| Matter of Philadelphia Ins. Co. (Utica Natl. Ins. Group) |
| 2012 NY Slip Op 05470 [97 AD3d 1153] |
| July 6, 2012 |
| Appellate Division, Fourth Department |
| In the Matter of the Arbitration between Philadelphia InsuranceCompany, Respondent, and Utica National Insurance Group, Doing Business as Utica MutualIns. Co., Appellant. |
—[*1] Damon Morey LLP, Buffalo (Michael J. Willett of counsel), forpetitioner-respondent.
Appeal from an order of the Supreme Court, Erie County (Patrick H. NeMoyer, J.), enteredMarch 7, 2011 in a proceeding pursuant to CPLR article 75. The order, among other things,granted the petition to vacate an arbitration award.
It is hereby ordered that the order so appealed from is reversed on the law without costs, thepetition is denied, the cross motion is granted and the arbitration award is confirmed.
Memorandum: Petitioner commenced this proceeding pursuant to CPLR 7511 (b) seekingvacatur of the arbitration award on the ground that arbitration was not available because underInsurance Law § 5105 (a) neither of the vehicles involved in the collision was "usedprincipally for the transportation of persons or property for hire." We conclude that SupremeCourt erred in granting the petition to vacate the arbitration award and in denying the crossmotion to confirm the award. Inasmuch as petitioner failed to apply for a stay of arbitrationbefore arbitration, petitioner waived its contention that respondent's claim for reimbursement offirst-party benefits is not arbitrable under Insurance Law § 5105 (see Matter of LibertyMut. Ins. Co. [Allstate Ins. Co.], 234 AD2d 901 [1996]). In view of that waiver, petitionermay not thereafter seek to vacate the arbitration award on the ground that the arbitration panelexceeded its power (see id.; Matter of Utica Mut. Ins. Co. v Incorporated Vil. of FloralPark, 262 AD2d 565, 566 [1999]; see also Rochester City School Dist. v RochesterTeachers Assn., 41 NY2d 578, 583 [1977]).
Were we to reach the issue whether respondent's vehicle was used principally for thetransportation of persons or property for hire under Insurance Law § 5105, we would agreewith our dissenting colleagues that the appropriate standard of review is whether the award wasarbitrary and capricious (see Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur.Co., 89 NY2d 214, 223 [1996]). However, despite acknowledging that we must apply adeferential standard of review, the dissent proceeds to conduct, with laser-like precision, acomprehensive legal analysis of the statutory phrase "vehicle used principally for thetransportation of persons or [*2]property for hire" (§ 5105).In reaching a legal conclusion as to the appropriate definition to be assigned to the subjectphrase, the dissent relies upon eight different definitions of or references to the phrase "vehiclefor hire," which the dissent concedes arise in "other [statutory or legal] contexts." Notably, noneof those definitions or references relied upon by the dissent was raised during arbitration or onappeal.
As the court recognized, petitioner has "contended from the outset that there is no legal orfactual basis here for loss transfer pursuant to [Insurance Law § ] 5105," and we disagreewith the dissent's conclusion that "at no point during the course of the proceedings in this matterdid petitioner take the position that the claim was not arbitrable." Indeed, in addition to labelingits defense as one for "lack of jurisdiction," petitioner twice asserted in the arbitration that it was"not subject to the loss transfer procedure." Thus, we have no difficulty concluding that petitionertook the position that the claim was not arbitrable. In concluding that the phrase assigned topetitioner's defense (lack of jurisdiction) is not dispositive, our dissenting colleagues fail to offerany explanation of what was otherwise meant thereby. Moreover, the dissent's reliance onMatter of Progressive Cas. Ins. Co. v New York State Ins. Fund (47 AD3d 633 [2008]) ismisplaced because, unlike here, the petitioner in Progressive "at no point during thecourse of the proceedings . . . [took] the position that the arbitration panellacked jurisdiction or that the . . . claim was not arbitrable" (id. at 634[emphasis added]). Thus, that case does not support the dissent's position that petitioner, despitelabeling its defense as one for "lack of jurisdiction," did not assert that the claim was notarbitrable.
Both the dissent and the court disregard controlling precedent of this Court in determiningthat petitioner's contention was not waived (see Liberty Mut. Ins. Co., 234 AD2d 901).The doctrine of stare decisis "recognizes that legal questions, once resolved, should not bereexamined every time they are presented" (Dufel v Green, 198 AD2d 640, 640 [1993],affd 84 NY2d 795 [1995]). " 'The doctrine . . . rests upon the principle that acourt is an institution, not merely a collection of individuals, and that governing rules of law donot change merely because the personnel of the court changes' " (People v Taylor, 9 NY3d 129, 148[2007], quoting People v Bing, 76 NY2d 331, 338 [1990], rearg denied 76 NY2d890 [1990]). Stare decisis " 'is the preferred course because it promotes the evenhanded,predictable, and consistent development of legal principles, fosters reliance on judicial decisions,and contributes to the actual and perceived integrity of the judicial process' " (id.; seePeople v Damiano, 87 NY2d 477, 488-489 [1996] [Simons, J., concurring]; Baden vStaples, 45 NY2d 889, 892 [1978]).
Here, this Court has previously held that, by failing to apply for a stay before arbitration, aninsurer waives the contention that the claim is not arbitrable under Insurance Law § 5105(Liberty Mut. Ins. Co., 234 AD2d 901). In the instant matter, the court acknowledged ourdecision in Liberty Mut. Ins. Co., but concluded that it was overruled by Motor Veh.Acc. Indem. Corp. (89 NY2d 214). That was error. Indeed, the Court of Appeals in MotorVeh. Acc. Indem. Corp. did not hold that insurers are precluded from obtaining judicialreview of the threshold question of whether a claim was subject to loss-transfer arbitration undersection 5105. Rather, the courts of this State have long recognized that a court has the power toresolve the threshold question whether a loss-transfer arbitration should be stayed under CPLRarticle 75 (see Matter of State Farm Mut. Auto Ins. Co. v Aetna Cas. & Sur. Co.132AD2d 930, 931 [1987], affd 71 NY2d 1013 [1988]; City of Syracuse v Utica Mut.Ins. Co., 90 AD2d 979 [1982], affd 61 NY2d 691 [1984]; Utica Mut. Ins.Co., 262 AD2d 565; Liberty Mut. Ins. Co., 234 AD2d 901).
Motor Veh. Acc. Indem. Corp. (89 NY2d 214), also relied upon by the dissent as abasis for concluding that the award is arbitrary and capricious, involved an "erroneousapplication of the Statute of Limitations" by the arbitrator (id. at 224). In concluding thatsuch an error of law was not arbitrary and capricious as a matter of law, the Court inMotor Veh. Acc. Indem. Corp. [*3]noted the varyinginterpretations of the limitations rule by the courts. Here, there is a paucity of decisionsinterpreting the phrase "for hire" in the Insurance Law § 5105 context, and our owndecision on this point noted that the statute is "inartfully drafted" and does not limit the universeof vehicles embraced thereby to "taxis and buses, and livery vehicles" (State Farm Mut. Auto.Ins. Co., 132 AD2d at 931). Therefore, even assuming, arguendo, that we could reach theissue, we would conclude that, under the circumstances presented, it cannot be said that thearbitration panel's award was arbitrary and capricious or was unsupported by any reasonablehypothesis (see Motor Veh. Acc. Indem. Corp., 89 NY2d at 224).
All concur except Peradotto and Sconiers, JJ., who dissent and vote to affirm in thefollowing memorandum.
Peradotto and Sconiers, JJ. (dissenting).We respectfully dissent. Unlike the majority, weconclude that petitioner did not waive its contention that the vehicle owned by its insured andinvolved in the subject accident was not "used principally for the transportation of persons orproperty for hire" within the meaning of Insurance Law § 5105 (a). We further concludethat there is no evidentiary support or rational basis for the arbitration panel's determination thatthe at-issue vehicle—a minivan owned by a nonprofit community residence fordevelopmentally disabled individuals and used by its employees to transport the six residents ofthe group home—is a vehicle "for hire" under that section.
Petitioner's insured, Rivershore, Inc. (Rivershore), is a private, nonprofit organization thatprovides residential and community support services to individuals with developmentaldisabilities. Rivershore operates several state-funded community residences for people withdisabilities, including a residence on 17th Street in Niagara Falls. On May 11, 2009, Rivershoreemployee Thomas Beckhorn, a night program manager at the 17th Street residence, was on hisway to pick up one of the residents from her mother's home when he was involved in a motorvehicle accident with a vehicle owned by Mary D. Farmel and operated by Cheryl K. French.French sustained injuries in the accident. At the time of the accident, Beckhorn was operating aminivan owned by Rivershore and insured by petitioner. The Farmel vehicle was insured byrespondent. After paying first-party personal injury protection (first-party) benefits to and onbehalf of French, respondent filed an application for inter-company arbitration, seekingreimbursement of those benefits from petitioner pursuant to the loss-transfer provisions ofInsurance Law § 5105. In a contentions sheet submitted to the arbitration panel, petitionercontended that it was "not subject to the loss[-]transfer procedure because not one of the vehiclesin the accident weighed more than 6,500 lbs. and/or neither vehicle was used principally fortransportation of persons or property for hire." In an amended contentions sheet, petitionerspecifically contended that the minivan operated by Beckhorn weighed between 5,001 and 6,000pounds, and that it was not used for the transportation of persons or property for hire. Rather,petitioner asserted that the minivan "was used in the course of providing general services to adisabled person, services that are regularly provided by Rivershore[ ] . . . to itsdevelopmentally disabled residents."
The arbitration panel determined that the Rivershore minivan "meet[s] the definition of alivery for this loss" and awarded respondent the full amount of the first-party benefits respondenthad paid to French. Petitioner then commenced this proceeding seeking to vacate the arbitrationaward pursuant to CPLR 7511 (b) on the ground that the award was without evidentiary supportor rational basis and thus was arbitrary and capricious insofar as the arbitration panel determinedthat the minivan was a vehicle for hire within the meaning of Insurance Law § 5105.Respondent cross-moved to confirm the award. Supreme Court granted the petition, denied thecross motion, and vacated the arbitration award on the ground that the arbitrators "actedirrationally and without an evidentiary basis" in concluding that the minivan was "usedprincipally for the transportation of persons or property for hire" (§ 5105). We wouldaffirm.[*4]
As relevant here, Insurance Law § 5105 (a)provides that "[a]ny insurer liable for the payment of first[-]party benefits . . . whichanother insurer would otherwise be obligated to pay . . . but for the provisions ofth[e No Fault Statute]" has a "right to recover [those benefits] . . . only if atleast one of the motor vehicles involved . . . [weighs] more than [6,500] poundsunloaded or is . . . used principally for the transportation of persons or propertyfor hire" (emphasis added). Thus, the right to recovery under that statute's loss-transferprovision is limited to accidents in which one of the involved vehicles (1) exceeds 6,500 pounds,or (2) transports persons or property "for hire." The Legislature amended section 5105 (a) in 1977to add those alternative conditions with the intention of "limit[ing] the right of insurance carriersto recover first-party payments" (Matter of State Farm Mut. Auto. Ins. Co. v Aetna Cas. &Sur. Co., 132 AD2d 930, 931 [1987], affd 71 NY2d 1013 [1988]; see Matter of Progressive Northeastern Ins.Co. [New York State Ins. Fund], 56 AD3d 1111, 1112 [2008], lv denied 12NY3d 713 [2009]). Pursuant to section 5105 (b), "mandatory arbitration is the sole remedyregarding disputes between insurers over responsibility for payment of first-party benefits"(State Farm Mut. Auto. Ins. Co. v Nationwide Mut. Ins. Co., 150 AD2d 976, 977 [1989];see also NY St Ins Dept 2005 Circular Letter No. 10, RE: PIP [No-fault]inter-company loss transfer procedures ["If there is a dispute with respect to a claim arisingpursuant to [s]ection 5105, the sole remedy of any insurer or compensation provider is via thesubmission of the controversy to a mandatory arbitration program"]).
Contrary to the contention of respondent and the conclusion of the majority, we conclude thatat no point during the course of the proceedings in this matter did petitioner assert that the claimwas not arbitrable, i.e., that the arbitrators lacked the authority to adjudicate the claim (seeMatter of Progressive Cas. Ins. Co. v New York State Ins. Fund, 47 AD3d 633, 634 [2008];cf. Matter of Liberty Mut. Ins. Co. [Allstate Ins. Co.], 234 AD2d 901 [1996]). Duringarbitration, petitioner did not object to proceeding in the arbitral forum or contend that the claimwas not subject to arbitration, and does not so contend on appeal. Rather, petitioner asserted onthe merits that respondent could not recover pursuant to the loss-transfer provisions of InsuranceLaw § 5105 because neither vehicle involved in the accident weighed more than 6,500pounds or was used principally for the transportation of persons or property for hire. Thus,petitioner's "participation in the arbitration proceeding without first moving for a stay ofarbitration did not constitute a waiver of its contention that the [minivan] was not. . . [a vehicle for hire] within the meaning of . . . [section] 5105"(Progressive Cas. Ins. Co., 47 AD3d at 634). The fact that petitioner's contentions sheetlabeled its defense as one for "lack of jurisdiction" is not dispositive of the issue whetherpetitioner asserted that the claim was not arbitrable. The substance of petitioner's contention, i.e.,that the minivan did not qualify as a vehicle for hire, "is a condition precedent to ultimaterecovery [under section 5105], not a condition precedent to 'access to the arbitral forum' "(id., quoting Matter of County of Rockland [Primiano Constr. Co.], 51 NY2d 1, 7[1980] [emphasis added]; see Progressive Northeastern Ins. Co., 56 AD3d at 1112). Inlight of the broad scope of the mandatory arbitration provision in Insurance Law § 5105(b), we conclude that petitioner properly submitted the issue whether the minivan was a "vehicle. . . for hire" to the arbitration panel for determination (§ 5105 [a]; seeProgressive Cas. Ins. Co., 47 AD3d at 634) and, arguably, had no choice but to do so(see § 5105 [b]; Paxton Natl. Ins. Co. v Merchants Mut. Ins. Co., 74 AD2d715, 716 [1980], affd 53 NY2d 646 [1981] ["Arbitration provides the sole remedy in losstransfer between insurers and the arbitration panel is the proper forum . . . for thedetermination of all questions of law and fact which may arise in connection with the remedy thatrespondent seeks"]).
With respect to the merits, "[w]here, as here, the parties are obligated by statutory mandate tosubmit their dispute to arbitration (see Insurance Law § 5105 [b]), the arbitrator'sdetermination is subject to 'closer judicial scrutiny' than with voluntary arbitration"(Progressive Northeastern Ins. Co., 56 AD3d at 1113, quoting Matter of Motor Veh.Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214, 223 [1996]; see Matter ofFurstenberg [Aetna Cas. & Sur. Co.—Allstate Ins. Co.], 49 NY2d 757, 758 [1980])."To be upheld, an award in a compulsory arbitration proceeding must have evidentiary supportand cannot be arbitrary and capricious" (Motor Veh. Acc. Indemn. Corp., 89 NY2d at223). Further, "article 75 review questions whether the decision was rational or had a plausiblebasis" (Matter of Petrofsky [Allstate Ins. Co.], 54 NY2d 207, 211 [1981]; seeProgressive Cas. Ins. Co., 47 AD3d at 634).
It was respondent's burden, as the party seeking reimbursement, to establish its right torecovery under Insurance Law § 5105 (a) (see Progressive Northeastern Ins. Co.,56 AD3d at 1112; see also Matter of Hanover Ins. Co. v State Farm Mut. Auto. Ins. Co.,226 AD2d 533, 534 [1996]). Here, we conclude not only that respondent failed to meet itsburden, but we also conclude that there is no evidentiary support or rational basis for thearbitrators' determination that the minivan was principally used to transport persons "for hire," acondition precedent to respondent's entitlement to reimbursement under section 5105 (a) (seeProgressive Northeastern Ins. Co., 56 AD3d at 1113). As this Court held in State FarmMut. Auto Ins. Co. (132 AD2d at 931), "the words 'for hire' modify the word 'vehicle' and. . . the statute covers only those vehicles hired to transport people, such as taxisand buses, and livery vehicles hired to transport property" (emphasis added). Weagree with the court that, under the circumstances of this case, "the Rivershore minivan cannot becategorized as or even likened to a taxi or bus."
The term "vehicle for hire" is commonly understood and defined in other contexts as avehicle held out to the public for the provision of transportation services in exchange for a fee(see generally Penal Law § 60.07 [2] [b] [defining " 'for-hire vehicle' " as "avehicle designed to carry not more than five passengers for compensation and such vehicle is ataxicab, . . . a livery, . . . or a 'black car' "]; Vehicle and Traffic Law§ 121-e [defining "livery" as "(e)very motor vehicle, other than a taxicab or a bus, used inthe business of transporting passengers for compensation"]; Vehicle and Traffic Law § 401[5-a] [a] [ii] [defining "motor vehicle operated for hire" as "mean(ing) and includ(ing) a taxicab,livery, coach, limousine or tow truck"]; Ops Gen Counsel NY Ins Dept No. 01-01-11 [Jan. 2001]["The phrase 'a motor vehicle used principally for the transportation of persons or property forhire' refers to vehicles hired to transport people and livery vehicles hired to transport property"]).Such vehicles are typically operated by drivers who are required to have a particular certificationor license, and are subject to specialized licensing, insurance, safety, and other requirements(see e.g. Vehicle and Traffic Law § 148-a [defining a "taxicab" as "[e]very motorvehicle, other than a bus, used in the business of transporting passengers for compensation, andoperated in such business under a license or permit issued by a local authority"]; Vehicle andTraffic Law § 370 [1] [requiring filing of indemnity bond or insurance policy by everyperson or entity "engaged in the business of carrying or transporting passengers for hire in anymotor vehicle"]; Vehicle and Traffic Law § 375 [23] ["Every motor vehicle operated forhire upon the public highways of this state shall be equipped with handles or other devices whichshall permit the door or doors to the passenger compartment to be readily opened from theinterior of the vehicle"]; see generally Vehicle and Traffic Law § 498 [governinginterjurisdictional pre-arranged for-hire vehicle operations]).
The evidence before the arbitration panel in this case consisted of the deposition testimony ofBeckhorn, the driver of the minivan, and material from Rivershore's website. Such evidenceestablishes that Rivershore is not in the business of transporting members of the public forcompensation, and that the Rivershore minivan was not used for that purpose. Rivershore'swebsite states that it supports 12 state-funded community residences for individuals withdevelopmental disabilities, and "serves many more people in their private homes throughoutNiagara County." In addition to its residential services, Rivershore "provides life planningservices, clinical services, and support with employment and volunteer pursuits." Beckhorntestified that he worked at the 17th Street community residence as a nighttime program manager,and that, at the time of the accident, he was driving to pick up one of the residents from [*5]her mother's house. Beckhorn testified that he was not specificallyhired to pick up the resident; rather, transporting residents of the group home was only one of hismany duties as a program manager. Beckhorn did not charge a fare, and he was not paid per trip.Further, the record establishes that Beckhorn possessed a "regular" driver's license and that theminivan bore passenger plates rather than livery or commercial license plates.
In determining that the minivan constituted a vehicle for hire under Insurance Law §5105 (a), the arbitrators relied upon Beckhorn's testimony that he "was going to pick up one ofRivershore's customers," as well as materials from Rivershore's website, which, according to thearbitrators, "proves that [Rivershore] offers a series of services for their customers. . . [including] transportation to appointments." Beckhorn's testimony, however,establishes that he was on his way to pick up not simply a "customer[ ]" of Rivershore; rather, hewas picking up a resident of the 17th Street community residence in a minivan used byRivershore staff for group home purposes. With respect to Rivershore's website, none of thematerials submitted to the arbitration panel refer to Rivershore's provision of transportationservices, let alone the transportation of customers "for hire." The portion of the website reliedupon by the arbitrators applies to Rivershore's individualized service environment program,which is "designed for people who live in their own apartment or house, or in a familydwelling" (emphasis added), not for individuals who live in a community residence. In anyevent, even if that program was involved here, the website does not state that Rivershoreprovides transportation services to program participants. Rather, it states that "[h]ighly trainedstaff will visit [participants'] home[s] and provide supports to help [them] achieve [their] goals,which are specific and individualized to [each participant]. These supports include assisting[participants] in completing all necessary daily activities, assisting [them] with attending anyneeded medical appointments, and gaining further independence, productivity and inclusionin [their] community" (emphasis added).
In sum, the record establishes that the Rivershore minivan was not held out to the communityas a vehicle transporting people "for hire." To the contrary, the minivan was assigned to the 17thStreet community residence for the exclusive purpose of assisting the six individuals who livethere with activities of daily living, i.e., shopping, attending events, family visits, etc. The driverof the minivan was not hired for the purpose of providing transportation and did not possess aspecialized license to provide transportation services; rather, he was hired to provide residentialservices to the residents of the group home that, from time to time, included driving them tovarious activities. We therefore conclude that the arbitration panel's determination that theat-issue minivan was "used principally for the transportation of persons . . . for hire"lacks evidentiary support or a rational basis, and thus that the court properly vacated thearbitration award on that ground (Insurance Law § 5105 [a]; see generally ProgressiveNortheastern Ins. Co., 56 AD3d at 1113-1114; Progressive Cas. Ins. Co., 47 AD3d at634). Present—Centra, J.P., Peradotto, Carni, Lindley and Sconiers, JJ.