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Current Developments in the Commercial Divisions of the
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Posted: December 22, 2014

No Fault Insurance Arbitration Award Vacated As Arbitrary and Capricious

On December 4, 2014, Justice Bransten of the New York County Commercial Division issued a decision in New York Central Mutual Fire Insurance Co. v. Bronx Chiropractic Services, P.C., 2014 NY Slip Op. 33210(U), vacating a no-fault arbitration award as arbitrary and capricious because it did not follow clear legal precedent.

In New York Central Mutual Fire Insurance, the court granted the petitioner’s motion to vacate a no-fault arbitration award, explaining:

CPLR 751l(b)(l)(iii) permits a reviewing body to vacate a no-fault arbitration award on the ground that the arbitrator making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter was not made.

CPLR 7511 also has been construed to include review of whether the award was arbitrary, capricious, and unsupported by the evidence in the record. The arbitrator’s award will be upheld if the award is supported by a reasonable hypothesis and not contrary to what could fairly be described as settled law.

Further, in Matter of Petrofsky [Allstate Ins. Co.], 54 N.Y.2d 207, 210 (1981), the Court of Appeals held that the Master Arbitrator’s authority to review the award of the lower arbitrator is derived from Insurance Law § 6754 which states in pertinent part that a master arbitrator may vacate or modify an award made by an arbitrator in accordance with simplified procedures to be promulgated or approved by the superintendent, but that the grounds for vacating or modifying an arbitrator’s decision shall not be limited to those grounds for review set forth in article seventy five of the civil practice law and rules. Therefore, in accordance with the superintendent’s directive, 11 NYCRR 65.17(a)(4), as well as the grounds set forth in CPLR Article 75, the Master Arbitrator may vacate or modify an award if, among other things, the award was incorrect as a matter of law. However, the master arbitrator is expressly precluded from reviewing factual or procedural errors.

In a CPLR 7511 proceeding, a court may not set aside a Master Arbitrator’s determination unless it is irrational. The Master Arbitrator’s decision will be upheld if there is any reasonable basis to support it. However, the award cannot be contrary to what could fairly be described as settled law because it is arbitrary and capricious for an arbitrator not to follow clear precedent.

(Internal quotations and citations omitted) (emphasis added). The court went on to hold that the decision failed to follow clear precedent, and for that reason vacated it.

If this decision is appealed, we look forward to seeing what the First Department has to say about it.

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