In no-fault loss-transfer arbitration, carrier’s failure to apply for stay waived its claim that arbitrator lacked jurisdiction to rule on carrier’s retroactive rescission of policy. 

Hereford Ins. was the subrogee of two passengers in a “for hire” vehicle” that had been rear-ended by Infinite Indemnity’s insured.   Infinity Indemnity participated in and opposed the arbitration arguing that after the accident it had retroactively rescinded the policy so that there was no coverage on the date of the accident.  The arbitrator rejected that argument and made two awards in favor of Hereford Ins.

Infinite Indemnity then brought the instant article 75 proceeding under CPLR 7511 to vacate the awards on two grounds:  (a) the retroactive rescission deprived the arbitrator of jurisdiction over the arbitration and (b) the arbitrator should have applied Pennsylvania law (where the policy was obtained) instead of New York law.  Hereford Ins. cross-petitioned to confirm the awards.  Supreme Court confirmed the awards in favor Hereford Insurance which the Second Department affirmed, holding that Infinite Indemnity’s claims were meritless.

With regard to Infinite Indemnity’s contention that its “good faith” retroactive denial of insurance coverage divested the arbitrator of jurisdiction, the Second Department stated that Insurance Law § 5105(b) provides that arbitration is the only forum in which a loss-transfer claim may be litigated and that by failing to apply for a stay of the arbitration, Infinite Indemnity waived its claim that the claim was not arbitrable.  In addition, any possible error by the arbitrator in applying New York law was no basis for vacatur.   Matter of Infinity Indem. Ins. Co. v Hereford Ins. Co., 2017 NY Slip Op 03177, 2nd Dept 4-26-17

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