New York Law Journal: 9/2013

Arbitration Influx: Recent Decisions of Interest and Practitioner Update

By: Michael C. Rosenberger and Jason A. Moroff

Due to an extraordinary backlog, assigned first party no-fault cases scheduled to be tried within the New York State Unified Court System have been adjourned, in most instances, to 2016. These exponentially expanding adjourn dates seemingly have no end in sight and subsequently resulted in an influx of filings in arbitration. The numbers are telling. According to the American Arbitration Association, “there were 143,000 filings in the No-Fault program [in 2012], a 50% increase over 2011 and more than double the volume of 2010.”[1]

In response to the dramatic influx of new no-fault arbitration filings, the American Arbitration Association hired a bevy of new arbitrators and support staff.[2] A majority of the new arbitrators possess an extensive background in no-fault insurance law and were hired directly from firms handling no-fault matters. All arbitrators are required to hear the cases the day they are scheduled and are disinclined to adjourn or continue cases, unless a party would suffer undue hardship or prejudice. This practice is both welcome and necessary as it will ultimately prevent the creation of a backlog which plagued the American Arbitration Association years ago.

Due to the high volume of cases, hundreds of arbitration decisions are issued every month. The purpose of this article is to highlight certain arbitration decisions of interest in order to inform the no-fault arbitration practitioner of how arbitrators have been ruling on the most common issues. This month the focus will be on three questions: 1) Should the so-called “rocket docket” rule prohibiting the consideration of late arbitration submissions be strictly enforced? 2) What impact will the recent Alrof and Bright Medical decisions have on the arbitration forum? and 3) Is an arbitrator “inherently biased” and prohibited from hearing no-fault cases simply because of their prior affiliations and dealings?

Rocket Docket

Pursuant to the No-Fault Regulations, once an applicant submits its documents and respondent is advised of the submission the “respondent shall, within 30 calendar days after the mailing of such advice, provide all documents supporting its position on the disputed matter. Such documents shall be submitted to the applicant at the same time. The respondent may, in writing, request that the designated organization provide an additional 30 calendar days to respond based upon reasonable circumstances that prevent it from complying.”[3] Thereafter, “the written record shall be closed upon receipt of the respondent’s submission or the expiration of the period for receipt of the respondent’s submission. Documents submitted by either party after the record is closed shall be marked “late” and not considered by the arbitrator unless such submission is made with the approval of the arbitrator.[4]

In Mercury Casualty Co. v. Healthmakers Medical Group, P.C., an Article 75 proceeding was filed to vacate an award of a master arbitrator.[5] The petitioner argued, inter alia, the arbitrator abused his discretion in refusing to consider its late submission. In affirming the decision of the master arbitrator, the Appellate Division held, “the arbitrator acted within their discretionary authority in refusing to entertain late submissions from the petitioner.”[6]

Most arbitrators strictly enforce this rule, but others contend there must be a showing of prejudice.[7]However, in an area of law governed by timeframes, the “prejudice rule” seems to contradict the prevailing case law and purpose of the no-fault regulations. Indeed, the very goal of the No-Fault Regulations is the “prompt” payment of claims.[8] The submission of claims, verification requests and denials all carry stringently enforced time limitations in order to effectuate this goal. There is no reason why this section of the regulations should be treated any different. The rule is not set forth by the American Arbitration Association, but rather, the Insurance Department. Since the terms of the statute are plain and unambiguous, it must be construed to effectuate the plain meaning of the words contained therein.[9] The legislative intent of a statute must be “ascertained from the words and language used, and the statutory language is generally construed according to its natural and most obvious sense, without resorting to an artificial or forced construction.”[10] The New York Court of Appeals has spoken on the importance of following statutory timeframes and the peril that will follow for those who choose to ignore such rules.[11]

In Miceli v. State Farm Mutual Automobile Ins. Co., the plaintiff initiated an action against defendant to recover damages following an automobile accident.[12]  The plaintiff moved for summary judgment, but did so more than 120 days after it filed its note of issue in violation of CPLR R.3212.  The lower court granted the plaintiff’s motion for summary judgment, and the defendant subsequently appealed.  The Appellate Division affirmed the decision of the lower court, and the defendant appealed to the New York Court of Appeals.  In reversing the order of the Appellate Division, the New York Court of Appeals held, “statutory time frames-like court-ordered time frames are not options, they are requirements, to be taken seriously by the parties.   Too many pages of the Reports, and hours of the courts, are taken up with deadlines that are simply ignored.”

Similarly, the timeframes regarding the submission of no-fault arbitration documents are not options and do not require a showing of prejudice based upon a plain reading of the statute. Therefore, the application of “rocket docket” should be strictly enforced.

Evidence of No Show

A medical provider is required to submit to examinations under oath (hereinafter referred to as “EUO”) when requested by the insurer as a condition precedent to payment of a claim.[13]However, this alleged noncompliance must be established by demonstrating the requests were mailed and the party did not appear.[14] For many years, the burden placed upon insurance carriers by the Appellate Courts to demonstrate a failure to appear was de minimis. This has now changed and the Appellate Term has abandoned its minimalist approach for a more stringent standard.[15]

In Alrof v. Safeco, the Appellate Term held, “a conclusory statement from an attorney which fails to demonstrate his or her personal knowledge is insufficient to support summary judgment.”[16] A review of the record on appeal revealed that the affidavit indicated the attorney possessed “personal knowledge based upon a file review”, which was found to be insufficient. Thereafter, the Appellate Term reaffirmed its new position in Bright Medical Supply, Co. v. IDS Property and Casualty Ins. Co., by rejecting the affidavit of an attorney who swore he was “present” at the location of the scheduled EUO and “would likely have been the attorney assigned to conduct said EUO” if the individual would have appeared.[17] This was more than a mere file review, but was still insufficient to establish nonappearance. The Appellate Term gives little guidance as to what would be sufficient, but based upon a review of the rejected affidavits it is apparent the standard is stringent. The ruling has a rational basis since finding that an individual failed to comply with the terms of an insurance policy can be as drastic as terminating the ability to recover benefits retroactively to the date of loss, and therefore, the highest standard of proof should apply in both litigation and arbitration.[18]

To date the authors are aware of only three arbitration decisions that specifically address theAlrof decision. The first decision involved an affidavit from an individual from an insurance carrier’s claims office who claimed to possess personal knowledge of nonappearance at an EUO scheduled to transpire at a law office.[19] In opposition to the affidavit, the applicant argued such individual lacked personal knowledge.[20] In rejecting the position of the carrier and relying upon the reasoning in Alrof, the arbitrator held since the affiant, “is not an employee [of the firm] I find that her Affidavit is devoid of probative value and is not sufficient for the Respondent to meet its burden of proving that the Applicant failed to appear for the scheduled EUOs.”[21]

Finally, two recent arbitration decisions rejected the standard set forth in Alrof, essentially finding the case inapplicable in arbitration. In Ozone Park Chiropractic, P.C. v. State Farm Mutual Automobile Insurance Company, an insurance carrier submitted an affidavit from the partner of a law firm hired to schedule and conduct the EUO of the applicant.[22] The affidavit submitted was four paragraphs long and the only reference to nonappearance was the following statement: “a review of my records shows than an examination under oath was never performed on that day because the provider failed to appear at the examination.” The affidavit was nearly identical in substance to the affidavit rejected in Alrof. Nevertheless, the arbitrator accepted the affidavit and held, “the No Fault regulations indicate that arbitration proceedings need not be carried out with strict conformity to the rules of evidence.”[23] Similarly, in KJP Acupuncture, P.C. v. State Farm Mut. Auto. Ins. Co., the arbitrator held, “if applicant wanted strict application of the rules of evidence Applicant could have commenced an action in Court.”[24]

In both instances the arbitrators may have misapplied the holding of Alrof. The application of the Alrof decision does not involve a strict application of the rules of evidence. The Court inAlrof did not find the affidavit was not in admissible form.  Rather, the Court stated the affidavit was insufficient to establish nonappearance as a matter of law. Similarly, at the arbitration there was no issue with the admissibility of the affidavit; this was a pure issue of fact and law. The affidavit was indisputably part of the record without objection. The question was whether the content of the affidavit was in compliance with the recent change in the rule of law regarding nonappearance. Unfortunately, this question was not addressed, but should have been answered in the negative as both affidavits were on all fours with the affidavits in Alrof and Bright Medical.

Phantom Bias    

Recently, in Surendranath K. Reddy, M.D., P.C. v. Fiduciary Insurance Company of America, an insurance carrier alleged the decision of an arbitrator should be vacated based solely upon the ground that prior to his appointment he was an associate of a law firm (not affiliated with Applicant) that represented medical providers in first party no-fault actions.[25] The carrier did not address the “critical issue” in that it failed to timely submit its documentation, and therefore was barred from presenting its case. The carrier alleged the arbitrator is “inherently biased” and should not be permitted to hear no-fault cases.[26] In affirming the decision of the arbitrator, the Master arbitrator held, “it is clear that it is the law and Insurance Regulations that control here and not any bias of the lower arbitrator.”[27]

Arbitrators are appointed through the New York State Department of Finance, and work as independent contractors for the American Arbitration Association.[28] The regulations specifically state that, “all no-fault arbitrators shall be appointed by, and serve at the pleasure of, the superintendent. An arbitrator candidate shall disclose to the superintendent any circumstance, which is likely to create an appearance of bias, or which might disqualify such person as an arbitrator, and the superintendent shall determine whether the candidate should be disqualified.”[29] Based upon the foregoing provision, arbitrators disclose their former affiliations prior to appointment and are “disqualified” if the superintendent believes the candidate will not be impartial. Moreover, the Appellate Division has held, “the fact that the arbitrator is a member of a law firm that represents insurance companies and that he has been the adversary of appellant’s attorney in certain matters does not support a claim of bias.”[30]

By challenging the impartiality of an arbitrator, the carrier is indirectly challenging the integrity of the entire appointment process and the American Arbitration Association. Based upon such logic the majority of arbitrators would not be allowed to hear any cases due to their prior affiliations. Of course, the carrier did not challenge any decisions from arbitrators that once worked for insurance carriers where the “bias” would turn in its favor.

Presently, it is unclear if the Respondent’s challenge to the arbitrator was a last ditch effort to preserve a case it had neglected to actually defend or a true feeling within some segment of the No-Fault community that arbitrators should have no experience in the insurance industry.


With as many arbitrators and as many filings as the American Arbitration Association has, there will be disagreement over how cases and calendars are handled.  It is incumbent upon the practitioners appearing at hearings to understand that each arbitrator will have their own way of handling matters and to prepare accordingly. Arbitrators must also make an effort to be versed in the law and follow it.

In the three instances presented herein it would seem that the law is well settled and there should be uniformity of application. However, there continues to be divergent thought. A strict application of “rocket docket” fits squarely into the case law and purpose of the no-fault regulations.  Failing to enforce the rules creates more work and causes undue delay, which frustrates the purpose of arbitration. The Alrof decision presents a more complicated problem for arbitrators in that the standard has undoubtedly changed, but while Alrof indicates what is insufficient it gives little guidance on what would be sufficient.  Finally, there seems to be irrefutable proof that the past work experience of the arbitrators has little to do with how they will rule.  The proof is that many arbitrators have a background working for insurance carriers, yet applicants continue to file in ever increasing numbers.

[1] American Arbitration Association. President Letter and Financial Statements. New York: 2013. Web.

[2] Id.

[3] 11 NYCRR 65-4.4(g)

[4] 11 NYCRR 65-4.2(3)(iii); 11 NYCRR 65-4.2(3)(iv)

[5] 67 A.D.3d 1017 (2ndDept. 2009)

[6] Id.

[7] Comprehensive Psychological Evaluation, P.C. v. Ocean Harbor Cas. Ins. Co., 412012074409 (2013); Get Well Acupuncture, P.C. v. Country-Wide Ins. Co., 412012128624 (2013); Inwood Hill Medical, P.C. v. Allstate Ins. Co., 412010012628 (2010).

[8] 11 NYCRR 65-3.2(a)

[9] Patrolmen’s Benevolent Assn. of City of N.Y. v. City of New York, 41 N.Y.2d 205 (1976).

[10]McKinney’s Cons. Laws Statutes §94

[11] See generally, Miceli v. State Farm Mutual Automobile Ins. Co., 3 N.Y.3d 725 (2004); See also,Brill v.    City of New York, 2 N.Y.3d 648 (2005); Kihl v. Pfeffer, 94 N.Y.2d 118 (1999).

[12] Miceli v. State Farm Mutual Automobile Ins. Co., 3 N.Y.3d 725 (2004)

[13] 11 NYCRR § 65-1.1

[14] Stephen Fogel Pychological, P.C. v. Progressive Cas, Ins. Co., 35 A.D.2d 720 (2ndDept. 2006)

[15] Alrof, Inc. v. Safeco Ins. Co., 39 Misc.3d 130(A) (N.Y. App Term 2nd, 11th and 13th Jud. Dists. 2013)

[16] Id.

[17] 2013 NY Slip Op 51123(U) (N.Y. App Term 2nd, 11th and 13th Jud. Dists. 2013)

[18] Stephen Fogel, supra.

[19] Radiology of New York, P.C. v. GEICO, AAA 412013001898 (2013)

[20] Id.

[21] Id.

[22] Ozone Park Chiropractic, P.C. v. State Farm Mut. Auto Ins. Co.,  AAA 412012103128 (2013).

[23] Id.

[24] KJP Acupuncture, P.C. v. State Farm Mut. Auto. Ins. Co., AAA 412012097007 (2013).

[25] AAA 412012105348 (2013)

[26] Id.

[27] Id.

[28] 11 NYCRR 65-4.5(d)(1)

[29] 11 NYCRR 65-4.5(d)(3)

[30] Palmieri v. Insurance Co. of North America, 67 A.D.2d 967 (2ndDept. 1979)


Michael C. Rosenberger is a partner at Rapuzzi, Palumbo & Rosenberger, P.C. Jason A. Moroff is a partner at Gabriel & Shapiro, LLC. Steven Miranda assisted in the preparation of this article.

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