Opinion ID: 2141110
Heading Depth: 1
Heading Rank: 2

Heading: Effect of Aetna's Submission of the Statute of Limitations Issue for Resolution in the Compulsory Arbitration Proceeding

Text: In asserting its Statute of Limitations defense, Aetna failed to avail itself of its opportunity to have the issue of timeliness decided judicially pursuant to CPLR 7503 (b), which permits an application to stay arbitration on the grounds that the claim sought to be arbitrated is time-barred ( see , CPLR 7502 [b]). CPLR 7502 (b) further provides that the failure to assert the limitations bar shall not preclude its assertion before the arbitrators and, [e]xcept as provided in subdivision (b) of section 7511, such exercise of discretion by the arbitrators shall not be subject to review by a court on an application to confirm, vacate or modify the award. Thus, while CPLR 7502 (b) states that the arbitrators' decision to apply the Statute of Limitations is generally insulated from judicial review, the phrase  [e]xcept as provided in subdivision (b) of section 7511  makes it clear that our review is not completely foreclosed (emphasis supplied). In this action, Aetna submitted the Statute of Limitations issue to the arbitrator and now seeks to invoke the defense absolutely in its motion to vacate the award (CPLR 7511 [b]). Aetna's attempt to, in effect, obtain two de novo unqualified considerations of its Statute of Limitations defense must fail. CPLR 7511 (b), setting forth the grounds for vacatur of an arbitrator's award, does not contain a counterpart to CPLR 7503 (b)'s authorization to stay arbitration because the Statute of Limitations has run on the claim. The Statute of Limitations may be an independent, per se ground to vacate an award only when asserted by a party who neither participated in the arbitration nor was served with a notice of intention to arbitrate ( see , CPLR 7511 [b] [2] [iv]). An arbitration award made after all parties have participated, however, will not be overturned merely because the arbitrator committed an error of fact or of law ( see , Matter of Silverman [Benmor Coats] , 61 N.Y.2d 299, 308, rearg denied sub nom. Norris v Cooper , 62 N.Y.2d 803). Moreover, where the arbitration is pursuant to the voluntary agreement of the parties, in the absence of proof of fraud, corruption, or other misconduct, the arbitrator's determination on issues of law, such as the application of the Statute of Limitations, as well as fact, is conclusive ( see , Sherrill v Grayco Bldrs. , 64 N.Y.2d 261). Here, however, the obligation to arbitrate arises not through voluntary agreement, but through statutory mandate ( see , Insurance Law § 5105 [b]; § 5221 [b] [6]). Where arbitration is compulsory, our decisional law imposes closer judicial scrutiny of the arbitrator's determination under CPLR 7511 (b) ( see , Mount St. Mary's Hosp. v Catherwood , 26 N.Y.2d 493; Matter of Furstenberg [Aetna Cas. & Sur. Co.  Allstate Ins. Co.] , 49 N.Y.2d 757). To be upheld, an award in a compulsory arbitration proceeding must have evidentiary support and cannot be arbitrary and capricious ( Matter of Furstenberg [Aetna Cas. & Sur. Co.] , supra ; Matter of Central Gen. Hosp. v Hanover Ins. Co. , 49 N.Y.2d 950; Matter of Garcia v Federal Ins. Co. , 46 N.Y.2d 1040, revg 61 AD2d 236). Thus, in the matter before us, the arbitrator's rejection of Aetna's Statute of Limitations defense, and its implicit determination of the applicable limitations period and accrual date, are subject to judicial review under an arbitrary and capricious standard. As we have shown, the limitations period and the time of commencement applicable to a demand for compulsory arbitration pursuant to Insurance Law § 5105 were unsettled and subject to conflicting court decisions. In addition to the judicial decisions previously cited herein as support for the parties' respective arguments, still other examples reflect the inconsistent limitations periods and accrual dates that have been applied in related actions ( see generally , Matter of Nationwide Mut. Ins. Co. v Motor Vehicle Acc. Indem. Corp. , 190 AD2d 798, lv denied 82 N.Y.2d 651; Matter of Pacific Ins. Co. v State Farm Mut. Auto. Ins. Co. , 150 AD2d 455; Micha v Merchants Mut. Ins. Co. , 94 AD2d 835). Indeed, in this very case the courts below agreed that the limitations period did not commence until the benefits payments to the claimants were complete. Consequently, we cannot say, as a matter of law, that the arbitrator's decision was arbitrary and capricious or unsupported by any reasonable hypothesis and, thus, the awards cannot be overturned in the courts even though under this decision, it entailed an erroneous application of the Statute of Limitations. Accordingly, the order of the Appellate Division should be affirmed, with costs. Order affirmed, with costs.