SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
810
CA 11-02565
PRESENT: CENTRA, J.P., PERADOTTO, CARNI, LINDLEY, AND SCONIERS, JJ.
IN THE MATTER OF THE ARBITRATION BETWEEN
PHILADELPHIA INSURANCE COMPANY,
PETITIONER-RESPONDENT,
AND MEMORANDUM AND ORDER
UTICA NATIONAL INSURANCE GROUP, DOING BUSINESS
AS UTICA MUTUAL INS. CO., RESPONDENT-APPELLANT.
BROWN & KELLY, LLP, BUFFALO (JOSEPH M. SCHNITTER OF COUNSEL), FOR
RESPONDENT-APPELLANT.
DAMON MOREY LLP, BUFFALO (MICHAEL J. WILLETT OF COUNSEL), FOR
PETITIONER-RESPONDENT.
Appeal from an order of the Supreme Court, Erie County (Patrick
H. NeMoyer, J.), entered March 7, 2011 in a proceeding pursuant to
CPLR article 75. The order, among other things, granted the petition
to vacate an arbitration award.
It is hereby ORDERED that the order so appealed from is reversed
on the law without costs, the petition is denied, the cross motion is
granted and the arbitration award is confirmed.
Memorandum: Petitioner commenced this proceeding pursuant to
CPLR 7511 (b) seeking vacatur of the arbitration award on the ground
that arbitration was not available because under Insurance Law § 5105
(a) neither of the vehicles involved in the collision was “used
principally for the transportation of persons or property for hire.”
We conclude that Supreme Court erred in granting the petition to
vacate the arbitration award and in denying the cross motion to
confirm the award. Inasmuch as petitioner failed to apply for a stay
of arbitration before arbitration, petitioner waived its contention
that respondent’s claim for reimbursement of first-party benefits is
not arbitrable under Insurance Law § 5105 (see Matter of Liberty Mut.
Ins. Co. [Allstate Ins. Co.], 234 AD2d 901). In view of that waiver,
petitioner may not thereafter seek to vacate the arbitration award on
the ground that the arbitration panel exceeded its power (see id.;
Matter of Utica Mut. Ins. Co. v Incorporated Vil. of Floral Park, 262
AD2d 565, 566; see also Rochester City School Dist. v Rochester
Teachers Assn., 41 NY2d 578, 583).
Were we to reach the issue whether respondent’s vehicle was used
principally for the transportation of persons or property for hire
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under Insurance Law § 5105, we would agree with our dissenting
colleagues that the appropriate standard of review is whether the
award was arbitrary and capricious (see Matter of Motor Veh. Acc.
Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214, 223). However,
despite acknowledging that we must apply a deferential standard of
review, the dissent proceeds to conduct, with laser-like precision, a
comprehensive legal analysis of the statutory phrase “vehicle used
principally for the transportation of persons or property for hire” (§
5105). In reaching a legal conclusion as to the appropriate
definition to be assigned to the subject phrase, the dissent relies
upon eight different definitions of or references to the phrase
“vehicle for hire,” which the dissent concedes arise in “other
[statutory or legal] contexts.” Notably, none of those definitions or
references relied upon by the dissent was raised during arbitration or
on appeal.
As the court recognized, petitioner has “contended from the
outset that there is no legal or factual basis here for loss transfer
pursuant to [Insurance Law §] 5105,” and we disagree with the
dissent’s conclusion that “at no point during the course of the
proceedings in this matter did petitioner take the position that the
claim was not arbitrable.” Indeed, in addition to labeling its
defense as one for “lack of jurisdiction,” petitioner twice asserted
in the arbitration that it was “not subject to the loss transfer
procedure.” Thus, we have no difficulty concluding that petitioner
took the position that the claim was not arbitrable. In concluding
that the phrase assigned to petitioner’s defense (“lack of
jurisdiction”) is not dispositive, our dissenting colleagues fail to
offer any explanation of what was otherwise meant thereby. Moreover,
the dissent’s reliance on Matter of Progressive Cas. Ins. Co. v New
York State Ins. Fund (47 AD3d 633) is misplaced because, unlike here,
the petitioner in Progressive “at no point during the course of the
proceedings . . . [took] the position that the arbitration panel
lacked jurisdiction or that the . . . claim was not arbitrable” (id.
at 634 [emphasis added]). Thus, that case does not support the
dissent’s position that petitioner, despite labeling its defense as
one for “lack of jurisdiction,” did not assert that the claim was not
arbitrable.
Both the dissent and the court disregard controlling precedent of
this Court in determining that petitioner’s contention was not waived
(see Liberty Mut. Ins. Co., 234 AD2d 901). The doctrine of stare
decisis “recognizes that legal questions, once resolved, should not be
reexamined every time they are presented” (Dufel v Green, 198 AD2d
640, 640, affd 84 NY2d 795). “ ‘The doctrine . . . rests upon the
principle that a court is an institution, not merely a collection of
individuals, and that governing rules of law do not change merely
because the personnel of the court changes’ ” (People v Taylor, 9 NY3d
129, 148, quoting People v Bing, 76 NY2d 331, 338, rearg denied 76
NY2d 890). Stare decisis “ ‘is the preferred course because it
promotes the evenhanded, predictable, and consistent development of
legal principles, fosters reliance on judicial decisions, and
contributes to the actual and perceived integrity of the judicial
process’ ” (id.; see People v Damiano, 87 NY2d 477, 488-489 [Simons,
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J., concurring]; Baden v Staples, 45 NY2d 889, 892).
Here, this Court has previously held that, by failing to apply
for a stay before arbitration, an insurer waives the contention that
the claim is not arbitrable under Insurance Law § 5105 (Liberty Mut.
Ins. Co., 234 AD2d 901). In the instant matter, the court
acknowledged our decision in Liberty Mut. Ins. Co., but concluded that
it was overruled by Motor Veh. Acc. Indem. Corp. (89 NY2d 214). That
was error. Indeed, the Court of Appeals in Motor Veh. Acc. Indem.
Corp. did not hold that insurers are precluded from obtaining judicial
review of the threshold question of whether a claim was subject to
loss-transfer arbitration under section 5105. Rather, the courts of
this State have long recognized that a court has the power to resolve
the threshold question whether a loss-transfer arbitration should be
stayed under CPLR article 75 (see Matter of State Farm Mut. Auto Ins.
Co. v Aetna Cas. & Sur. Co.132 AD2d 930, 931, affd 71 NY2d 1013; City
of Syracuse v Utica Mut. Ins. Co., 90 AD2d 979, affd 61 NY2d 691;
Utica Mut. Ins. Co., 262 AD2d 565; Liberty Mut. Ins. Co., 234 AD2d
901).
Motor Veh. Acc. Indem. Corp. (89 NY2d 214), also relied upon by
the dissent as a basis for concluding that the award is arbitrary and
capricious, involved an “erroneous application of the Statute of
Limitations” by the arbitrator (id. at 224). In concluding that such
an error of law was not arbitrary and capricious as a matter of law,
the Court in Motor Veh. Acc. Indem. Corp. noted the varying
interpretations of the limitations rule by the courts. Here, there is
a paucity of decisions interpreting the phrase “for hire” in the
Insurance Law § 5105 context, and our own decision on this point noted
that the statute is “inartfully drafted” and does not limit the
universe of vehicles embraced thereby to “taxis and buses, and livery
vehicles” (State Farm Mut. Auto. Ins. Co., 132 AD2d at 931).
Therefore, even assuming, arguendo, that we could reach the issue, we
would conclude that, under the circumstances presented, it cannot be
said that the arbitration panel’s award was arbitrary and capricious
or was unsupported by any reasonable hypothesis (see Motor Veh. Acc.
Indem. Corp., 89 NY2d at 224).
All concur except PERADOTTO and SCONIERS, JJ., who dissent and vote
to affirm in the following Memorandum: We respectfully dissent.
Unlike the majority, we conclude that petitioner did not waive its
contention that the vehicle owned by its insured and involved in the
subject accident was not “used principally for the transportation of
persons or property for hire” within the meaning of Insurance Law §
5105 (a). We further conclude that there is no evidentiary support or
rational basis for the arbitration panel’s determination that the at-
issue vehicle—a minivan owned by a nonprofit community residence for
developmentally disabled individuals and used by its employees to
transport the six residents of the group home—is a vehicle “for hire”
under that section.
Petitioner’s insured, Rivershore, Inc. (Rivershore), is a
private, nonprofit organization that provides residential and
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community support services to individuals with developmental
disabilities. Rivershore operates several state-funded community
residences for people with disabilities, including a residence on 17th
Street in Niagara Falls. On May 11, 2009, Rivershore employee Thomas
Beckhorn, a night program manager at the 17th Street residence, was on
his way to pick up one of the residents from her mother’s home when he
was involved in a motor vehicle accident with a vehicle owned by Mary
D. Farmel and operated by Cheryl K. French. French sustained injuries
in the accident. At the time of the accident, Beckhorn was operating
a minivan owned by Rivershore and insured by petitioner. The Farmel
vehicle was insured by respondent. After paying first-party personal
injury protection (first-party) benefits to and on behalf of French,
respondent filed an application for inter-company arbitration, seeking
reimbursement of those benefits from petitioner pursuant to the loss-
transfer provisions of Insurance Law § 5105. In a “Contentions Sheet”
submitted to the arbitration panel, petitioner contended that it was
“not subject to the loss[-]transfer procedure because not one of the
vehicles in the accident weighed more than 6,500 lbs. and/or neither
vehicle was used principally for transportation of persons or property
for hire.” In an amended contentions sheet, petitioner specifically
contended that the minivan operated by Beckhorn weighed between 5,001
and 6,000 pounds, and that it was not used for the transportation of
persons or property for hire. Rather, petitioner asserted that the
minivan “was used in the course of providing general services to a
disabled person, services that are regularly provided by Rivershore[ ]
. . . to its developmentally disabled residents.”
The arbitration panel determined that the Rivershore minivan
“meet[s] the definition of a livery for this loss” and awarded
respondent the full amount of the first-party benefits respondent had
paid to French. Petitioner then commenced this proceeding seeking to
vacate the arbitration award pursuant to CPLR 7511 (b) on the ground
that the award was without evidentiary support or rational basis and
thus was arbitrary and capricious insofar as the arbitration panel
determined that the minivan was a vehicle for hire within the meaning
of Insurance Law § 5105. Respondent cross-moved to confirm the award.
Supreme Court granted the petition, denied the cross motion, and
vacated the arbitration award on the ground that the arbitrators
“acted irrationally and without an evidentiary basis” in concluding
that the minivan was “used principally for the transportation of
persons or property for hire” (§ 5105). We would affirm.
As relevant here, Insurance Law § 5105 (a) provides that “[a]ny
insurer liable for the payment of first[-]party benefits . . . which
another insurer would otherwise be obligated to pay . . . but for the
provisions of th[e No Fault Statute]” has a “right to recover [those
benefits] . . . only if at least one of the motor vehicles involved .
. . [weighs] more than [6,500] pounds unloaded or is . . . used
principally for the transportation of persons or property for hire”
(emphasis added). Thus, the right to recovery under that statute’s
loss-transfer provision is limited to accidents in which one of the
involved vehicles (1) exceeds 6,500 pounds, or (2) transports persons
or property “for hire.” The Legislature amended section 5105 (a) in
1977 to add those alternative conditions with the intention of
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“limit[ing] the right of insurance carriers to recover first-party
payments” (Matter of State Farm Mut. Auto. Ins. Co. v Aetna Cas. &
Sur. Co., 132 AD2d 930, 931, affd 71 NY2d 1013; see Matter of
Progressive Northeastern Ins. Co. [New York State Ins. Fund], 56 AD3d
1111, 1112, lv denied 12 NY3d 713). Pursuant to section 5105 (b),
“mandatory arbitration is the sole remedy regarding disputes between
insurers over responsibility for payment of first-party benefits”
(State Farm Mut. Auto Ins. Co. v Nationwide Mut. Ins. Co., 150 AD2d
976, 977; see also NY St Ins Dept 2005 Circular Letter No. 10, RE: PIP
[No-Fault] Inter-company Loss Transfer Procedures [“If there is a
dispute with respect to a claim arising pursuant to [s]ection 5105,
the sole remedy of any insurer or compensation provider is via the
submission of the controversy to a mandatory arbitration program”]).
Contrary to the contention of respondent and the conclusion of
the majority, we conclude that at no point during the course of the
proceedings in this matter did petitioner assert that the claim was
not arbitrable, i.e., that the arbitrators lacked the authority to
adjudicate the claim (see Matter of Progressive Cas. Ins. Co. v New
York State Ins. Fund, 47 AD3d 633, 634; cf. Matter of Liberty Mut.
Ins. Co. [Allstate Ins. Co.], 234 AD2d 901). During arbitration,
petitioner did not object to proceeding in the arbitral forum or
contend that the claim was not subject to arbitration, and does not so
contend on appeal. Rather, petitioner asserted on the merits that
respondent could not recover pursuant to the loss-transfer provisions
of Insurance Law § 5105 because neither vehicle involved in the
accident weighed more than 6,500 pounds or was used principally for
the transportation of persons or property for hire. Thus,
petitioner’s “participation in the arbitration proceeding without
first moving for a stay of arbitration did not constitute a waiver of
its contention that the [minivan] was not [a vehicle for hire] within
the meaning of . . . [section] 5105” (Progressive Cas. Ins. Co., 47
AD3d at 634). The fact that petitioner’s contentions sheet labeled
its defense as one for “lack of jurisdiction” is not dispositive of
the issue whether petitioner asserted that the claim was not
arbitrable. The substance of petitioner’s contention, i.e., that the
minivan did not qualify as a vehicle for hire, “is a condition
precedent to ultimate recovery [under section 5105], not a condition
precedent to ‘access to the arbitral forum’ ” (id., quoting Matter of
County of Rockland [Primiano Constr. Co.], 51 NY2d 1, 7 [emphasis
added]; see Progressive Northeastern Ins. Co., 56 AD3d at 1112). In
light of the broad scope of the mandatory arbitration provision in
Insurance Law § 5105 (b), we conclude that petitioner properly
submitted the issue whether the minivan was a “vehicle . . . for hire”
to the arbitration panel for determination (§ 5105 [a]; see
Progressive Cas. Ins. Co., 47 AD3d at 634) and, arguably, had no
choice but to do so (see § 5105 [b]; Paxton Natl. Ins. Co. v Merchants
Mut. Ins. Co., 74 AD2d 715, 716, affd 53 NY2d 646 [“Arbitration
provides the sole remedy in loss transfer between insurers and the
arbitration panel is the proper forum . . . for the determination of
all questions of law and fact which may arise in connection with the
remedy that respondent seeks”]).
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With respect to the merits, “[w]here, as here, the parties are
obligated by statutory mandate to submit their dispute to arbitration
(see Insurance Law § 5105 [b]), the arbitrator’s determination is
subject to ‘closer judicial scrutiny’ than with voluntary arbitration”
(Progressive Northeastern Ins. Co., 56 AD3d at 1113, quoting Matter of
Motor Veh. Acc. Indemn. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214,
223; see Matter of Furstenberg [Aetna Cas. & Sur. Co.-Allstate Ins.
Co.], 49 NY2d 757, 758). “To be upheld, an award in a compulsory
arbitration proceeding must have evidentiary support and cannot be
arbitrary and capricious” (Motor Veh. Acc. Indemn. Corp., 89 NY2d at
223). Further, “article 75 review questions whether the decision was
rational or had a plausible basis” (Matter of Petrofsky [Allstate Ins.
Co.], 54 NY2d 207, 211; see Progressive Cas. Ins. Co., 47 AD3d at
634).
It was respondent’s burden, as the party seeking reimbursement,
to establish its right to recovery under Insurance Law § 5105 (a) (see
Progressive Northeastern Ins. Co., 56 AD3d at 1112; see also Matter of
Hanover Ins. Co. v State Farm Mut. Auto. Ins. Co., 226 AD2d 533, 534).
Here, we conclude not only that respondent failed to meet its burden,
but we also conclude that there is no evidentiary support or rational
basis for the arbitrators’ determination that the minivan was
principally used to transport persons “for hire,” a condition
precedent to respondent’s entitlement to reimbursement under section
5105 (a) (see Progressive Northeastern Ins. Co., 56 AD3d at 1113). As
this Court held in State Farm Mut. Auto Ins. Co. (132 AD2d at 931),
“the words ‘for hire’ modify the word ‘vehicle’ and . . . the statute
covers only those vehicles hired to transport people, such as taxis
and buses, and livery vehicles hired to transport property” (emphasis
added). We agree with the court that, under the circumstances of this
case, “the Rivershore minivan cannot be categorized as or even likened
to a taxi or bus.”
The term “vehicle for hire” is commonly understood and defined in
other contexts as a vehicle held out to the public for the provision
of transportation services in exchange for a fee (see generally Penal
Law § 60.07 [2] [b] [defining “ ‘for-hire vehicle’ ” as “a vehicle
designed to carry not more than five passengers for compensation and
such vehicle is a taxicab, . . . a livery, . . . or a ‘black car’ ”];
Vehicle and Traffic Law § 121-e [defining “livery” as “(e)very motor
vehicle, other than a taxicab or a bus, used in the business of
transporting passengers for compensation”]; Vehicle and Traffic Law §
401 [5-a] [a] [ii] [defining “motor vehicle operated for hire” as
“mean(ing) and includ(ing) a taxicab, livery, coach, limousine or tow
truck”]; Ops Gen Counsel NY Ins Dept No. 1-12-2001 [Jan. 2001] [“The
phrase ‘a motor vehicle used principally for the transportation of
persons or property for hire’ refers to vehicles hired to transport
people and livery vehicles hired to transport property”]). Such
vehicles are typically operated by drivers who are required to have a
particular certification or license, and are subject to specialized
licensing, insurance, safety, and other requirements (see e.g. Vehicle
and Traffic Law § 148-a [defining a “taxicab” as “[e]very motor
vehicle, other than a bus, used in the business of transporting
passengers for compensation, and operated in such business under a
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license or permit issued by a local authority”]; Vehicle and Traffic
Law § 370 [1] [requiring filing of indemnity bond or insurance policy
by every person or entity “engaged in the business of carrying or
transporting passengers for hire in any motor vehicle”]; Vehicle and
Traffic Law § 375 [23] [“Every motor vehicle operated for hire upon
the public highways of this state shall be equipped with handles or
other devices which shall permit the door or doors to the passenger
compartment to be readily opened from the interior of the vehicle”];
see generally Vehicle and Traffic Law § 498 [governing
interjurisdictional pre-arranged for-hire vehicle operations]).
The evidence before the arbitration panel in this case consisted
of the deposition testimony of Beckhorn, the driver of the minivan,
and material from Rivershore’s Web site. Such evidence establishes
that Rivershore is not in the business of transporting members of the
public for compensation, and that the Rivershore minivan was not used
for that purpose. Rivershore’s Web site states that it supports 12
state-funded community residences for individuals with developmental
disabilities, and “serves many more people in their private homes
throughout Niagara County.” In addition to its residential services,
Rivershore “provides life planning services, clinical services, and
support with employment and volunteer pursuits.” Beckhorn testified
that he worked at the 17th Street community residence as a nighttime
program manager, and that, at the time of the accident, he was driving
to pick up one of the residents from her mother’s house. Beckhorn
testified that he was not specifically hired to pick up the resident;
rather, transporting residents of the group home was only one of his
many duties as a program manager. Beckhorn did not charge a fare, and
he was not paid per trip. Further, the record establishes that
Beckhorn possessed a “regular” driver’s license and that the minivan
bore passenger plates rather than livery or commercial license plates.
In determining that the minivan constituted a vehicle for hire
under Insurance Law § 5105 (a), the arbitrators relied upon Beckhorn’s
testimony that he “was going to pick up one of Rivershore’s
customers,” as well as materials from Rivershore’s Web site, which,
according to the arbitrators, “proves that [Rivershore] offers a
series of services for their customers . . . [including]
transportation to appointments.” Beckhorn’s testimony, however,
establishes that he was on his way to pick up not simply a
“customer[]” of Rivershore; rather, he was picking up a resident of
the 17th Street community residence in a minivan used by Rivershore
staff for group home purposes. With respect to Rivershore’s Web site,
none of the materials submitted to the arbitration panel refer to
Rivershore’s provision of transportation services, let alone the
transportation of customers “for hire.” The portion of the Web site
relied upon by the arbitrators applies to Rivershore’s individualized
service environment program, which is “designed for people who live in
their own apartment or house, or in a family dwelling” (emphasis
added), not for individuals who live in a community residence. In any
event, even if that program was involved here, the Web site does not
state that Rivershore provides transportation services to program
participants. Rather, it states that “[h]ighly trained staff will
visit [participants’] home[s] and provide supports to help [them]
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achieve [their] goals, which are specific and individualized to [each
participant]. These supports include assisting [participants] in
completing all necessary daily activities, assisting [them] with
attending any needed medical appointments, and gaining further
independence, productivity and inclusion in [their] community”
(emphasis added).
In sum, the record establishes that the Rivershore minivan was
not held out to the community as a vehicle transporting people “for
hire.” To the contrary, the minivan was assigned to the 17th Street
community residence for the exclusive purpose of assisting the six
individuals who live there with activities of daily living, i.e.,
shopping, attending events, family visits, etc. The driver of the
minivan was not hired for the purpose of providing transportation and
did not possess a specialized license to provide transportation
services; rather, he was hired to provide residential services to the
residents of the group home that, from time to time, included driving
them to various activities. We therefore conclude that the
arbitration panel’s determination that the at-issue minivan was “used
principally for the transportation of persons . . . for hire” lacks
evidentiary support or a rational basis, and thus that the court
properly vacated the arbitration award on that ground (Insurance Law §
5105 [a]; see generally Progressive Northeastern Ins. Co., 56 AD3d at
1113-1114; Progressive Cas. Ins. Co., 47 AD3d at 634).
Entered: July 6, 2012 Frances E. Cafarell
Clerk of the Court