Spychalski v. Continental Ins. Companies

Decision Date12 July 1977
Citation396 N.Y.S.2d 533,58 A.D.2d 193
PartiesApplication of Richard SPYCHALSKI, Appellant, v. The CONTINENTAL INSURANCE COMPANIES, Respondent.
CourtNew York Supreme Court — Appellate Division

Bayer, Dupee & Smith, Rochester, for appellant (Jon C. Dupee, Rochester, of counsel).

Wickes, Weidman & Jordan, Rochester, for respondent (George G. Mackey, Rochester, of counsel).

Before CARDAMONE, J. P., and HANCOCK, DENMAN, GOLDMAN and WITMER, JJ.

WITMER, Justice.

The question presented on this appeal is whether respondent insurer may successfully move for a stay of arbitration after the 20-day period limited therefor in subdivision (c) of section 7503 of the Civil Practice Law and Rules has expired, on the ground that it appears that another insurer has agreed to pay petitioner $10,000 for the injuries that he received in a hit-and-run accident.

As petitioner was entering the automobile of John Olles, which was insured by the Utica Mutual Insurance Company (Utica), it was struck by an unidentified automobile and he was injured. Plaintiff was insured by respondent, The Continental Insurance Companies (Continental), and he served notice on Continental of his intention to make claim against it under the uninsured-unidentified motorist endorsement attached to his insurance policy pursuant to Insurance Law ( § 167, subd. 2-a). Continental replied that it considered Utica to be the primary insurer, and so it declined to honor petitioner's claim. On July 20, 1976 petitioner duly served demand for arbitration on respondent Continental, pursuant to the terms of the insurance endorsement and subdivision (c) of section 7503 of the Civil Practice Law and Rules. It contained the statutory provision that a motion to stay arbitration, if intended, must be made within 20 days of the service of the demand (CPLR § 7503(c)). Petitioner and Utica then agreed that the latter would pay petitioner $10,000 for a release; and by letter of August 3, 1976, petitioner's attorney advised the American Arbitration Association thereof. Respondent did not move to stay arbitration within the 20-day period. On August 23, 1976, however, it mailed to petitioner by regular mail a notice to stay arbitration, which petitioner received on August 24, returnable at Special Term on September 7, 1976. Petitioner promptly cross-moved for an order compelling respondent to arbitrate, returnable on the same date. Special Term granted respondent's motion to stay arbitration and denied petitioner's cross-motion to compel it; and petitioner appeals from the order entered on that decision.

In its decision Special Term acknowledged that respondent's motion for a stay was untimely under the Civil Practice Law and Rules ( § 7503, subd. (c)), but it held that since Utica had agreed to pay $10,000 to petitioner for his injuries, there was nothing to arbitrate, because the statute requiring the inclusion in the policy of the uninsured, unidentified motorist endorsement was only designed to protect claimant to the extent of $10,000 (Insurance Law, § 167, subd. 2-a). Although the court found no lawful way to avoid the impact of subdivision (c) of section 7503 of the Civil Practice Law and Rules, it decided to save the time of the parties, of the arbitrator and of the courts by "cutting the Gordion knot", and it determined the ultimate merits of the issue presented, thus terminating the matter. Because of the clear statutory limitation on the authority of the court in this situation, we conclude that Special Term erred in this determination.

Subdivision (c) of section 7503 of the Civil Practice Law and Rules provides in part that "An application to stay arbitration must be made by the party served within twenty (20) days after service upon him of the notice or demand, or he shall be so precluded " (emphasis supplied). Originally, the statute provided for only 10 days in which to move, but it was amended by the Laws of 1973 (Ch. 1028, effective September 1, 1973) to enlarge the time to 20 days. The intent of the Legislature in limiting this time period was to expedite the arbitration of disputes (see Matter of Raisler Corp. (N.Y. City Housing Auth.), 32 N.Y.2d 274, footnote at p. 281, 344 N.Y.S.2d 917, footnote at p. 922, 298 N.E.2d 91, footnote at p. 94; and Matter of Knickerbocker Ins. Co. (Gilbert), 28 N.Y.2d 57, 320 N.Y.S.2d 12, 268 N.E.2d 758). It has been uniformly held that if the motion for a stay is not served within the 10 (now 20) day period, the court has no jurisdiction to entertain it (Matter of Aaacon Auto Transp. (State Farm Mut. Auto. Ins. Co.), 41 N.Y.2d 951; Aetna Life & Cas. Co. v. Stekardis, 34 N.Y.2d 182, 356 N.Y.S.2d 587, 313 N.E.2d 53; Matter of Raisler Corp. (N.Y. City Housing Auth.), 32 N.Y.2d 274, 344 N.Y.S.2d 917, 298 N.E.2d 91, supra; Matter of Logan, Inc. (Stillwater Worsted Mills), 31 A.D.2d 208, 295 N.Y.S.2d 853 (1st Dept.), affd. 24 N.Y.2d 898, 301 N.Y.S.2d 636, 249 N.E.2d 477; United Servs. Auto Assn. v. Cutrona, 42 A.D.2d 1033, 348 N.Y.S.2d 612 (4th Dept.); Matter of Mell (Allstate Ins. Co.), 35 A.D.2d 898, 315 N.Y.S.2d 708 (3rd Dept.); Matter of Sisters of Charity of St. Vincent De Paul (Boegel & Allodi), 32 A.D.2d 818, 302 N.Y.S.2d 462 (2d Dept.); Eager, The Arbitration Contract and Proceedings, § 91; and 8 Weinstein-Korn-Miller, N.Y.Civ.Prac., § 7503.28). In Matter of Knickerbocker Ins. Co. (Gilbert) (28 N.Y.2d 57, supra at p. 60, 320 N.Y.S.2d 12 at p. 14, 268 N.E.2d 758 at p. 759) the court wrote that "The failure to give notice to stay, it is emphasized, bars assertion of inarbitrability in subsequent judicial proceedings."

An attempt in Matter of Frame (Amer. Motorists Ins. Co.), 31 A.D.2d 872, 297 N.Y.S.2d 247, to carve out of subdivision (c) an exception to its application was not accepted by us (United Servs. Auto Assn. v. Cutrona, 42 A.D.2d 1033, 348 N.Y.S.2d 612 supra ) and was overruled in Aetna Life & Cas. Co. v. Stekardis, 34 N.Y.2d 182, 356 N.Y.S.2d 587, 313 N.E.2d 53, wherein the court noted that where the issues presented are within subdivisions (a) and (b) of section 7503 of the Civil Practice Law and Rules, the court has no jurisdiction to entertain a late motion for a stay under subdivision (c) thereof. The statutory language in subdivision (a) is, "Where there is no substantial question whether a valid agreement (to arbitrate) was made or complied with * * * the court shall direct the parties to arbitrate"; and in subdivision (b) it is, "A party * * * may apply to stay arbitration on the ground that a valid agreement was not made or has not been complied with * * *."

In the case at bar there is no doubt that the policy contains an arbitration clause and that respondent has not complied with the agreement. The case is before us because it appears that Utica has agreed...

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