Uninsured Motorists - Comp Offsets

Saturday, February 11, 2006 | 0

By Larry Rogak

ARBITRATOR'S REFUSAL TO CONSIDER WORKERS COMP BENEFITS AS OFFSET TO UM AWARD RESULTS IN NEW HEARING

CNA Global Resource Managers v. Berry, NYLJ 2/02/06 (Supreme Court, Kings County) (SCHACK, j) CNA Global Resource Managers and Custom Towing, Inc. moved to vacate and set aside a $300,000.00 March 16, 2005 arbitration award to respondent Berry "for any and all injuries sustained as a result of the occurrence of April 15, 2002," issued in a SUM arbitration between the parties, on the grounds that the arbitrator exceeded his powers by issuing an award that was arbitrary and capricious; or, in the alternative petition, to modify the $300,000.00 arbitration award on the grounds that the arbitrator failed to reduce the award by workers' compensation benefits previously paid to the respondent. Respondent Berry opposed the petitions on the grounds that the petitioners waived any right to a workers' compensation offset when they failed to request such at the arbitration proceeding.

The SUM arbitration arose out of an accident, allegedly occurring on April 15, 2002, when respondent's tow truck was struck in the rear while stopped at the intersection of East 37th Street and Avenue I, in Brooklyn. According to the arbitration award, Mr. Berry testified that his vehicle was struck in the rear while stopped for a red light. The force of the collision reportedly caused the offending vehicle to be impaled upon the tow truck's rear metal lift. Subsequently, the operator of the offending vehicle fled the scene.

During the arbitration proceeding, two workers' compensation applications with regard to the accident were proffered. The initial application, dated July 17, 2002, stated that the accident occurred at Avenue J and 23rd Street [this intersection does not exist in Brooklyn]. The subsequent application, dated November 2, 2002, identified the accident location as Avenue I and East 37th Street.

In determining liability, the arbitrator noted that any denial of respondent's claim "would have to be based upon his total and complete responsibility for the happening of this occurrence." Moreover, the arbitrator made clear that "the question of whether or not there was a contact by [an] adverse vehicle into [respondent's] tow truck was not before him]." Upon considering the "significant testimony" of respondent with regard to the happening of the accident and the location of its occurrence, the arbitrator determined that there was "no evidence" submitted which would allow him to find respondent solely responsible for the subject accident.

In this petition, petitioners contended that the arbitration award should be vacated because the arbitrator overlooked "strong evidence of fraud on the part of [respondent] regarding whether an accident ever even occurred at all." Specifically, petitioners argued that the arbitrator overlooked inconsistencies in respondent's workers' compensation applications with regard to where the accident actually took place. Further, petitioners argued that the arbitrator improperly overlooked or failed to credit evidence that a traffic control device did not exist at the intersection of East 37th Street and Avenue I. They also contended that the arbitrator erred in failing to provide an opportunity to the petitioners to submit additional definitive proof on the issue of the absence of a traffic light at the purported accident scene.

Respondent contended that petitioners did not offer any evidence that he was solely responsible for the alleged accident and, therefore, the arbitrator's liability determination was not arbitrary or capricious. He also argued that the absence of a traffic light at the intersection did not demonstrate that the accident did not occur or that respondent was solely responsible for the accident since, in any event, he claims that he was actually stopped at the intersection of East 37th Street and Avenue I at the time of the accident due to a red traffic light located approximately one block ahead of him.

The Appellate Division, Second Department, has applied the CPLR Article 78 "arbitrary and capricious" standard of review to petitions to vacate compulsory arbitration awards. In State Farm Mut. Auto Ins. Co. v. City of Yonkers, 21 AD3d 1110, 1111 (2005) the Court stated, that an arbitration award in a mandatory arbitration proceeding will be upheld if it is supported by the evidence and is not arbitrary and capricious. On review, an award may be found to be rational if any basis for such a conclusion is apparent to the court based upon a reading of the record.

"An arbitrator's paramount responsibility is to reach an equitable result, and the courts will not assume the role of overseers to mold the award to conform to their sense of justice. Thus, an arbitrator's award will not be vacated for errors of law and fact committed by the arbitrator. Even where the arbitrator states an intention to apply a law, and then misapplies it, the award will not be set aside," held the Court.

"The liability determination in the instant arbitration award was not arbitrary and capricious. Therefore, this Court will not disturb the award with respect to the arbitrator's finding that respondent did not cause the accident. The arbitrator, in his award, stated: [d] denial of [Mr. Berry's] claim on the question of liability would have to be based upon his total and complete responsibility for the happening of this occurrence. There is no evidence submitted on behalf of [CNA and Custom Towing] that would allow me to make such a distinction on the question of liability."

"The arbitrator based his decision upon respondent's testimony that he was struck from behind while his vehicle was stopped at the intersection of East 37th Street and Avenue I. The arbitrator gave no weight to [an investigator's] testimony that no traffic light existed at the subject intersection, given that his testimony was not accompanied by any photographs or other documentary evidence. Moreover, even if some evidence existed that there was no traffic control device located at the subject intersection, such evidence would not prove that Mr. Berry was not stopped at the intersection at the time of the accident, was not struck in the rear by a vehicle whose driver fled the scene, and that Mr. Berry in any way contributed to the proximate cause of the occurrence."

"The arbitration award clearly, and correctly, states that the question of whether any contact ever occurred between respondent's vehicle and the alleged offending vehicle was not before the arbitrator. The Court, in Nationwide Ins. Co. v. McDonnell, 272 AD2d 547, 548 (2d Dept 2000), held that it is well settled that a court, and not an arbitrator, just resolve the issue of whether there was actual contact with a hit-and-run vehicle. Accordingly, an arbitrator acts in excess of his or her powers when he or she considers the question of contact and reviews evidence that there may have been no contact between the allegedly offending vehicle and the vehicle operated by the claimant seeking uninsured motorist benefits...."

"However, with regard to petitioners' application to modify the arbitration award, the Court finds that it is appropriate to remand the proceeding to the arbitrator solely for a determination of the amount, if any, of a set-off based upon payment to respondent of workers' compensation benefits."

"In the instant matter, the relevant insurance policy contains a non-duplication clause which states that the uninsured motorist coverage provided pursuant to the policy shall not duplicate benefits payable pursuant to the workers' compensation law. Therefore, to the extent that any portion of the $300,000 award rendered in favor of respondent Berry compensates him for the same economic loss for which he has already received workers' compensation benefits, the award should be reduced by such benefits. The failure to reduce benefits would result in the duplication of compensation which the non-duplication clause seeks to avoid."

"Although an arbitration award is not rendered susceptible to vacature or modification if the arbitrator has made a mistake of fact or law, the award may be set aside if the arbitrator excluded pertinent evidence from the hearing."

"In this matter, respondent apparently refused to produce any evidence of his receipt of workers' compensation benefits to petitioners. The arbitrator excluded such evidence from the hearing as irrelevant. However, given the existence of the non-duplication clause in the subject insurance policy, as well as the fact that evidence as to respondent's economic loss was presented at the hearing (although an economist's report was apparently not credited by the arbitrator), the court finds that the arbitrator incorrectly excluded evidence of respondent's receipt of workers' compensation benefits from the hearing."

"Further, although respondent claims that such award solely reflects compensation for non-economic loss such as pain and suffering, the award itself states that it represents payment for all injuries sustained as a result of the occurrence of April 15, 2002, and does not explicitly limit the award to injuries of a non-economic nature."

"The court notes that by remanding the matter to the arbitrator, the arbitrator is not directed to modify the award to reflect workers' compensation benefits offsets, as requested by petitioners, but rather, the arbitrator is directed to consider any evidence of workers' compensation benefit payments with regard to his determination of the monetary award to be issued to respondent."

The Court therefore ordered a new arb hearing "to the extent that the matter shall be remanded to the arbitrator for the sole purpose of determining whether such an offset is warranted and, if so, to modify the monetary award to reflect same." Respondent Berry was ordered "to produce any and all documentation concerning his receipt of workers' compensation benefits with regard to the subject accident within 90 days of the date of the notice of entry of this decision and order... upon remand, the arbitrator shall consider such documentation in determining whether a workers' compensation offset to the award is appropriate."

Article by Larry Rogak. Lawrence N. Rogak is an insurance defense attorney in New York. He writes The Rogak Report, a daily insurance law newsletter, and his insurance law articles appear in several industry publications. For more information see www.Rogak.com.

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