specifically enumerated limitation on the arbitrator's power" (Matter of Local 342 v Town of Huntington, 52 AD3d 720, 720 [2d Dept 2008]). [*8]

"It is well settled that contracts which violate statutory provisions are, as a general rule, unenforceable on public policy grounds where the statute which is violated is enacted to protect the public health and safety ... or where the statute's purpose [is] the protection of public ... morals or the prevention of fraud'" (Alsaedi v Alsaedi, 177 Misc 2d 440, 442 [Civil Ct Kings County 1998], quoting Benjamin v Koeppel, 85 NY2d 549, 554 [1995]).

While the New York courts reserve the authority to invalidate arbitration awards on public policy grounds, this reserved authority is not boundless. A legal error by an arbitrator is not, by itself, a proper basis for permitting a disappointed party to avoid the result decreed by the body that the party agreed would render a final and binding determination (see Matter of Sprinzen v Nomberg, 46 NY2d 623, 629-630 [1979] [Jasen, J.]). All laws, at least to some extent, reflect public policy; all laws, at least indirectly, seek to promote or protect public health, safety or other public purpose. Consequently, the courts, while seeking to deter violations of declared public policies, may not stretch their authority so far as to permit any failure of law to become a fulcrum against which every disappointed party may leverage challenges to arbitration awards with which they disagree.

As Judge Jasen wrote in Matter of Sprinzen, supra :

Despite this policy of according an arbitrator seemingly unfettered discretion in matters submitted to him by the consent of the parties, it is the established law in this State that an award which is violative of public policy will not be permitted to stand ....The courts, however, must exercise due restraint in this regard, for the preservation of the arbitration process and the policy of allowing parties to choose a nonjudicial forum, embedded in freedom to contract principles, must not be disturbed by courts, acting under the guise of public policy, wishing to decided the dispute on its merits, for arguably every controversy has as its core some issue requiring the application, of weighing, of policy considerations (Matter of Sprinzen, 46 NY2d at 630 [citation omitted]).

In articulating a standard by which courts may measure challenges to arbitration awards based on public policy considerations, the Court of Appeals ruled that it is proper to vacate an arbitration award only in exceptional cases where the "public policy considerations, embodied in statute or decisional law, prohibit, in an absolute sense, particular matters being decided or certain relief being granted by an arbitrator" — i.e., that public policy precludes its enforcement (Matter of Sprinzen, 46 NY2d at 631; see also Matter of New York City Tr. Auth. v Transport Workers Union of America, 99 NY2d 1 [2002]).

It is axiomatic that "an agreement which is otherwise void and unenforceable is not enforceable in arbitration (Hirsch v Hirsch, 37 NY2d 312, 315 [1975]; see also Matter of Exercycle Corp. v Maratta, 9 NY2d 329 [1961] [arbitrator's [*9]award to an unlicensed home improvement contractor was vacated because the underlying home improvement contract was void and unenforceable as violative of licensing statute enacted to safeguard homeowners from abusive practices of contractors]). "Furthermore, a challenge to the arbitrability of an issue on public policy grounds may be made either on an application for a stay of arbitration ... or ... on a motion to vacate the award" (Hirsch, supra , 37 NY2d at 315).

The case law concerning the enforceability of contracts that violate statutes or regulations is well settled. As outlined by the Court of Appeals: Illegal contracts are, as a general rule, unenforceable. However, "[w]here contracts which violate statutory provisions are merely malum prohibitum the general rule does not apply. If the statute does not provide expressly that its violation will deprive the parties of their right to sue on the contract, and the denial of relief is wholly out of proportion to the requirements of public policy * * * the right to recover will not be denied" (Lloyd Cap. Corp. v Pat Henchar, Inc., 80 NY2d 124, 127 [1992, quoting John E. Rosasco Creameries v Cohen, 276 NY 274, 278 [1937]).

The Court further noted that because "forfeitures by operation of law are disfavored, particularly where a defaulting party seeks to raise illegality as a sword for personal gain rather than a shield for public good' ... [they are inappropriate] where there are regulatory sanctions and statutory penalties in place to redress violations of the law" (Lloyd Cap. Corp., 80 NY2d at 128). In Lloyd Capital, after finding that the federal statute was enacted "to encourage the growth of small businesses by compensating for the difficulty they may have in obtaining financing from conventional lenders" and not to protect the public's health and safety (id.), the Court decided to enforce a loan agreement over the borrower's defense of illegality based on the loan's violation of the Federal Small Business Administration regulations which limited the interest ceiling to 20.125%.

Similarly, in Wowaka & Sons, Inc. v Pardell (242 AD2d 1 [2d Dept 1998]), the Appellate Division, Second Department enforced a home improvement agreement which violated General Business Law Article 3-A, § 771(1)(b),(e),(f) and (h). Defendants contended that the agreement violated this law by failing to include the contractor's license number, escrow notices, the amounts of periodic payments due, and defendants' rescission rights. Relying on Lloyd Capital, the Second Department enforced the agreement on the grounds that the law in question did not "mandate that contracts which are not in strict compliance therewith are unenforceable" and "the denial of relief to the respondent in this case would be out of proportion to the requirements of public policy or appropriate individual punishment insofar as the alleged contractual omissions played no part whatsoever In inducing the appellants to enter into [*10]the contract" (Wowoka & Sons, Inc., 242 AD2d at 6).

Applying these legal standards to the disputed presented here, the Court must first determine whether there was a violation of the insurance regulations. The Court concludes that there was. The Court does not agree with Reliance that the Rating Option allowed it to aggregate all of its lines of coverage (including those that did not involve retrospective rating) written for Castle to meet the $500,000 threshold. Instead, it is clear that the threshold could only be met if all of the lines of insurance were going to be subject to the retrospective Rating Option.[FN4]

Having concluded that Reliance violated the governing insurance regulations, the Court must address Castle's claim that because the Premium Agreements violated the regulations, the award must be vacated on public policy grounds. The Court does not agree with Castle. Rather, the Court agrees with the reasoning of the Panel that, despite Reliance's technical violations of the Rating Option (both the failure to meet the $500,000 threshold and the failure to obtain signed Notices of Election), the agreements would be enforced and the arbitration award sustained.

Granting Castle's contention that the business of insurance, and the rates charged for insurance, is regulated in order to prevent excessive, inadequate or unfairly discriminatory rates, to promote the availability and reliability of insurance, and regulate cooperation between insurers, Castle has not shown that any of these fundamental public policy considerations were so seriously offended as to permit Castle to avoid paying the full amount of the reduced premiums that the flawed insurance plan inappropriately awarded to it by Reliance.

The cited public policy considerations are articulated as the reasons for the general statutory insurance provisions. But the specific requirements of the insurance program involved here are not by statute, but by regulation. Generally, a direct statutory command or a direct statutory prohibition, emanating from the Legislature, is a surer and louder clarion of public policy than the dictates of regulation, emanating from an administrative or executive agency. If a legal requirement is embodied in a statute it speaks with more force than if set forth in a technical regulation.

Further, the regulations at issue here were developed for the purpose of promoting the availability of competitive pricing to large sophisticated insureds. The regulations further the financial interests of such insureds. It necessarily follows that, if an insurer mistakenly affords the benefit of reduced prices to a sophisticated insured, it [*11]is the insured who benefits, not the insurer. If anything, the mistaken offering of a reduced premium has the effect of making the premium charged inadequate. While it may be said that it is against public policy to allow insurers to charge inadequate premiums, that public policy exists in order to prevent the insolvency of the insurer, and the loss of insurance to its insureds. But if the risk of inadequate premiums is the collapse of the insurer, it hardly furthers the public policy of avoiding insurer insolvency to deny the insurer full payment of an inadvertently reduced premium. Indeed, to the extent that the insurer and the insured colluded to achieve a reduction in violation of the regulation, it hardly makes for sound public policy to reward the insured by allowing it to escape from paying even the amount of the reduced premium.

Moreover, to the extent that sanctions are to be invoked in order to punish wrongdoing or to prevent future violations, the regulations themselves provide for penalties for infractions, penalties which do not call for forfeiture of premiums.

The cases cited by Petitioner are not applicable as they involved either violations of specific commands (see Gutfreund v DeMian, 227 AD2d 234 [1st Dept 1996]; Alsaedi v Alsaedi, 177 Misc 2d 440 [Sup Ct Kings County 1998]) or the imposition by arbitrators of a remedy that invaded statutory responsibilities of governmental entities (see Matter of New York City Tr. Auth. v Transport Workers Union of America, 243 AD2d 567 [2d Dept 1997], lv denied 91 NY2d 812 [1998]; see also Matter of Binghampton City School Dist. v Peacock, 33 AD3d 1074 [3d Dept 2006], lv dismissed 8 NY3d 240 [2007]). Moreover, the public policies implicated in those cases were ones that directly protect public's health, safety and welfare, such as the safety of passengers on subway trains and the protection of students in public schools from inappropriate contacts with their teachers. Here, the regulations violated here do not affect the public directly; the regulations are intended to make insurance cheaper for large sophisticated businesses. The public at large benefits only indirectly and, then, only financially. The regulations at issue in this case are akin to the purpose of the federal statute in Lloyd Capital which was "to encourage the growth of small businesses by compensating for the difficulty they may have in obtaining financing from conventional lenders." Likewise, here, the regulations were enacted to provide a reasonable cost of insurance by allowing insureds to lower premiums by controlling and reducing their losses (Manual at 1, Petrilla Aff., Ex. J).

For these reasons, the Court will deny Castle's petition to vacate the award.

While Reliance did not formally cross-petition to confirm the award, CPLR 7511(subd. e) provides that "upon the denial of a motion to vacate or modify" an arbitration award, the court "shall confirm the award." Thus, having determined to deny Castle's petition to vacate the award, the Court is required to confirm the award.

Finally, Castle requests that the Court award attorneys' fees based on the provision in the insurance premium agreements which authorizes such an award to a [*12]party that has applied for a court's confirmation of the award.[FN5] Castle opposes this application arguing because Reliance did not cross-petition to confirm the award (Reliance simply defended against Castle's petition to vacate), the provision authorizing an award of attorneys' fees is inapplicable (i.e., it would have only been applicable had the language in the agreement provided that a party was entitled to attorneys' fees not only where it sought the confirmation of the arbitration award, but also where it defended against an action seeking to vacate the award). The Court finds Castle's argument to raise a distinction without a difference. Here, in its answer, Reliance specifically requests that the award be confirmed, and while it did not technically cross-petition for the confirmation of the award, Reliance appropriately relies on CPLR 7511(e) which directs a Court upon a denial of a motion to vacate an award to confirm an award. Accordingly, because Reliance's defense of Castle's motion to vacate also sought this Court's confirmation of the award, and because the provision of the premium agreement directs the Court confirming the award to require the party against whom the confirmation is sought to pay the other party's attorneys' fees and costs, the Court shall award attorneys' fees to Reliance after the conclusion of a hearing to determine the amount and reasonableness of the fees to be awarded.

CONCLUSION

The Court has considered the following papers:

(1)Notice of Petition and Petition dated April 14, 2009;

(2)Affidavit of Bryan W. Petrilla, Esq. in Support of Petition to Vacate Arbitration Award, sworn to April 14, 2009, together with attached exhibits;

(3)Petitioner's Memorandum of Law dated April 14, 2009;

(4)Respondents' Answer to the Petition dated May 15, 2009;

(5)Affidavit of Kimball Ann Lane, Esq., sworn to May 14, 2009, together with attached exhibits;

(6)Reliance's Memorandum of Law in Opposition to Motion to Vacate [*13]and in Support of Confirmation of Award dated May 14, 2009; and

(7)Reply Memorandum of Law dated May 21, 2009

Accordingly, for the reasons stated and based upon the papers aforesaid, it is hereby

ORDERED that the petition by Petitioner Castle Oil Corporation for an order vacating the arbitration award dated April 14, 2009 is denied, and it is further

ORDERED that, based on the denial of the petition by Castle Oil Corporation to vacate the arbitration award dated April 14, 2009, the said award is hereby confirmed (CPLR 7511[e]); and it is further

ORDERED that the application of Respondent Reliance Insurance Corporation (In Liquidation) for an award of attorneys' fees is granted to the extent that the application is set down for a hearing on August 14, 2009 at 2:00 p.m. to hear and determine all issues relating to the attorneys' fees due; and it is further

ORDERED that Respondent shall serve and file, on or before August 3, 2009 at 4:00 p.m. an affirmation setting forth the attorneys' services provided, together with copies of all bills and other documentation in support thereof, with service to be made both by certified mail, return receipt requested, and by overnight delivery (next day delivery); and it is further

ORDERED that Petitioner shall serve and file any opposition to the amount sought by Respondent for attorneys' fees on or before August 10, 2009, at 4:00 p.m.; and it is further

ORDERED that Respondent shall, pursuant to the provisions of 22 N.Y.C.R.R §202.48, submit a proposed judgment to the Court for settlement on August 14, 2009 at 2:00 p.m. with the amounts to be awarded for attorneys' fees and costs being left blank so that the Court may insert the amounts awarded, if any, at the conclusion of the hearing ordered herein; and it is further

ORDERED that Respondent's counsel shall serve upon the Petitioner by certified mail, return receipt requested and by overnight delivery (next day delivery) and file with the Clerk of the Court, a copy of this Decision and Order with Notice of Entry, a Notice of Inquest and shall pay the appropriate filing fees on or before July 31, 2009.

The foregoing constitutes the Decision and Order of this Court.

Dated: White Plains, New York

July _, 2009 [*14]

E N T E R :

Alan D. Scheinkman

Justice of the Supreme Court

APPEARANCES

Reed Smith LLP

By: John N. Ellison, Esq.

Timothy P. Law, Esq.

Attorneys for Petitioner Castle Oil Corporation

599 Lexington Avenue, 22nd Floor

New York, New York 10022

Duane Morris LLP

By: Kimball Ann Lane, Esq.

Christine Megna Van Gelder, Esq.

Attorneys for Respondent Reliance Insurance Company (In Liquidation)

1540 Broadway, Suite 1400

New York, New York 10036 Footnotes

Footnote 1:According to the Arbitration Panel's October 2007 Decision, under the workers' compensation program, "Reliance would charge an initial premium based on projected annual losses, which would be adjusted retrospectively following the close of each year based on actual loss experience" (October 22, 2007 Decision, Affidavit of Bryan W. Petrilla, Esq. in Support of Petition to Vacate Arbitration Award, sworn to April 14, 2009 ["Petrilla Aff."], Ex. E).

Footnote 2:The New York Retrospective Rating Manual issued January 1, 2000 provides that in order for an insured to be subject to the Plain, the insured must elect to be subject to the plan "by notifying the insurance carrier that it has agreed to application of the Plan. The notification shall be executed in writing" (New York Retrospective Rating Plan Manual dated issued January 1, 2000 at 15 [Petrilla Aff., Ex. J]).

Footnote 3:The documents annexed are the October 22, 2007 Decision, the final award dated April 14, 2009, the Panel's Decision and Interim Order No. 1 dated September 7, 2005, the October 4, 2006 Bulletin, relevant portions of transcripts from the arbitration hearing held on June 11, 2007, a copy of the Policy issued to Castle for the period May 15, 1998 to May 15, 1999, and a copy of Castle's Reply Brief submitted in the arbitration proceeding.

Footnote 4: For example the manual provides that "is an available option for risks with an estimated annual standard premium in excess of $500,000 individually or in any combination with General Liability, Commercial Automobile, Hospital Professional Liability, Crime, Glass or Workers Compensation."

Footnote 5:Premium Agreement, section IX(G), provides:

Either party may apply to ... a State Court of competent jurisdiction for an order confirming the award ... A judgment of such Court shall thereupon be entered on the award. If such an order is issued, the attorneys' fees of the party so applying and court costs will be paid by the party against whom the confirmation is sought" (Petrilla Aff. Ex. C at 11).