Shirom Acupuncture, P.C. v Country-wide Ins. Co. (2017 NY Slip Op 51412(U))

HUCV 2206-16
James F. Matthews, J.

Upon the following papers numbered 1 to 21 read on this petition for an order vacating the decision in part of a master arbitrator; by Notice of Petition /Order to Show Cause and supporting papers 1-3, ; Notice of Cross Motion and supporting papers ; Answering Affidavits and supporting papers 10,11 ; Replying Affidavits and supporting papers18,21 ; Filed papers ; Other exhibits: 4-9,12-17,19,20 ; (and after hearing counsel in support of and opposed to the motion), it is

ORDERED that the petition to vacate the part of the award and remand rendered by a Master Arbitrator’s decision dated June 27, 2016, which vacated the lower Arbitrator’s award dated March 8, 2016 for $4,329.19 to petitioner, and then remanded the matter to lower arbitration for consideration of respondent’s Mallela defense of fraudulent incorporation, is granted. That part of the award of the Master Arbitrator dated June 27, 2016, which vacated the lower Arbitrator’s award of $4,329.19 to petitioner, and then remanded the matter to arbitration for consideration of respondent’s Mallela defense, is vacated; and it is further

ORDERED that the remaining part of the award rendered by the Master Arbitrator’s decision dated June 27, 2016, which confirmed the decision of the lower Arbitrator dated March 8, 2016, is confirmed.

Petitioner asks the Court to vacate that part of the award of a Master Arbitrator dated June 27, 2016, which vacated the lower Arbitrator’s award of $4,329.19 to petitioner, and then remanded the matter to lower arbitration for consideration of whether respondent’s Mallela defense of fraudulent incorporation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]) was appropriate.

The respondent opposes the relief sought by petitioner, and requests that the Master Arbitrator’s award dated June 27, 2016, be confirmed.

The lower arbitration decision dated March 8, 2016, awarded the sum of $4,329.19 to petitioner, based upon a finding that mailing requests for two Examinations Under Oath [*2](“EUO’s”) set for June 24, 2015 and July 16, 2015, respectively, were ignored and unattended by petitioner, but the mailing requests were nonetheless facially untimely, in that the first EUO scheduling request was mailed four and one-half (4 1/2) years after the claim was submitted, thereby rendering the EUO requests a nullity, as related to the billing at issue, and rendering all other issues moot. The lower arbitration also found respondent failed to persuasively support their fee schedule defense and awarded the disputed sum of $4,329.19 to petitioner.

The Master Arbitrator’s decision dated June 27, 2016 leaves only a single issue for determination by the Court: respondent contends the lower arbitrator’s decision did not render a determination concerning respondent’s Mallela defense of fraudulent incorporation, which issue it asserts was raised before the arbitrator and was not precluded due to time constraints.

The Master Arbitrator found that the decision of the lower arbitrator was imperfectly rendered pursuant to CPLR 7511(b) (1)(iii) and 11 NYCRR 65-4.5(s), based upon the lack of a specific determination addressing respondent’s Mallela defense of fraudulent incorporation. It therefore vacated the award of $4,329.19 to petitioner, and remanded the matter back to arbitration for consideration of the Mallela contentions concerning fraudulent incorporation.

Petitioner contends that both the lower arbitration and the Master Arbitration found the EUO scheduling notices to be untimely, thereby precluding respondent’s fee schedule defense due to failure of a timely denial of the claim.

In addition, petitioner asserts that the lower arbitration decision included the statement that “all other issues are moot,” thereby including sufficient language to satisfy respondent’s Mallela contentions. Petitioner argues that respondent failed to provide its Mallela contentions with any type of factual allegations, which is why the lower arbitration decision was written in the manner provided. Respondent’s mere cite to Mallela contentions without factual support is legally insufficient (see generally Country-Wide Ins. Co. v Bay Needle Care Acupuncture, P.C., 2016 NY Slip Op 37157 [NY Supp 2016] [wherein the Court focused on petitioner’ belief that respondent may have been ineligible for benefits as an unlawfully incorporated professional corporation, but “petitioner nowhere specifies how respondent failed to meet that burden at the arbitration”]).

The Master Arbitrator’s decision implies that the lower arbitrator was obligated to disclose the basis for its decision, which is why the matter was remanded to lower arbitration for further consideration on the Mallela contentions. However, in actuality, an arbitrator is not obligated to reveal the basis for its award (see Hausknecht v Comprehensive Med. Care of New York, P.C., 24 AD3d 778 [2nd Dept 2005]; Matter of Nationwide Mut. Ins. Co. v Steiner, 227 AD2d 563 [2nd Dept 1996]).

The standard of review for an arbitration award is limited to a determination of whether the award was arbitrary, capricious or incorrect as a matter of law. A master arbitrator’s powers in reviewing an initial arbitrator’s decision are limited to the grounds stated in CPLR 7511, and additionally, under insurance regulations, is limited to whether the initial arbitrator ruled on factual and procedural issues in a manner that was arbitrary, capricious, irrational or without a plausible basis (see Matter of Petrofsky v Allstate Ins. Co., 54 NY2d 207, 211 [1981]; In the Matter of Allstate Ins. Co. v Keegan, 201 AD2d 724 [2nd Dept 1994]).

If a challenge is based upon a factual error in the arbitration, “the master arbitrator must uphold the determination if it has a rational basis” (see In the Matter of Richardson v Prudential Prop. & Cas. Ins. Co., 230 Ad2d 861 [2nd Dept 1996]). Moreover, an arbitrator’s award must be upheld “when the arbitrator ‘offer[s] even a barely colorable justification for the outcome [*3]reached'” (see In the Matter of Susan D. Settenbrino. P.C. v Barroga-Hayes, 89 AD3d 1094, 1095 [2nd Dept 2011]). Indeed, for an award to be irrational, there must be “no proof whatsoever to justify the award” (see In the Matter of Gaymon v MTA Bus Co., 117 AD3d 735, 736 [2nd Dept 2014]; In the Matter of Susan D. Settenbrino. P.C. v Barroga-Hayes, supra ). Moreover, “an arbitrator is not bound by principles of substantive law or rules of evidence, and may do justice and apply his or her own sense of law and equity to the facts as he or she finds them to be” (Id. at 1095).

Here, the Court finds that the petition before the Court is timely (see CPLR 7511[a]). Furthermore, the Court finds that the record demonstrates there was a rational basis for the initial arbitrator’s decision and the award dated March 8, 2016 was justified. It was supported by sufficient evidence in the record, and was not arbitrary, capricious, irrational or incorrect as a matter of law.

The Court further finds that the Master Arbitration award dated June 27, 2016, prejudiced petitioner by exceeding its powers (see CPLR 7511[b][1][iii]), and is irrational (see Matter of Falzone [New York Cent. Mut. Fire Ins. Co.], 15 NY3d 530 [2010]). Therefore, the petition is granted, to the extent that the part of the award of the Master Arbitrator dated June 27, 2016, which vacated the lower Arbitrator’s award of $4,329.19 to petitioner, and then remanded the matter to arbitration for consideration of respondent’s Mallela defense, is vacated.

The remaining part of the award rendered by the Master Arbitrator’s decision dated June 27, 2016, which confirmed the decision of the lower Arbitrator dated March 8, 2016, is hereby confirmed (see CPLR 7511[e]).

The foregoing constitutes the decision and order of this Court.

Dated: October 16, 2017
J.D.C.