An Arbitrator’s Award In Excess Of Policy Limit Constitutes Grounds For Vacatur (NY)
New York Appellate Court holds once an insurer has paid the full monetary limits set forth in its insurance policy, the insurer’s duties to the policyholder under the policy cease. Accordingly, where an arbitrator’s award directs payment in excess of the monetary limit of a policy of insurance, the Appellate Division, First Department has held that the award is subject to vacatur.
In Allstate Fire And Casualty Insurance Company v. Branch Medical P.C., 2022 WL 1163074 (1st Dep’t 2022), Petitioner-Respondent Allstate Fire & Casualty Insurance Company (“Allstate”) issued a policy of insurance to an insured that included a $50,000 policy limit for Personal Injury Protection coverage and a $25,000 policy limit for Optional Basic Economic Loss coverage. (the “Policy”). Subsequently, the insured received medical treatment from Respondent-Appellant Branch Medical, P.C. (“Branch Medical”). As such, Branch Medical sought to recoup fees from Allstate and the two parties submitted to arbitration. At the conclusion of the arbitration, the master arbitrator’s award directed payment to Branch Medical in excess of the monetary limit of the Policy. Consequently, Allstate petitioned to have the arbitrator’s award vacated, whereas Branch Medical submitted a cross-motion to confirm the arbitrator’s award. Ultimately, the Civil Court vacated the master arbitrator’s award and denied respondent’s cross-motion, resulting in Branch Medical filing an appeal with the First Department.
Upon review of the appeal, the First Department held the arbitrator’s award directing payment in excess of the monetary limit of the Policy exceeds the arbitrator’s power and constitutes grounds for vacatur of the award. In essence, Allstate’s submissions of evidence—including the testimony of Allstate’s claims adjustor, policy declarations page, and ledgers listing the dates any claims were received and paid—were deemed sufficient to establish the Policy had been exhausted by payments of no-fault benefits to other health care providers and lost wages to the assignor before Allstate was obligated to pay the claim at issue. Although Branch Medical attempted to assert new arguments throughout the appellate process, the Court noted that it would not consider different theories or new questions that were not presented to the Civil Court. Ultimately, the First Department upheld the Civil Court’s Order that granted the petition of Allstate to vacate the master arbitrator’s award and denied respondent’s cross-motion to confirm the arbitration award.
Thanks to Drew Fryhoff for his contribution to this post. Should you have any questions, please feel free to contact Tom Bracken.