Furstenburg v. Aetna Cas. & Sur. Co.

• Decision Date: 03 May 1979
• Parties: In the Matter of The Arbitration between Albert FURSTENBURG, Claimant-Petitioner-Respondent, v. AETNA CASUALTY & SURETY CO., Respondent-Appellant, and Allstate Insurance Co., Respondent-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 849

415 N.Y.S.2d 849

67 A.D.2d 580

In the Matter of The Arbitration between Albert FURSTENBURG Claimant-Petitioner-Respondent, v. AETNA CASUALTY & SURETY CO., Respondent-Appellant and Allstate Insurance Co., Respondent-Respondent.

Supreme Court, Appellate Division, First Department.

May 3, 1979.

Joseph D. Ahearn, New York City, of counsel (J. Robert Morris, New York City, atty.), for respondent-appellant.

Abraham L. Shapiro, New York City, of counsel (Gerald Richman, New York City, with him on the brief, Shapiro, Shiff, Beilly, Castleman & Fox, New York City, attys.), for respondent-respondent.

Before MURPHY, P. J., and SULLIVAN, MARKEWICH, LUPIANO and SILVERMAN, JJ.

SILVERMAN, Justice.

Appellant, Aetna Casualty & Surety Co., appeals from a judgment of the Supreme Court confirming an arbitration award, and denying appellant's motion to vacate the award.

This case arises under the so-called "no-fault" insurance law (Insurance Law § 670 Et seq.). The dispute is essentially between two insurance companies, respondent Allstate which insured the automobile involved at least until April 30, 1977 (the accident being on May 18, 1977), and appellant Aetna which had issued an automobile liability policy to the claimant. On April 30, 1977, Allstate purported to cancel its policy by a notice which failed to comply with the statutory requirement, Vehicle and Traffic Law § 313 subd. 1, that it "include in type of which the face shall not be smaller than twelve point a statement that proof of financial security is required to be maintained continuously throughout the registration period and that failure to maintain such proof of financial security requires revocation of the registration of the motor vehicle . . . ." Indeed the notice of cancellation did not contain the required statutory statement at all in any kind of type. Nevertheless, Allstate's insured (Felix Cruz Realty, Inc., hereinafter "Cruz") consulted its broker about obtaining other insurance and kept the vehicle in a garage because Cruz knew it did not have insurance. The automobile was apparently stolen and it was after its theft that the accident occurred.

On the basis of Cruz's testimony that Cruz was aware of the notice and understood it, the arbitrator took the view that no showing had been made that the notice did not in effect advise Allstate's insured, Cruz, as to all things that were statutorily necessary, and accordingly, the notice of cancellation by Allstate was valid. Thus, the responsibility for the no-fault medical payments fell upon Aetna.

This Court and the Appellate Division in the Second Department have both held that failure to include the statutory statement pursuant to Vehicle and Traffic Law § 313 subd. 1 in the correct size type invalidates the notice of cancellation even though the insured received the notice and is aware of the requirement that he carry insurance. Matter of Countrywide Insurance Co. (Meadows), 63 A.D.2d 951, 406 N.Y.S.2d 313 (1st Dept. 1978); Nassau Insurance Co. v. Hernandez, 65 A.D.2d 551, 408 N.Y.S.2d 956 (2d Dept. 1978). As these decisions were rendered after the arbitrator's award, the arbitrator was of course not aware of them.

We recognize that among the considerations militating against judicial vacatur of the arbitrator's award is the public policy, particularly in relation to no-fault insurance, that claims of injured parties shall be disposed of with as little litigation as possible.

Nevertheless we have come to the conclusion that the arbitrator's award should be vacated. At least as to the insurance company, arbitration under the no-fault insurance law is compulsory and not voluntary. Insurance Law § 675 subd. 2. The scope of judicial review of an arbitrator's award in a compulsory arbitration is broader than in a voluntary arbitration. Mount St. Mary's Hospital v. Catherwood, 26 N.Y.2d 493, 508, 311 N.Y.S.2d 863, 874, 260 N.E.2d 508, 516 (1970); Caso v. Coffey, 41 N.Y.2d 153, 391 N.Y.S.2d 88, 359 N.E.2d 683 (1976); Carlo Service Corp. v. Rachmani, 64 A.D.2d 579, 407 N.Y.S.2d 700 (1st Dept. 1978). In Mount St. Mary's Hospital v. Catherwood, supra, 26 N.Y.2d at 508, 311 N.Y.S.2d at 875, 260 N.E.2d at 516-17, the court said that the test in such cases is "whether the award is supported by evidence or other basis in reason, as may be appropriate, and appearing in the record." But the test is apparently still evolving. In Caso v. Coffey, supra, 41 N.Y.2d at 158, 391 N.Y.S.2d at 91-92, 359 N.E.2d at 686, this test was further elaborated as follows:

"An award may be found on review to be rational if any basis for such a conclusion is apparent to the court . . . . And it need only appear from the decision of the arbitrators that the criteria specified in the statute were 'considered' in good faith and that the resulting award has a 'plausible basis.' "

In attempting to apply the standards set by the Court of Appeals for judicial review of awards in compulsory arbitration, we find some illumination in the Court's statement of the reason of that rule. Thus in the Mount St. Mary's Hospital case, Supra, 26 N.Y.2d at 508, 311 N.Y.S.2d at 874, 260 N.E.2d at 516, Judge Breitel, speaking for the majority, said:

"Consequently, the arbitrator must be limited by the same constitutional requirements which limit the statute conferring power on him. Otherwise an arbitrator would have a power greater than the Constitution permits the Legislature to delegate to an administrative or regulatory agency, namely, to resolve a dispute or make regulations on less than substantial evidence or without reasonable basis or In disregard of applicable rules of law. . . . In short, the device for arbitration is a substitute for a determination of the dispute by an administrative or regulatory agency. As a substitute device, however, its objective may not be accomplished under lower constitutional standards than would be required of an administrative or regulatory agency." (Italics ours.)

And Chief Judge Fuld, speaking for the minority, referred to "the hypotheses which underlie the decision now being made that a compulsory arbitration proceeding is governed by the rules applicable to administrative agencies . . . ." (26 N.Y.2d at 517, 311 N.Y.S.2d at 882, 260 N.E.2d at 522.)

If now we apply to this arbitration the same standards for judicial review that would be applied to judicial review of a determination by an administrative agency, we would have to...