American Ins. Co. v. Messinger
Citation | 43 N.Y.2d 184,401 N.Y.S.2d 36,371 N.E.2d 798 |
Parties | , 371 N.E.2d 798 In the Matter of the arbitration between AMERICAN INSURANCE COMPANY, Respondent, and Philip MESSINGER et al., Respondents, Aetna Casualty and Surety Company, Appellant. |
Decision Date | 22 November 1977 |
Court | New York Court of Appeals |
We hold that the determination made in a property damage arbitration proceeding between two insurance carriers disallowing the disclaimer of coverage by one of them is binding in a controversy between the same carriers in a subsequent personal injury action arising out of the same accident.
The relevant facts for the purposes of this appeal are not disputed. On May 31, 1972 Mr. and Mrs. Messinger were injured when the automobile owned and driven by him in which she was a passenger was struck in the rear by a vehicle owned by Gerald Zook and driven by Thomas Nobles. The Messingers commenced an action against Zook and Nobles to recover for personal injuries. On August 10, 1973 Aetna Casualty and Surety Company, insurer for Zook, disclaimed on the grounds of late notice and lack of cooperation.
On August 1, 1973 American Insurance Company, carrier for the Messingers, pursuant to the Nationwide Inter-Company Arbitration Agreement, requested arbitration of its claim for subrogation with respect to the payment of $4,704.51 which it had made to its insured on account of property damage to the Messinger automobile incurred in the May 31 accident. Aetna objected to the arbitration on the ground that its insured had not complied with the cooperation provision of its policy. The arbitration proceeded to award on January 11, 1974 in which the three-member panel rejected the disclaimer and assessed damages against Aetna in the amount of $1,201.12.
On June 13, 1974 the Messingers made a demand for uninsured motorist arbitration against their insurer, American, based on Aetna's asserted disclaimer of coverage. On September 10, 1974 Special Term granted American's motion to stay the Messinger arbitration pending trial in the personal injury action of the preliminary issue as to the merit of Aetna's disclaimer.
American then moved in the personal injury action to strike Aetna's disclaimer and for summary judgment directing Aetna to afford coverage to Zook. American based its motion on the ground that the determination with respect to the disclaimer issue in the January 11, 1974 arbitration award relative to the subrogation claim in favor of American and adverse to Aetna was binding in the personal injury action. Special Term granted American's motion, struck the asserted disclaimer and directed Aetna to defend on behalf of its insured Zook. Special Term also treated American's motion as an application to confirm the award in the property damage arbitration and confirmed the award which had originally held Aetna's disclaimer invalid. The Appellate Division unanimously affirmed and granted leave to appeal to our court. In our turn we now affirm the dispositions below.
In an unusual development, in our court respondent American, which had prevailed in both courts below, has now joined with appellant Aetna to urge that the order of the Appellate Division be reversed (with support in an amicus curiae brief filed on behalf of the Committee on Insurance Arbitration). 1 It is asserted that to hold that the determination in the property damage subrogation claim arbitration proceeding is binding in the subsequent personal injury action will be to endanger the entire intercompany arbitration system on which the insurance industry relies so heavily for efficient disposition of internal controversies. In a joint supplemental brief, the two insurance company litigants state:
Fundamental to our consideration of the present appeal is recognition that in general the doctrines of claim preclusion and issue preclusion between the same parties (more familiarly referred to as res judicata or direct estoppel) 2 apply as well to awards in arbitration as they do to adjudications in judicial proceedings (Rembrandt Inds. v. Hodges Int., 38 N.Y.2d 502, 381 N.Y.S.2d 451, 344 N.E.2d 383; New York Lbr. & Wood Working Co. v. Schneider, 119 N.Y. 475, 24 N.E. 4; Wiberly v. Matthews, 91 N.Y. 648; 23 Carmody-Wait 2d, N.Y.Prac., Arbitration, § 141:151, p. 80).
Next we observe that the question presented must be resolved under principles of issue preclusion between the same parties. That is to say, the question now before us is the effect to be accorded the determination with respect to a particular issue made in a proceeding between two parties when the same issue is raised in a subsequent proceeding between the same two parties. This is not an instance of issue preclusion in subsequent litigation between different parties, in which the question would be the effect to be accorded a prior determination when the same issue arises in a subsequent proceeding to which one of the former litigants is a party but where the adversaries in the second proceeding are not the same as those in the first proceeding. Therefore our decisions in Schwartz v. Public Administrator of County of Bronx, 24 N.Y.2d 65, 298 N.Y.S.2d 955, 246 N.E.2d 725 and B. R. DeWitt, Inc. v. Hall, 19 N.Y.2d 141, 278 N.Y.S.2d 596, 225 N.E.2d 195, are not on point. In each of those cases the question was whether one of two parties to the trial of the personal injury aspect of an automobile accident which was first litigated would later be bound by, i. e., precluded from relitigating, a determination therein adverse to it when the same issue was raised in a subsequent action for property damage brought against one of the prior litigants but involving different adversaries. No case has been brought to our attention in which our court has applied the Schwartz analysis and principles to situations of issue preclusion between the same parties, and we do not do so now.
We turn then to the several contentions urged by the parties as grounds for reversal of the determinations below that in the present personal injury action Aetna is bound by the rejection in the property damage arbitration of its right to disclaim and thus is precluded from relitigating that issue. For the purposes of our analysis and disposition these contentions can be grouped in four categories. The first relates to assertions of error committed in the arbitration proceeding. Thus, it is stated that under the express terms of the Nationwide Inter-Company Arbitration Agreement, arbitration of a controversy thereunder "must be deferred until all companion claims or suits not subject to arbitration have been disposed of by settlement or otherwise, except that all parties to the arbitration may agree to waive deferment". In this instance it is obvious that the personal injury claims had not been disposed of and thus the statement in American's demand for arbitration that no companion claims or suits were pending was wholly inaccurate. It is asserted that inasmuch as the parties proceeded to arbitration under a mutual mistake of fact and there was no waiver of deferment, the arbitration award was invalid and should not be given any effect for present purposes. The response is clear. Whether or not there is merit to the contentions that it was error to have proceeded to arbitration or that there was no valid agreement to arbitrate, such issues present questions which either must be raised as threshold questions under CPLR 7503 (subd. (b)) or are for the arbitrator in the arbitration proceeding. (Matter of Aaacon Auto Transp. (State Farm Mut. Auto. Ins. Co.), 41 N.Y.2d 951, 951-952, 394 N.Y.S.2d 635, 363 N.E.2d 359; Pearl St. Dev. Corp. v. Conduit & Foundation Corp., 41 N.Y.2d 167, 170-171, 391 N.Y.S.2d 98, 99-101, 359 N.E.2d 693, 694-695; Aetna Life & Cas. Co. v. Stekardis, 34 N.Y.2d 182, 185-186, 356 N.Y.S.2d 587, 589-590.) Errors in the arbitration proceeding, whether of fact or law, are beyond the scope of judicial review and clearly may not now be raised in this subsequent judicial proceeding. (Matter of Wolff & Munier (Diesel Constr. Co.), 36 N.Y.2d 750, 752, 368 N.Y.S.2d 828, 829, 329 N.E.2d 662, 663; Matter of Raisler Corp. (New York City Housing Auth.), 32 N.Y.2d 274, 279, 344 N.Y.S.2d 917, 919, 298 N.E.2d 91, 92.)
Next, our attention is drawn to what it is argued are the several substantial infirmities and deficiencies in the arbitration proceeding, very much along the lines of a Schwartz analysis. Thus it is pointed out that the arbitration proceeding was a...
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