Fresh Meadows Medical Associates v. Liberty Mutual Insurance, 49 N.Y.2d 93 (1979)

In arbitration under New York Insurance Law § 675, an arbitrator may award reasonable attorney’s fees that include compensation for the legal work required to substantiate the attorney’s claim for fees itself.

Summary

Fresh Meadows Medical Associates, as assignee of Janina Tokarz, sought arbitration against Liberty Mutual for an unpaid $70 X-ray bill and associated attorney’s fees. The arbitrator awarded both, including additional attorney’s fees for the work done to justify the initial fee claim. Liberty Mutual challenged the portion of the award covering fees for substantiating the fee claim, arguing the arbitrator exceeded their authority. The Court of Appeals held that the arbitrator acted within their authority, as the statute’s intent was to fully indemnify claimants forced to arbitrate valid claims, thus allowing compensation for all legal work reasonably necessary to recover, including justifying the fee.

Facts

Janina Tokarz was injured in a car accident and received X-ray services from Fresh Meadows Medical Associates, incurring a $70 bill.

Tokarz assigned her claim for the bill to Fresh Meadows, who then sought payment from Liberty Mutual, the insurer of the vehicle in which Tokarz was a passenger.

Liberty Mutual declined payment, leading Fresh Meadows to initiate arbitration under New York Insurance Law § 675, seeking payment for the bill and attorney’s fees.

The attorney for Fresh Meadows submitted memoranda arguing for both the $70 payment and $1,650 in attorney’s fees.

After Liberty Mutual contested the fees, Fresh Meadows’ attorney submitted a reply memorandum, increasing the attorney’s fees request to $2,850 to account for the additional legal work in responding to Liberty Mutual’s arguments on the fee claim itself.

Procedural History

The arbitrator awarded Fresh Meadows the $70 for the X-ray and $2,850 in attorney’s fees.

Liberty Mutual moved to vacate the portion of the award related to attorney’s fees, arguing the arbitrator exceeded their authority.

Special Term denied the motion and confirmed the full award.

The Appellate Division reversed, reducing the award by $1,200, representing the fees awarded for substantiating the initial attorney’s fee claim.

Issue(s)

Whether, in determining reasonable attorney’s fees in arbitration under New York Insurance Law § 675, an arbitrator may include compensation for the attorney’s services in substantiating the claim for attorney’s fees itself (