Mere Denial of Notice is Insufficient to Vacate Award

Saturday, April 21, 2007 | 0

By Larry Rogak

Clarendon National Insurance Co. v. State of New York Workers' Compensation Board (Supreme Court, New York County) (2007 NY Slip Op 30540(U)) (Feinman, j)

Clarendon brought this petition to vacate an arbitration award made by Arbitration Forums Inc. Clarendon alleged that its first notice of the arbitration proceeding was a "second notice" seeking to collect on the award.

Further, it alleged that it did not have coverage on the vehicle in which the claimant, Catherine Pedersen, was an occupant at the time of her work-related accident. Instead, alleged Clarendon, a DMV abstract showed that Liberty Mutual insured the subject vehicle on the date of loss.

Therefore, Clarendon alleged, the award against it should be vacated on the grounds that it was not a proper party to the arbitration, and further that the award should be vacated in the interests of justice and equity.

The court held, first, that an arbitration award may be vacated only where the rights of the complaining party were prejudiced by corruption, fraud, or misconduct in obtaining the award; or where the arbitrator was partial; or where the arbitrator exceeded his powers or failed to make a final and definite award; or where the statutory procedure was not followed.

Questions of law or fact are not reviewable by the court unless the award is so irrational that vacatur is required.

"Although Clarendon argues it was not the insurer, respondent [Workers' Comp Board] points to the police report from the motor vehicle accident which indicates that, as concerns the Pedersen vehicle, the insurer was '075,' the code number assigned by the New York State Insurance Department's Web site of insurance companies to Clarendon National Insurance Company. The insurance code written on the police report has been held to be presumptive proof of insurance coverage. Thus, it cannot be found that the arbitrator 'irrationally' determined that Clarendon was the insurer and liable for coverage."

The Workers' Comp Board showed that it served Clarendon with the application for arbitration at its New York City offices, where it was signed for by an "R. Olivier" on "12-20."

"Although neither the receipt nor the card is postmarked," the board also submitted "copies of the arbitration documents which include the first page of the decision form issued by Arbitration Forums Inc. Personal Injury Subrogation Forum, on which appears a signed certification of service dated December 14, 2004, stating that three copies of the application were mailed to ... Clarendon, at its address in New York, notably the same address as that on the certified mail card and receipt and that listed with the State Insurance Department ..."

"The decision, issued on March 7, 2005 on default, determined that the Workers' Compensation Board proved 100% liability against Clarendon, as Pedersen 'lost control and struck applicant in the rear.'"

"In answer to all of the above documentation, [Clarendon] asserts only that its first notice of the arbitration was in May 2006. It does not state that the address to which the documents were mailed was the incorrect address, that the contact name on file with the State Insurance Department was the wrong name, or that '075' was not the number assigned to it by the State Insurance Department. It merely offers a bald denial of receipt which is insufficient to rebut the totality of respondent's proof of notice of the arbitration."

"Accordingly, the petition to vacate the arbitration award ... is denied, and the award ... is confirmed."

Comment: Vacating an arbitration award solely on the grounds of lack of notice is very difficult.

Here, Clarendon must pay the award even if, in fact, it did not cover the subject vehicle on the date of loss. There's little that can be done in cases like this.

It does seem odd that Clarendon received neither the application for arbitration from the Workers' Comp Board, nor the notice of the arbitration from Arbitration Forums Inc.

Looks like this one just slipped through the cracks somewhere -- to the insurer's detriment.

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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