Allstate Ins. Co. v State of New York

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[*1] Allstate Ins. Co. v State of New York 2021 NY Slip Op 21120 Decided on April 23, 2021 Supreme Court, Albany County Mackey, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the printed Official Reports.

Decided on April 23, 2021
Supreme Court, Albany County

Allstate Insurance Company A/S/O Martin Quirk, Petitioner,


State of New York A/K/A Office of General Services of the State of New York, Respondent.


The Stuttman Law Group, P.C.

Attorneys for Petitioner

(Dennis D. Murphy, Esq., of Counsel)

709 Westchester Avenue

Suite 300

White Plains, New York 10604

Hon. Letitia James

Attorney General of New York State

Attorney for Respondent

(Charles Lim, Assistant Attorney General,

of Counsel)

Department of Law

The Capitol

Albany, New York 12224
L. Michael Mackey, J.

In this Article 75 proceeding, petitioner Allstate Insurance Company A/S/O Martin Quick (hereinafter "Allstate") seeks a judgment confirming an arbitration award dated June 4, 2020, in the amount of $24,500, for a claim arising out of a motor vehicle accident that occurred on February 20, 2019. Respondent the State of New York a/k/a Office of General Services of the State of New York (hereinafter the "State") cross-moves to vacate the award on the ground that the arbitrators exceeded their authority.

It is well settled that "[t]he scope of judicial review of an arbitration proceeding is extremely limited" (Elul Diamonds Co. Ltd. v. Z Kor Diamonds, Inc., 50 AD3d 293 [1st Dept. 2008]). Courts are "obligated to give deference to the decision of the arbitrator" and may vacate an arbitrator's award only on the grounds stated in CPLR § 7511(b) (New York City Transit Auth. v Transp. Workers' Union of Am., Local 100, AFL-CIO, 6 NY3d 332, 336 [2005]). CPLR § 7511 provides four grounds upon which an arbitration award may be vacated on the application of a party which has participated in the arbitration. The third of these, the only one relevant here, is that "an arbitrator ... exceeded his power..." CPLR 7511(b)(1)(iii). To establish that an arbitrator has "exceeded his power" within the meaning of CPLR 751 l(b)(1)(iii), a party must show that the award "violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on an arbitrator's power under CPLR 7511(b)(1)" (EM Diamonds Co. Ltd. v Z Kor Diamonds, Inc., 50 AD3d 293 [1st Dept. 2008]). With respect to arbitration proceedings concerning no-fault insurance benefits, "an arbitration award made in excess of the contractual limits of an insurance policy has been deemed an action in excess of authority" (State Farm Ins. Co. v Credle, 228 AD2d 191 [1st Dept 1996]) and such excess of authority constitutes grounds for vacatur of the award (see Matter of Brijmohan v State Farm Ins. Co., 92 NY2d 821, 822 [1998]; 11 NYCRR 65-1.1).

Pursuant to the Insurance Law, automobile insurance policies issued in New York provide for up to $50,000 in coverage for basic economic loss for each person injured in an accident. Insurance Law § 5102(a)(5) also provides that "basic economic loss" includes an option to purchase, for an additional premium, an additional $25,000 of coverage which the insured may specify will be applied to lost earnings after the initial $50,000 of basic economic loss has been exhausted ("OBEL coverage").

The challenged arbitration arose out of an accident that occurred on February 20, 2019, when a vehicle owned Martin Quirk (hereinafter "Mr. Quirk") and a vehicle owned by the State of New York were involved in a collision. Both vehicles were traveling eastbound on Route 109 in the Town of Babylon, New York when the driver of the State-owned vehicle attempted to change lanes and struck Mr. Quirk's vehicle.[FN1] At the time of the accident, Mr. Quirk was insured by Allstate and the State was self-insured. As a result of the accident, Allstate paid Mr. Quirk $50,000 in personal injury protection (hereinafter "PIP") first party benefits as well as an [*2]additional $24,500 in OBEL coverage.[FN2] Because the State's vehicle exceeded 6500 pounds [FN3] Allstate sought loss transfer reimbursement from the State, pursuant to Insurance Law § 5105(a). Thereafter, the State reimbursed Allstate in the amount of $50,000 for the basic no-fault payment made to Allstate's insured. Allstate then sought, through arbitration, to recover from the State $24,500 it had paid to Mr. Quirk under its OBEL coverage. In the arbitration proceeding Allstate argued that, under Insurance Law § 5105, it was entitled to recover payments made to cover basic economic loss and that, pursuant to Insurance Law § 5102(a)(5), the availability of OBEL coverage increased the total recoverable basic economic loss from $50,000 to $75,000. The State responded that it had already paid $50,000 in PIP Loss Transfer, which is the maximum amount allowed under New York State Executive Law § 203.

By decision dated June 4, 2020, the arbitration panel granted Allstate's application and determined that Allstate was entitled to recoup the $24,500. The instant proceeding ensued.

The Court of Appeals has held that where arbitration is mandatory, an award "must have evidentiary support and cannot be arbitrary and capricious" (MVAIC v Aetna Casualty & Surety Co., 89 NY2d 214, 223 [1996]). "Moreover, with respect to determinations of law, the applicable standard in mandatory no-fault arbitrations is whether 'any reasonable hypothesis can be found to support the questioned interpretation'" (Matter of Fiduciary Ins. Co. v American Bankers Ins. Co. of Florida, 132 AD3d 40, 46 [2nd Dept. 2015], quoting Matter of Shand [Aetna Ins. Co.], 74 AD2d 442, 454 [2nd Dept. 1980]; see Matter of Motor Veh. Acc. Indemn. Corp. v. Aetna Cas. & Sur. Co., 89 NY2d 214, 224 [1996]).

Insurance Law requires no-fault automobile insurance policies issued in New York to provide up to $50,000 in coverage for basic economic loss, which compensates the injured person for, among other things, medical expenses and lost income (Insurance Law § 5102 [a][1], [2]). In addition, when an insured chooses to purchase OBEL coverage, the total amount of basic economic loss rises to $75,000 (Id. § 5102[a][5]; see 11 NYCRR § 65-1.2 [requiring insurers to furnish to all insureds who purchase OBEL coverage an "Optional Basic Economic Loss Coverage Endorsement," which provides, in pertinent part, that "[b]asic economic loss of each eligible injured person on account of any single accident shall not exceed $75,000, the last $25,000 of which represents optional basic economic loss coverage, payable after the first $50,000 of basic economic loss has been exhausted . . ."]; Balanca v Geico Gen. Ins. Co., 13 Misc 3d 90, 93 [App Term, 2nd Dept. 2006] [finding that Insurance Law §§ 5102[a], [b] and 11 NYCRR § 65-1.2 [a] "establish that when OBEL coverage is purchased, there is $75,000 in coverage for basic economic loss"]).

Where an accident involves at least one vehicle weighing more than 6,500 pounds, a [*3]no-fault carrier who pays first party benefits, i.e. "payments to reimburse a person for basic economic loss on account of personal injury arising out of the use or operation of a motor vehicle" (Insurance Law § 5102[b]), is entitled to reimbursement from the tortfeasor's insurer in mandatory loss transfer arbitration (Insurance Law § 5105). "Insurance Law § 5105 serves to mitigate the effect of placing the entire burden of loss on the first-party insurer, even where its insured was not at fault, and allows insurers to recover from each other the first-party no-fault benefits paid to their insureds, allocated on the basis of their relative fault." Matter of Fiduciary Ins. Co. v American Bankers Ins. Co. of Florida, 132 AD3d 40, 48 [2nd Dept. 2015] [internal quotation marks and citations omitted]). To that end, where a no-fault insurer pays its insured $75,000 in first party benefits, representing basic economic loss and OBEL, it is entitled to recoup the entire $75,000 from the tortfeasor's insurer (see Matter of Allstate Ins. Co. v Travelers Cos., Inc., 159 AD3d 982, 983 [2nd Dept 2018] [finding that "the arbitrators' determination that Travelers was entitled to recoup the entire payment made to its insured pursuant to basic economic loss and optional basic economic loss coverage ... was rationally based on the relevant statutes and regulations"]).

Here, the State does not dispute that the contractual limits for basic PIP and OBEL coverage under Mr. Quirk's policy is $75,000. Nor does the State dispute OBEL payments are generally eligible for loss transfer under Insurance Law § 5105(a). Rather, the State argues that the language of Executive Law § 203 limits the maximum amount payable by the State for any occurrence in accordance with Article 51 of the Insurance Law to $50,000.

According to Executive Law 203:

The commissioner of the office of general services is authorized ... to pay and cause to be satisfied and discharged claims for damage to personal or real property or for bodily injuries or wrongful death caused in connection with the operation of a motor vehicle (a) by officers or employees of the state, while acting within the scope of their employment . Such claims payments shall be made in accordance with a contract with a private firm to process, adjust, investigate, negotiate, settle, pay, and subrogate such claims on behalf of the state, as specified in such contract, provided that such firm is duly licensed to perform such services by the state department of financial services.

Notwithstanding any other provision of law, any such contract may provide for the payment of benefits up to a maximum of fifty thousand dollars for any occurrence in accordance with article fifty-one of the insurance law and for such payments, not based on tort, the attorney general's approval shall not be required. (Emphasis supplied).

Contrary to the State's argument, Executive Law 203 does not provide a cap on the State's liability for damages caused by the negligence of its employees in operating motor vehicles in the course of their employment. Rather, it sets forth a procedure for processing certain claims against the State, pursuant to contracts with private firms, and limits the authority of such firms to settle such claims to $50,000 (without approval of the attorney general). Here, Allstate's claim against the State was not settled but, rather, resolved by an arbitration award after a contested proceeding. Because Executive Law 203 does not provide a damages cap, the arbitration panel did not exceed its authority and did not act arbitrarily or capriciously in determining that Allstate was entitled to recoup the OBEL payment made to its insured. Rather, the arbitration panel's decision was rationally based on the relevant statutes and regulations (see [*4]Insurance Law § 5102[a], [b]; 11 NYCRR §§ 65—1.1, 65—1.2).

Accordingly, it is ORDERED and ADJUDGED that the motion of petitioner Allstate Insurance Company is granted; and it is further ORDERED and ADJUDGED that the cross-motion of respondent the State of New York a/k/a Office of General Services of the State of New York is denied; and it is further ORDERED and ADJUDGED that the Arbitration Award rendered in favor of respondent Allstate Insurance Company on June 4, 2020, is confirmed; and it is further ORDERED and ADJUDGED that the clerk shall enter a judgment accordingly.


Albany, New York

April 23, 2021


Supreme Court Justice

Papers Considered: NYSCEF Documents 1 - 24.

This memorandum constitutes the Decision and Order of the Court. The Court has uploaded the original Decision and Order to the case record in this matter maintained on the NYSCEF website, whereupon it is to be entered and filed by the Office of the County Clerk. Counsel is not relieved from the applicable provisions of CPLR § 2220 regarding service and notice of entry.


Footnote 1:The State concedes that its driver was 100% at fault.

Footnote 2:In addition to the basic $50,000 of no-fault coverage, Mr. Quirk's policy included $25,000 in OBEL coverage.

Footnote 3:Insurance Law § 5105 provides, in relevant part, that if at least one of the motor vehicles involved in the accident weighs more than 6,500 pounds (unloaded), then a No Fault carrier may recover first party benefits it has paid from the insurer of the at-fault party (hereinafter "PIP Loss Transfer"). Here, PIP Loss Transfer applies because the State's vehicle was a Mack dump truck and qualifies due to weight.

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