June 3, 2019

Matter of Spartan Med. Supply v Liberty Mut. Ins. Co. (2019 NY Slip Op 50862(U))


The main issue decided in this case was whether the master arbitrator's decision to affirm a lower arbitration award was rational or if it should be vacated. The court considered the fact that New York public policy strongly favors arbitration and that the scope of review of an arbitration decision is extremely limited. The court also considered the grounds set forth in the Civil Practice Law and Rules (CPLR) for vacating an arbitration award, and whether the master arbitrator exceeded his authority in making the award. The holding of the court was that the master arbitrator's award was not irrational and did not exceed his authority in affirming the lower arbitration award, so the petitioner's motion was denied and the master arbitrator's award was confirmed.

Reported in New York Official Reports at Matter of Spartan Med. Supply v Liberty Mut. Ins. Co. (2019 NY Slip Op 50862(U))

In the Matter of the Arbitration Between Spartan Medical Supply a/a/o Julio Pelaez, Petitioner(s),


Liberty Mutual Insurance Company, Respondent(s).


Attorneys for Plaintiffs: Economou & Economou, P.C., 85 Cold Spring Road, Suite 200, Syosset, NY 11791 (516) 682-0010

Attorneys for Defendants: Martyn and Martyn, 330 Old Country Road, Suite 211, Mineola, NY 11501 (516) 739-0329

Ignatius L. Muscarella, J.

The following papers have been considered by the Court on this special proceeding submitted April 12, 2019

Papers Numbered

Notice of Petition w/ annexed supporting papers 1
Affirmation in Opposition w/ annexed supporting papers 2
Reply Affirmation 3

Petitioner brings this proceeding seeking an order, pursuant to CPLR 7511(1), vacating the master arbitration award herein, dated November 14, 2018, which affirmed the lower arbitration award, dated August 10, 2018. Petitioner further requests that, upon such award being vacated, it be awarded the amount of $2,027.00, together with statutory interest from December 29, 2016, as well as, costs and attorneys fees.

Specifically, petitioner contends that the master arbitrator’s award was arbitrary, capricious and incorrect as a matter of law in upholding a denial of benefits defense premised upon exhaustion of policy limits notwithstanding that the policy was not exhausted at the time petitioner’s otherwise valid claim was earlier denied in good faith by respondent carrier.

New York public policy strongly favors arbitration (Hackett v Milbank, Tweed, Hadley & McCloy, 86 NY2d 146,155 [1995]; Maross Constr., Inc. v Central New York Regional Transp. Authority, 66 NY2d 341, 346 [1985]). Since 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. “Moreover, courts are obligated to give deference to the decision of the arbitrator” (In re N.Y.C. Transit Authority v Transport Workers’ Union of America, Local [*2]100, AFL-CIO, 6 NY3d 332, 336 [2005]).

Judicial review of a master arbitrator’s award is restricted to the grounds set forth in CPLR 7511, except in those instances where the award is $5,000 or more (see Matter of Petrofsky (Allstate Ins. Co.), 54 NY2d 207, 210 [1981]). As applicable in this case, Section 7511(b)(1)(iii) of the CPLR allows the court to vacate an arbitration award upon the application of either party, if it finds that the arbitrator prejudiced the applicant’s right by exceeding the scope of his or her authority in making the award. In no-fault insurance cases, it is the role of the master arbitrator to review the lower arbitration award and determine whether it was made in a rational manner and that it was neither arbitrary nor capricious (see Allstate Ins. Co. v Keegan, 201 AD2d 724, 725 [2d Dept 1994]).

“A master arbitrator exceeds his statutory power by making his own factual determination, by reviewing factual and procedural errors committed during the course of the arbitration, by weighing the evidence, or by resolving issues such as the credibility of the witnesses (see Matter of Smith [(Fireman’s Ins. Co.) 55 NY2d 224 [1982]]” (Id.; see also Matter of Jasser v Allstate Ins. Co., 77 AD3d 751 [2d Dept 2010]). On the other hand, even if the master arbitrator’s decision vacates the lower arbitration award based upon the fact that the lower arbitrator made an error of law, this is within the scope of the master arbitrator’s review, and “the courts are limited in their further review of the master arbitrator’s resolution of that error of law, since we generally will not vacate an arbitrator’s award where the error claimed is the incorrect application of a rule of substantive law, unless it is so irrational as to require vacatur” (Matter of Smith (Firemen’s Ins. Co.) 55 NY2d at 232 [citations and internal quotations omitted] [bold type added]).

Here, there is no claim that the master arbitrator made his own factual determination. Rather petitioner’s contention that the master arbitrator’s decision to affirm the lower arbitration was “contrary to controlling law” (Petition at ¶ 10) is necessarily premised on the contention that, as such, it is “so irrational as to require vacatur” within the meaning of Matter of Smith (Firemen’s Ins. Co.), supra.

Where as here, both the arbitrator and the master arbitrator cited and considered the split between the First and Second Departments on the issue of policy exhaustion and priority of payment (compare Harmonic Physical Therapy, P.C. v Praetorian Ins. Co., 47 Misc 3d 137(A) [App Term 1st Dept [2015]; Alleviation Med. Servs., P.C. v. Allstate Ins. Co., 55 Misc 3d 44 [App Term 2d Dept [2017]), ultimately following the rationale of Harmonic, the master arbitrator’s award cannot be found to be irrational. As the master arbitrator did not exceed his authority in affirming the lower arbitration award, vacatur of that award is not warranted,

Accordingly, petitioner’s motion is denied in all respects, and the master arbitrator’s award is confirmed (CPLR 7511[e]; Matter of Mercury Cas. Co. v Healthmakers Med. Group, PC, 67 AD3d 1017 [2d Dept 2009]).

So Ordered.

Dated: June 3, 2019
Hon. Ignatius L. Muscarella