No. 115967/09. Motion Seq. No. 001.
Allstate Insurance Company has petitioned this Court for an order pursuant to CPLR §7503(b) for a permanent stay of the arbitration demanded by its insured respondent Jose LeGrand based on his claim for uninsured motorist benefits. Allstate contends that LeGrand's accident was not a "covered event." LeGrand opposes, claiming that the petition is untimely.
The claim relates to injuries allegedly incurred by LeGrand when his rental car was rear-ended by a drunk driver in Cancun, Mexico on July 20, 2008. On September 22, 2009, LeGrand gave Allstate written notice, via facsimile and regular and certified mail, of his intent to assert an Uninsured Motorist claim. On that same date, Allstate sent LeGrand a letter acknowledging receipt of the notice. By petition allegedly served and filed in or about November 2009, Allstate requested a permanent stay of the arbitration, or in the alternative, a temporary stay pending a coverage hearing or discovery.
The Petition Must be Denied as Untimely
Allstate contends that LeGrand cannot satisfy his burden of proving that the accident was a "covered event" within the meaning of the Supplementary Uninsured Motorists (SUM) Endorsement of his policy, a copy of which is attached to the petition as Exhibit A. Section II of that Policy Endorsement, entitled "SUM Coverage Period and Territory," states that "This SUM coverage applies only to accidents that occur during the policy period shown in the Declarations, and in the United States, its territories or possessions, or Canada." Based on this language, Allstate asserts that LeGrand's accident in Mexico is not covered.
LeGrand counters that the petition is untimely pursuant to CPLR §7503(c). He provides a copy of the mailing envelope with a postmark stamp of December 9, 2009. Section 7503(c) sets a twenty-day deadline for a petition to stay arbitration, stating that:
An application to stay arbitration must be made by the party served within twenty days after service upon him of the notice [of intention to arbitrate] or demand [for arbitration], or he shall be so precluded.... Service of the application by mail shall be timely if such application is posted within the prescribed period.
Measured from LeGrand's September 22, 2009 service of his Notice of Intent to Arbitrate, the mailing of this application in November 2009 is undeniably outside the twenty-day period.
However, citing to In re Matarasso v. Continental Casualty Co., 56 NY2d 264 (1982), Allstate insists that the twenty-day period does not apply here because of the coverage limitation in the SUM Endorsement. In Matarasso, the Court of Appeals carved out a limited exception to the twenty-day rule with respect to applications under CPLR §7503(c) where no agreement to arbitrate exists. Allstate here contends that because the parties never agreed to arbitrate claims regarding accidents in Mexico, the Matarasso exception applies and its application is timely.
Allstate's reliance on Matarasso is misplaced, as the holding is limited to situations where no agreement to arbitrate exists, as opposed to situations like the case at bar where the dispute is whether the arbitration clause applies. The limitation on the Matarasso exception is clear based on the Court's discussion of the facts, as well as its unambiguous holding. In Matarasso, the Court found that "the umbrella policy itself contains no provision for arbitration of disputes" and that "the underlying automobile liability policy did not extend to the provisions for uninsured motorist coverage (and arbitration of claims arising thereunder), as the umbrella policy covers only liability of the insureds for damages owing third parties." 56 NY2d at 268. The Court indicated that it could "not impute to the Legislature an intent to bind persons to the arbitral process by their mere inaction for 20 days where no agreement to arbitrate has ever been made." Id. at 267. It also articulated explicit limitations on its holding (at p. 266):
We hold today that such a motion [to stay arbitration] may be entertained when as here, its basis is that the parties never agreed to arbitrate, as distinct from situations in which there is an arbitration agreement which is nevertheless claimed to be invalid or unenforceable because its conditions have not been complied with.
The Court of Appeals recently reaffirmed the limitations on the Matarasso exception in Fiveco, Inc. v. Haber, 11 NY3d 140 (2008). The parties in Fiveco had entered into a contract which contained a broad arbitration clause. When an issue arose, Haber demanded arbitration to resolve it, and Fiveco moved to permanently stay the arbitration on the ground that the contract containing the arbitration clause had expired. Haber countered that Fiveco's petition to stay arbitration was untimely, as it had been brought beyond the twenty-day period in CPLR 7503(c).
After reviewing and reiterating the Matarasso exception, the Court found the petition time-barred and held that the arbitration should proceed. The Court explained its reasoning (at p. 145):
Because the contracts at issue in this case contain an arbitration provision, it cannot be said that "the parties never agreed to arbitrate" or that "no agreement to arbitrate has ever been made" (Matter of Matarasso, 56 N.Y.2d at 266, 267, 451 N.Y.S.2d 703, 436 N.E.2d 1305). Indeed, Fiveco does not assert that the parties never entered into an arbitration agreement; rather, it simply attacks the present viability of the contracts containing the agreement to arbitrate. Thus, the Materasso exception is inapplicable under the circumstances of this case (see Matter of Steck [State Farm Ins. Co.], 89 N.Y.2d 1082, 1084, 659 N.Y.S.2d 839, 681 N.E.2d 1285 ).
The First Department applied the Matarasso exception in a similar fashion to find the petition time-barred in Empire Ins. Co. v. Busse, 281 AD2d 377 (2001). Empire's petition to stay its insured's demand for arbitration of his underinsured motorist claim had been brought beyond the twenty-day statutory period, but it argued that the twenty-day rule did not apply. Emphasizing the distinction articulated in Mararasso, the First Department soundly rejected Empire's claim and found the twenty-day rule applicable (at p. 378):
We reject petitioner's argument that since the subject policy does not contain any underinsurance coverage, its application to stay arbitration of an underinsurance claim did not have to be made within 20 days as required by CPLR 7503 (c). Matter of Matarasso (Cont. Cas. Co.) (56 NY2d 264) on which petitioner relies, is distinguishable since here the policy, in its "supplementary uninsured motorist endorsement," contains an arbitration clause. Petitioner's arguments that respondent is not entitled to any underinsured, as opposed to uninsured, benefits under that endorsement, and that the maximum amount of any benefits that would be due under the endorsement was offset by the payment respondent received from the offending vehicle's insurer, relate to whether certain conditions of the policy have been complied with and not whether the parties agreed to arbitration (see, Matter of Travelers Prop. Cas. Corp. v. Klepper, 275 AD2d 234; Matter of Steck [State Farm Ins. Co.], 89 NY2d 1082).
See also, In re Colonial Co-op Ins. Co., 46 AD3d 1012, 1013 (3rd Dep't 2007) (petitioner's claim that the arbitration agreement covered contract claims only and not tort claims challenged "the scope of the parties' existing arbitration agreement", rather than the existence of the agreement itself, and thus was subject to the twenty-day rule).
The same analysis applies here. Counsel necessarily agree that LeGrand's policy contains an arbitration clause applicable to uninsured motorist claims. Their dispute is whether LeGrand's injuries are covered because the accident took place in Mexico and the SUM Endorsement does not include Mexico in the territory covered. The issue relates to the scope of coverage, not to the existence of the arbitration agreement itself. Thus, the Matarasso exception to the twenty-day rule does not apply.
The courts have no discretion to extend the twenty-day rule to permit consideration of an untimely application such as this one. Matarasso, 56 NY2d at 267; State Farm v. Kankom, 3 AD3d 418 (1st Dep't 2004) (petition dismissed as untimely where arbitration agreement existed and the dispute was whether the conditions had been satisfied). Allstate cites Zappone v. Home Ins. Co., 55 NY2d 131 (1982) for the proposition that the courts cannot create coverage where none exists. However, Zappone is wholly inapposite, as there the party was seeking coverage from Home Insurance Company for a car insured by Aetna, and the issue was what steps, if any, Home Insurance was required to take under the Insurance Law to deny coverage. Neither CPLR §7503(c), nor the issue of timeliness, was even involved.
Accordingly, it is hereby
ORDERED AND ADJUDGED that the petition of Allstate Insurance Company is denied in its entirety as untimely, and this proceeding is dismissed. The Clerk is directed to enter judgment accordingly. --------------- Notes: Petitioner has filed two affidavits of service, the first alleging service by certified mail on November 13, 2009 and the second alleging service by regular mail on December 3. As CPLR §7503(c) requires service by certified mail, the November date will be utilized by the Court here to determine the timeliness of the petition.