Gersten v. American Transit Insurance

161 Misc. 2d 57, 613 N.Y.S.2d 555, 1994 N.Y. Misc. LEXIS 201
CourtNew York Supreme Court
DecidedApril 27, 1994
StatusPublished
Cited by6 cases

This text of 161 Misc. 2d 57 (Gersten v. American Transit Insurance) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gersten v. American Transit Insurance, 161 Misc. 2d 57, 613 N.Y.S.2d 555, 1994 N.Y. Misc. LEXIS 201 (N.Y. Super. Ct. 1994).

Opinion

OPINION OF THE COURT

Kristin Booth Glen, J.

Petitioner Mendel Gersten (Gersten) petitions, pursuant to CPLR 7510, to confirm a master arbitrator’s no-fault arbitration award. Respondent American Transit Insurance Company (American Transit or the insurer) opposes confirmation of the award but has not cross-petitioned to vacate or modify the award. The petition raises a question of apparent first impression concerning the effect of commencement and abandonment of a de nova judicial review by an insurer on the underlying arbitration award. To determine this issue, however, it is first necessary to review the facts and procedural posture of the petition.

FACTUAL AND PROCEDURAL HISTORY

Gersten was injured in a 1986 automobile accident. When American Transit failed to pay Gersten’s claim the parties proceeded to arbitration. The arbitrator awarded Gersten $20,000 for lost earnings due to injuries he sustained in the accident, together with attorney’s fees and interest. On August 3, 1989 the master arbitrator affirmed the award. The award was delivered by mail on August 24, 1989.1 On November 20, 1989, American Transit timely sought to exercise its right to adjudicate the dispute de nova,2 and commenced an action against Gersten by serving him with a summons and complaint. Following joinder of issue, however, American [59]*59Transit failed to prosecute the action. After nearly three years passed, Gersten served a 90-day notice pursuant to CPLR 3216, demanding resumption of prosecution and the filing of a note of issue. In July of 1993, Justice Lehner dismissed the action for lack of prosecution, and left open the question of whether Gersten was entitled to no-fault benefits. (American Tr. Ins. Co. v Gersten, index No. 110281/93, Sup Ct, NY County, July 2, 1993.) The following month Gersten commenced this proceeding to confirm the master arbitrator’s award.

American Transit opposes confirmation, arguing that because the de nova action eliminated the arbitration award, there is no award to confirm. Alternatively, it argues that, even assuming the arbitration award still exists after a de nova action is commenced, the petition to confirm, made almost three years after delivery of the award, is now barred by the one-year Statute of Limitations imposed by CPLR 215 (5).

Gersten asserts that since the de nova action was dismissed without the court reaching its merits, the action did not eliminate the arbitration award. He argues that the effect of the de nova action was to toll the Statute of Limitations. Thus, the substantive issue here is what effect, if any, a de nova action, that is properly commenced but subsequently dismissed for lack of prosecution, has on the underlying arbitration award.

THE EFFECT OF DE NOVO ACTION ON ARBITRATION AWARD

A review of the relevant statutory and case law reveals no clear answer regarding the effect on an arbitration award of commencement and subsequent abandonment by an insurer of a de nova court action. Insurance Law § 5106 (c) provides, in relevant part: "The award of a master arbitrator shall be binding except for the grounds for review set forth in article seventy-five of the civil practice law and rules, and provided further that where the amount of such master arbitrator’s award is five thousand dollars or greater, exclusive of interest and attorney’s fees, the insurer or the claimant may institute a court action to adjudicate the dispute de nova.”

The de nova court action is a " 'plenary judicial adjudication.’ ” (Matter of Greenberg [Ryder Truck Rental], 70 NY2d 573, 577 [1987], citing Matter of Petrofsky [Allstate Ins. Co.] 54 NY2d 207, 210 [1987].) What form this litigation takes [60]*60when it is the insurer who seeks to adjudicate the dispute de nova is unclear. There is some authority which suggests that the insurer commences a declaratory judgment action seeking a declaration that the insured is not entitled to no-fault benefits. (See, e.g., State Farm Mut. Auto. Ins. Co. v Becker, 118 Misc 2d 806 [Sup Ct, Nassau County 1983].)

However, none of the cases address what results if the de nova action does not proceed to judgment. In the absence of clear statutory or case law authority, this question must be resolved in a manner that is consistent with the purposes and development of the statutory scheme (Comprehensive Automobile Insurance Reparations, Insurance Law art 51) (the No-Fault Law).

Although the No-Fault Law lacks a formal legislative history, and is otherwise silent as to its purpose (see, Taber v Niagara Frontier Tr. Auth., 101 Misc 2d 92, 94 [Sup Ct, Erie County 1979]), among its commonly accepted goals are: (1) to assure prompt claims payment; (2) to reduce the caseload of the courts (see, Pascente v Stoyle, 116 Misc 2d 641 [Rochester City Ct 1982]; Governor’s Mem approving L 1973, ch 13, 1973 NY Legis Ann, at 298); and (3) to reduce the costs of automobile liability insurance (see, Montgomery v Daniels, 38 NY2d 41, 62 [1975]).

In view of these objectives, and in the interest of safeguarding the arbitration process, American Transit’s arguments must be rejected. There is no authority to support American Transit’s arguments that (1) mere commencement of an action to adjudicate the dispute de nova eliminates the underlying award permanently, or (2) that regardless of which party initiates the de nova action the insured bears the burden of prosecuting it.

American Transit states that "by definition, the effect of a de nova action is to eliminate the arbitration award * * * [it] ceases to exist.” This assertion has some merit, particularly where an action is commenced in good faith and prosecuted to its conclusion. From this flows the presumption that commencing a de nova action eliminates the underlying award because the parties are in essence starting anew and a superseding resolution will result. If a judgment on the merits does result, the arbitration award is eliminated and the judgment replaces the award. Since the de nova action here did not result in a judgment which replaces the arbitration award, however, the award is revived.

[61]*61American Transit’s entitlement to plenary judicial determination of the dispute is clear. However, to avail itself of this right, and the benefit of eliminating the arbitration award that it considered unfavorable, American Transit was required to prosecute the action to judgment or, in the alternative, to reach a settlement with Gersten. American Transit’s reasoning that it is the claimant who is seeking benefits in the de nova action while the insurer is defending its denial of the benefits does not transfer the burden to prosecute the action from the plaintiff insurer to the defendant insured. The duty of prosecuting an action rests on the one who brings it. (See, Sortino v Fisher, 20 AD2d 25, 30 [1st Dept 1963].)

It has long been recognized that "the 'no-fault law’ is in derogation of the common law and it is a firmly established principle of law that statutes in derogation of the common law are to be strictly construed and the common law is never abrogated by implication. In short, the common law must be held to be no further abrogated than the clear import of the language used in the statute absolutely requires.” (Scarpelli v Marshall,

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Bluebook (online)
161 Misc. 2d 57, 613 N.Y.S.2d 555, 1994 N.Y. Misc. LEXIS 201, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gersten-v-american-transit-insurance-nysupct-1994.