Fill RX N.Y., Inc. v. LM Gen. Ins. Co.

• Docket Number: Index No. 651648/2023,Motion Seq. No. 001
• Decision Date: 24 August 2023
• Citation: 2023 NY Slip Op 32950 (U)
• Parties: In the Matter of FILL RX NY, INC., as assignee of SHEILA MOLINA, Petitioner, v. LM GENERAL INSURANCE COMPANY, Respondent.
• Court: New York Supreme Court

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2023 NY Slip Op 32950(U)

In the Matter of FILL RX NY, INC., as assignee of SHEILA MOLINA, Petitioner, v. LM GENERAL INSURANCE COMPANY, Respondent.

Index No. 651648/2023, Motion Seq. No. 001

Supreme Court, New York County

August 24, 2023

Unpublished Opinion

MOTION DATE 05/05/2023

PRESENT: HON. JOHN J. KELLEY, Justice

DECISION, ORDER, AND JUDGMENT

JOHN J. KELLEY, J.S.C.

The following e-filed documents, listed by NYSCEF document number (Motion 001) 1, 2, 3, 4, 5, 6, 7, 8, 9 were read on this motion to/for VACATE - DECISION/ORDER/JUDGMENT/AWARD.

In this proceeding pursuant to CPLR 7511, the petitioner, Fill RX NY Inc., as assignee of Sheila Molina, seeks to vacate the March 20, 2023 award of a master arbitrator, affirming a January 24, 2023 American Arbitration Association (AAA) arbitration award that had denied its claim for first-party (no-fault) benefits to reimburse it for drugs and pharmaceutical products that it had furnished to Molina in connection with an automobile accident. The petitioner requests that, upon vacatur, the court remit the matter to a different arbitrator for reconsideration or, in the alternative, enter judgment in its favor and against the respondent in the sum of $4,151.53 along with interest at rate of 2% from the date that it submitted a demand to arbitrate until entry of judgment along with attorneys' fees in the sum of 20% of the combined principal and interest, up to a maximum of $1,360.00. Although the respondent insurer, LM General Insurance Company, does not oppose the petition, the petition is denied, and the award is confirmed.

Sheila Molina, a 45-year-old pedestrian, was injured in a July 29, 2021 motor vehicle accident when the respondent's insured struck her with her vehicle. She complained that, as a consequence of the accident, she sustained multiple injuries. On October 1, 2021, the petitioner furnished Molina with numerous drugs and pharmaceutical products, totaling $4,151.53. Molina assigned the petitioner her claim to recover no-fault benefits, upon which the petitioner made claim upon the respondent for reimbursement of that sum. The respondent processed the claim and rejected it, asserting that the amount requested was not in accordance with applicable statutory and regulatory fee schedules, and that the limits of coverage under the policy already had been exhausted in any event.

The petitioner sought arbitration of the claim before the AAA. At the arbitration hearing, the petitioner argued that the respondent was not entitled to rely on the exhaustion defense because the subject invoice should have been paid before any of Molina's other medical, hospital, pharmacy, and health-care claims that the respondent insurer received subsequent to the petitioner's claim.

Relying upon Harmonic Physical Therapy, P.C. v Praetorian Ins. Co. (47 Misc.3d 137[A], 2015 NY Slip Op 50525[U], *1, 2015 NY Misc. LEXIS 1143, *2 [App Term, 1st Dept, Apr 14, 2015]), the lower arbitrator concluded that claims that are timely denied by an insurer do not hold a place in the priority-of-payment queue ahead of subsequently filed claims that were approved and paid by the insurer. The lower arbitrator consequently upheld the insurer's exhaustion-of-benefits defense. In a January 24, 2023 award, the lower arbitrator thus found in favor of the respondent insurer, and rejected the petitioner's claim for benefits. The petitioner sought review of the award before a master arbitrator. In a March 20, 2023 award, the master arbitrator affirmed the initial arbitration award. In his determination, the master arbitrator first explained that

"[r]elying, principally, on the holding in Harmonic Physical Therapy, P.C. v. Praetorian Ins. Co. (47 Misc.3d 137[A] [1st Dept App Term 2015]) and an Opinion Letter issued by the Office of General Counsel of the New York State Department of Financial Security [isc] (See, Op. No. 08-07-28), the Lower Arbitrator rejected the Appellant's priority of payment argument and concluded that exhaustion of the limits of coverage was dispositive.

"Notably, an arbitration award which goes beyond the underlying policy limits exceeds the limited authority the parties have vested in the forum and would be subject to vacatur on that ground. (See, CPLR 7511[b][iii]; Matter of Motor Veh. Acc. Indem. Corp, v American Country Ins. Co., 126 A.D.3d 657 [1st Dept 2015]; Spears v New York City Transit Auth., 262 A.D.2d 493, Ivden 94 N.Y.2d 761 [2000]; see also, Countrywide Ins. Co. v Sawh, 272 A.D.2d 245 [1st Dept 2000])."

"Recent appellate case law lends further support to the Lower Arbitrator's determination. 'Once a no-fault insurer "has paid the full monetary limits set forth in the policy, its duties under the contract of insurance cease" (Countrywide Ins. Co. v Sawh, 272 A.D.2d 245, 708 N.Y.S.2d 862 [1st Dept 2000]). An arbitrator's award directing payment beyond the monetary limit of a no-fault insurance policy exceeds the arbitrator's power and constitutes grounds for vacatur of the award (see Matter of Brijmohan v State Farm Ins. Co., 92 N.Y.2d 821, 823, 699 N.E.2d 414, 677 N.Y.S.2d 55 [1998]; see also Matter of Ameriprise Ins. Co. v Kensington Radiology Group, P.C., 179 A.D.3d 563, 118 N.Y.S.3d 82 [1st Dept 2020]).' (Matter of DTR Country-Wide Ins. Co. v Refill Rx Pharmacy, Inc., 212 A.D.3d 481, 181 N.Y.S.3d 252, 253 [1st Dept. 2023]; see also, Allstate Fire & Cas. Ins. Co. v Branch Med., P.C., 74 Misc.3d 134 [A] [1st Dept. App. Term 2022]).

"Based on the foregoing, the Award under review cannot reasonably be assailed as arbitrary, capricious, or incorrect as a matter of law."

This proceeding ensued.

The grounds specified in CPLR 7511 for vacatur of an arbitration award are exclusive (see Bernstein Family Ltd. Partnership v Sovereign Partners, L.P., 66 A.D.3d 1, 8 [1st Dept 2009]), and it is a "well-established rule that an arbitrator's rulings, unlike a trial court's, are largely unreviewable" (Matter of Falzone v New York Cent. Mut. Fire Ins. Co., 15 N.Y.3d 530, 534 [2013]). An arbitration award may be vacated pursuant to CPLR 7511 (b)(1)(iii) where an arbitrator exceeded his or her power, including where the award violates strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator's power (see Matter of Isernio v Blue Star Jets, LLC, 140 A.D.3d 480 [1st Dept 2016]). Where, as here, arbitration is compulsory (see Insurance Law § 5105), closer judicial scrutiny of the arbitrator's determination is required under CPLR 7511(b) than that applicable to consensual arbitrations (see Matter of Motor Veh. Acc. Indem. Corp, v Aetna Cas. & Sur. Co., 89 N.Y.2d 214, 223 [1996]; Matter of Furstenberg [Aetna Cas. & Sur. Co.-Allstate Ins. Co.], 49 N.Y.2d 757, 758 [1980]; Mount St. Mary's Hosp, v Catherwood, 26 N.Y.2d 493, 508-509 [1970]). To be upheld, an award in a compulsory arbitration proceeding must have evidentiary support and cannot be arbitrary and capricious (see Matter of Motor Veh. Acc. Indem. Corp, v Aetna Cas. & Sur. Co., 89 N.Y.2d at 223; Matter of Furstenberg [Aetna Cas. & Sur. Co-Allstate Ins. Co.], 49 N.Y.2d at 758).

In a compulsory no-fault arbitration, a party aggrieved by a lower arbitrator's award may seek vacatur or modification of that award solely by appeal to a master arbitrator, and only upon the grounds articulated in 11 NYCRR 65-4.10(a), which, as relevant here, include a contention that the award "was incorrect as a matter of law" (11 NYCRR 65-4.10[a][4]; see Insurance Law § 5106[b]). Hence, the function of the master arbitrator in reviewing the decision below is to confirm that the decision was arrived at in a rational manner, and that the decision was not arbitrary and capricious (11 NYCRR 65.17[a][1]) or incorrect as a matter of law (11 NYCRR 65.17[a][4]).

Inasmuch as the master arbitrator did not make his own factual determinations, review alleged factual or procedural errors made in the course of the arbitration, weigh the evidence, or resolve credibility issues, he did not exceed his authority (see Matter of Richardson v Prudential Prop. & Cas. Co., 230 A.D.2d 861 [2d Dept 1996]).

Moreover the court concludes that the master arbitrator's determination was not incorrect as a matter law. As the master arbitrator noted, there is a split in appellate authority on the issue of priority of claims in the face of the potential exhaustion of the limits of a no-fault insurance policy. The Appellate Term, First Department, has held that claims that are timely denied by an insurer do not hold a place in the priority-of-payment queue ahead of subsequently filed claims that were paid by the insurer, thus exhausting available coverage (see Harmonic Physical Therapy, P.C. v Praetorian Ins. Co., 47 Misc.3d 137[A]). The Appellate Term, Second Department, has held that fully verified claims are payable in the order they were received, and that there was no merit to an insurer's contention that it need not pay the denied claim because its payment of subsequent claims had the effect of...