October 1, 2008

Mills v Government Employees Ins. Co. (2008 NY Slip Op 52141(U))


The relevant facts considered in this case included the denial of no-fault benefits to Dr. Mills by Government Employees Insurance Co. (GEICO) after a motor vehicle accident and subsequent injuries. Dr. Mills petitioned the court for a trial, de novo, to challenge the decision of an Arbitrator that upheld the denial of benefits. The main issue decided by the court was whether Dr. Mills was entitled to further no-fault benefits, based on his claim of lost earnings due to his injuries. The court ultimately held that the arbitration process afforded Dr. Mills due process, and the decisions of the Arbitrator and Master Arbitrator had a sound basis in the record and were not irrational, capricious, or an abuse of discretion. Therefore, the arbitration award was affirmed, and GEICO was directed to settle judgment. The court also found that Dr. Mills was not entitled to a trial de novo and that a demand for relief under Article 75 was untimely.

Reported in New York Official Reports at Mills v Government Employees Ins. Co. (2008 NY Slip Op 52141(U))

Mills v Government Employees Ins. Co. (2008 NY Slip Op 52141(U)) [*1]
Mills v Government Employees Ins. Co.
2008 NY Slip Op 52141(U) [21 Misc 3d 1122(A)]
Decided on October 1, 2008
Supreme Court, Nassau County
LaMarca, 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This opinion is uncorrected and will not be published in the printed Official Reports.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 October 1, 2008

Supreme Court, Nassau County

Joseph Mills, Petitioner,


Government Employees Insurance Co., Respondent.


Anthony C. Donofrio, PLLC

Attorney for Petitioner

5518 Merrick Road

Massapequa, NY 11758

Short & Billy, PC

Attorneys for Respondent

217 Broadway, Suite 300

New York, NY 10007

William R. LaMarca, J.

Requested Relief

Complainant, JOSEPH MILLS (hereinafter referred to as “Dr. MILLS”), petitions the Court for an order, pursuant to 11 NYCRR §65-4.10(h), granting him a trial, de novo, with respect to a decision of an Arbitrator that upheld the denial of no-fault benefits to MILLS by respondent, GOVERNMENT EMPLOYEES INSURANCE CO. (hereinafter referred to as “GEICO”). GEICO opposes the petition on procedural as well as substantive grounds. The petition is determined as follows:


In the underlying arbitration dispute, MILLS sought arbitration seeking payment of lost earnings under the no-fault provisions of his policy with GEICO which had coverage of $100,000.00 for lost earnings. Following MILLS’ claim, GEICO paid the amount of $13,950.48, but denied him further benefits, and in the arbitration, Dr, MILLS sought payment for the balance of the amount which he had not received.

In his petition, Dr. MILLS, claims that, prior to December 6, 2002, he was a full time treating chiropractor that treated patients at two (2) locations: Chiropractic Low Back Pain in Huntington, New York, and Nassau Chiropractic Pain Management in Valley Stream, New York. He states that, on September 4, 2002, he was involved in a motor vehicle accident on Route 108 in Cold Spring Harbor, New York where he sustained serious injuries to his spine. He contends that, from September 4, 2002 to December 6, 2002, he continued to treat patients at his facilities in a limited capacity until he was no longer [*2]physically able to do so on December 6, 2002, and that he hired part-time chiropractors to treat patients because of his diminished capabilities. On December 7, 2002, the date that Dr. MILLS claimed complete disability, he hired a full time chiropractor to take over his share of the work at the various facilities. He asserts that he has undergone serious spinal surgery, including the fusion of vertebrae in his spine with bone grafted from his hip and is presently receiving Social Security Disability benefits for being totally disabled since December 6, 2002.

Dr. MILLS states that, based upon a medical examination that concluded that no further treatment was necessary, GEICO denied his claim on March 9, 2003 and, thereafter, he underwent further surgery. He states that he submitted proof to GEICO of his additional surgery on September 9, 2003, as well as proof that he was receiving Social Security Disability Benefits, but after another medical examination GEICO again denied his claim, on July 13, 2004. Thereafter, the matter was heard by Arbitrator Laura A. Yantsos, Esq., who concluded in a nine (9) page decision, dated August 9, 2007, that Dr. MILLS had not suffered any loss of earnings and was not entitled to the balance of the policy. Said decision by Arbitrator Yantsos, was appealed by Dr. MILLS and upheld by Master Arbitrator Donald T. DeCarlo, by decision dated January 8, 2008. It is from the Master Arbitrator’s decision that Dr. MILLS seeks a trial de novo under11 NYCRR §65-4.10(h). It is Dr. MILLS position that the decision of Arbitrator Yantsos is completely arbitrary and abusive and that she exceeded her power and abused her discretion. He claims that the Arbitrator demanded documents far in excess of what was necessary or regular and required twenty (26) hours of appearance time and demonstrated that she had no understanding of the no-fault law.

The Arbitration Decision reflects an exhaustive and comprehensive analysis of the facts and documentary evidence presented, that included IRS records, business records, a Social Security claim and other related documents. Dr. MILLS claim was for lost earnings which is defined in Insurance Law §5102(2) as “[l]oss of earnings from work which the person would have performed had he not been injured, and reasonable and necessary expenses incurred by such person in obtaining services in lieu of those that he would have performed for income . . .”. The Arbitrator found that Dr. MILLS was acting, before and after the accident, first and foremost, as a manager and owner of medical corporations and practices and of the buildings in which the practices were located, and that he was not disabled from performing his duties as a manager/owner. As part of the evidence considered was a letter submitted by Dr. MILLS, written to “Scott” and prepared in conjunction with his Social Security Disability hearing, which indicated that he had gone on disability for more that a year in 1995, some seven (7) years prior to the subject accident, when he had injured his back and learned that he could not return to work on a full time basis and started doing medical management, that he ran his own medical management company for the last several years and did almost no treating, that he managed the medical practice of another doctor, and that he could not work as a chiropractor because he could not do repetitive bending. Moreover, the Arbitrator found that the two (2) practices opened by Dr. MILLS just a few months before the accident envisioned his role to be that of a medical manager, that he did not work exclusively as a treating chiropractor, that his tax returns did not accurately reflect legitimate business expenses and his deductions were grossly inflated and untraceable, and that real estate [*3]taxes imposed on the businesses were in fact for expenses of buildings owned by Dr. MILLS in his personal capacity. Indeed, after consideration of the credible evidence presented, the Arbitrator found that Dr. MILLS did not sustain a loss of earnings but, on the contrary, received greater income than he did prior to the accident.

In opposition to the petition, counsel for GEICO points out the following:

1. That the Court lacks personal jurisdiction over the respondent because the notice and petition were not properly served. 22 NYCRR §65-4.10(h) directs, as follows:

(h) Appeal from master arbitrators award:

(1) A decision of a master arbitrator is final and binding, except f for:

(I) court review pursuant to an Article 75 proceeding, or

(Ii) if the award of the master arbitrator is $5,000 or greater, exclusive of interest and attorneys fees, either party may in lieu of an Article 75 proceeding, institute a court action to adjudicate the dispute de novo. (emphasis supplied).

As the award of the master arbitrator was for $0 dollars, the instant action must be commenced as a special proceeding (CPLR §7502), which requires that a party file a petition (CPLR §304) and that the notice must be served in the same manner as a summons (CPLR §403[c]). It is clear that the petition was not served upon the defendant corporation, pursuant to CPLR §311(a) as complainant served the notice and petition, by mail, upon counsel for GEICO, which is insufficient service.

2. That complainant is not entitled to a trial de novo as a pre-requisite for a de novo action is an award of a master arbitrator in the amount of $5,000 or greater. There can be no de novo review if there is no monetary award. Harlev v United Servs. Auto Assn., 191 AD2d 768, 594 NYS2d 405 (3d Dept. 1993), General Accident Fire & Life Insurance Co. v Avlonitis, 156 AD2d 424, 548 NYS2d 543 (2nd Dept. 1989).

3. That the complainant is barred from seeking relief under CPLR Article 75 because CPLR §7511 with respect to vacating or modifying an arbitration award requires the application to be made within ninety (90) days of delivery to him. In the case at bar, the decision of the Master Arbitrator was mailed on January 8, 2008 and the instant application was filed on May 9, 2008. The ninety (90) day period had expired and claimant is not entitled to Article 75 relief.

4. That the decision of Arbitrator Yantsos has a factual and rational basis. As discussed above, the decision reflects an exhaustive and comprehensive analysis of the facts and documentary evidence presented.

5. That the decision of Arbitrator Yantsos is not capricious, arbitrary or irrational. The record demonstrates that Dr. MILLS claim that “working full time as a treating chiropractor was the primary source of his income and how he made his likelihood” was contrary to the record. Rather the record shows that he was a chiropractor/businessman, who worked in medical management for which he was not disabled.

6. That the decision of Master Arbitrator DeCarlo is proper and should be confirmed. Master Arbitrator DeCarlo found that “the Master Arbitrator is not a fact finder, and if the evidence is sufficient to support an Arbitrator’s decision, it is not the role of the Master Arbitrator to vacate or modify”. He concluded that “the decision of the Arbitrator on its face [*4]supports an affirmation of the decision below and I therefore, rule in favor of Respondent in this matter”. Counsel for GEICO cites Matter of Petrofsky v Allstate Insurance Co., 54 NY2d 207, 445 NYS2d 77, 429 NE2d 755 (C.A. 1981).

The Law

The Court of Appeals has outlined the scope of review by a master arbitrator in the Matter of Petrofsky v Allstate Insurance Company, supra , and Smith and Firemen’s Fund Insurance Company, 55 NY2d 224, 448 NYS2d 444, 433 NE2d 509 (C.A. 1982). In Petrofsky, the Court of Appeals vacated a master arbitrator’s determination which set aside the original arbitration award and found that the master arbitrator erred by engaging in an extensive review of the facts. In Smith, the Court of Appeals upheld the master arbitrator because he based his decision on a matter of law and there was no indication that the master arbitrator exceeded his statutory power by weighing the evidence or resolving issues such as the credibility of the witnesses:

An arbitration award may be reviewed for whether it has a rational basis. The rational basis standard was developed by the Court of Appeals in a series of four (4) cases: Garcia v Federal Insurance Company, 46 NY2d 1040, 416 NYS2d 544, 389 NE2d 1066 ( C.A. 1979), Furstenberg v Aetna Casualty & Surety Co., 49 NY2d 757, 426 NYS2d 465, 403 NE2d 170 (C.A. 1980), Cohn v Royal Globe Insurance Company, 49 NY2d 942, 428 NYS2d 88, 406 NE2d 739 (C.A. 1980) and Levine v Zurich American Insurance, 49 NY2d 907, 428 NYS2d 193, 405 NE2d 675 (C.A. 1980).

CPLR § 7511(b) sets forth the four narrow grounds upon which an arbitration award may be vacated. These four grounds are 1) corruption, fraud, or misconduct in procuring the award; 2) partiality of an arbitrator appointed as a neutral; 3) that an arbitrator or agency making the award exceeded his power or so imperfectly executed it that a final definite award was not made; and 4) procedural defects, unless the party failed to notice the defect and failed to object to same. See also, Matra Building Corp v Alan Kucker, et al., 2 AD3d 732, 770 NYS2d 367 (2nd Dept. 2002). An arbitration award cannot be vacated even if the Court concludes that the arbitrators interpretation of an agreement misconstrues or disregards its plain meaning or misapplies substantive law unless the award is violative of a strong public policy, is totally irrational, or exceeds enumerated limitations of the arbitrators powers. Matra Building Corp. v Alan Kucker, et al., supra . The scope of review is extremely limited, as the goal of arbitration is to reach a final and definite resolution of the parties’ dispute without resorting to the judicial process, and the party commencing the action bears a heavy burden of proof. Indeed, an arbitration award will be confirmed if there is even a barely colorable justification for the outcome. Huntington Hospital v Huntington Hospital Nurses Association, 302 F. Supp. 2d 34 (EDNY, 2004).

. . . [I]n order to achieve arbitration’s dual purpose of an equitable result and expediency, the arbitrator’s award should be given great deference. Finality is the key. Accordingly, CPLR 7501 expressly forbids judicial review of the parties’ disputes. Therefore, failure to establish a statutory ground for vacatur under CPLR 7511 requires confirmation of the award (Matter of Granite Worsted Mills[Cowen] 25 NY2d 451, 255 NE2d 168, 306 NYS2d 934). Moreover, in New York there is a strong public policy favoring [*5]arbitration, consequently an award is not subject to vacatur “unless the court concludes that it is totally irrational or violative of a strong public policy” and thus in excess of the arbitrators powers (Hacket v. Milbank, Tweed, Hadley & McCloy, 86 NY2d 146, 630 NYS2d 274, 654 NE2d 95; Maross Constr. V. Central NY Regional Transp. Auth. 66 NY2d 341, 497 NYS2d 321, 488 NE2d 67).

Brown and Williamson Tobacco Corp. v. Chesley, 194 Misc 2d 540, 749 NYS2d 842 (NY County, 2002).

ConclusionAfter a careful reading of the submissions herein, the Court credits the analysis of GEICO’s counsel and finds that service of the petition was improper, that complainant is not entitled to a de novo trial, that a demand for relief under Article 75 is untimely, and that, even if juricdiction had been established and the application was timely, the awards of the Arbitrator and Master Arbitrator have a sound basis in the record and are not irrational, capricious or an abuse of discretion. It is the finding of the Court that the arbitration process afforded the complainant due process and is supported by adequate evidence in the record and is not totally irrational. See, Gulf Stream Coach v DiSanto, 173 Misc 2d 242, 661 NYS2d 498 (Sup. Lawrence Co. 1997); Ianotti v Safari Motor Coaches, 255 AD2d 848, 638 NYS2d 839 (3rd Dept 1996).Based on the totality of the evidence presented, the Court finds that there clearly was a rational basis for the arbitral decision and that the arbitrator acted within her powers.

Therefore, as CPLR § 7511(e) directs that once the Court denies a motion to vacate an award it shall confirm the arbitration award, the Arbitration Award is affirmed. GEICO is directed to settle judgment, on notice.

All further requested relief not specifically granted is denied.

This constitutes the decision and order of the Court.

Dated: October 1, 2008