Petrofsky v. Allstate Insurance Company, 54 N.Y.2d 207 (1981)
A master arbitrator reviewing an arbitrator’s decision in a compulsory arbitration setting, like no-fault insurance, cannot engage in a de novo review of facts but is limited to determining whether the arbitrator’s decision was rational, not arbitrary or capricious, and legally sound.
Summary
Petrofsky was injured in a car accident and, after initially being denied lost earnings benefits, began receiving them when he presented evidence of a job offer he couldn’t take due to his injuries. Allstate terminated benefits when Petrofsky suffered a heart attack. An arbitrator awarded Petrofsky lost earnings, but a master arbitrator vacated the award. The New York Court of Appeals held that the master arbitrator exceeded his authority by engaging in an extensive factual review and weighing evidence, which is beyond the scope of review for a master arbitrator in compulsory arbitration cases. The court reinstated the original arbitrator’s award.
Facts
Benjamin Petrofsky was injured in a car accident on December 4, 1977. Initially, he was not entitled to lost earnings benefits because he was unemployed at the time of the accident.
In February 1978, Petrofsky provided Allstate with a letter showing he had been offered a job starting January 3, 1978, at $300 per week, but he could not accept it due to his injuries.
Allstate began paying lost income benefits but stopped them on April 30, 1978, when Petrofsky suffered a heart attack. Allstate argued his inability to work was then due to the heart attack, not the car accident injuries.
Procedural History
Petrofsky filed a claim to recover lost earnings benefits, which went to arbitration.
The arbitrator awarded Petrofsky $4,629.40 for lost earnings and attorney’s fees.
Allstate moved to vacate the arbitrator’s award with a master arbitrator, who vacated the original award.
Petrofsky then commenced a proceeding to vacate the master arbitrator’s award.
Special Term granted Petrofsky’s petition and reinstated the arbitrator’s award. The Appellate Division reversed, reinstating the master arbitrator’s award.
Petrofsky appealed to the New York Court of Appeals.
Issue(s)
Whether the master arbitrator exceeded his powers by vacating the arbitrator’s award based on an extensive factual review, including weighing evidence and assessing credibility of medical reports.
Holding
Yes, because the master arbitrator’s powers of review do not encompass a de novo factual review or allow him to determine the weight of the evidence. The master arbitrator’s role is limited to ensuring the arbitrator’s decision was rational, not arbitrary or capricious, and legally sound, not to re-weigh the evidence and substitute his judgment for the arbitrator’s.
Court’s Reasoning
The Court of Appeals stated that judicial review of a master arbitrator’s award is restricted to the grounds for review set forth in Article 75 of the CPLR.
In cases of compulsory arbitration, CPLR Article 75 review includes whether the award is supported by evidence or has a rational basis. This incorporates the arbitrary and capricious standard of Article 78 review.
The superintendent’s regulations broaden the master arbitrator’s review to include questions of law, which are not normally reviewable under Article 75, but specifically preclude the master arbitrator from reviewing factual or procedural errors.
Quoting the court, “procedural or factual errors committed in the arbitration below are not encompassed within this ground”.
In this case, the master arbitrator engaged in an extensive factual review, weighing the evidence and assessing the credibility of medical reports. This exceeded his powers of review.
The court emphasized the distinction between reviewing the sufficiency of the evidence as a matter of law (permissible) and re-weighing the evidence and making independent findings of fact (impermissible).
The court noted that the master arbitrator’s role is to ensure that the arbitrator reached his decision rationally and legally and that his decision was not arbitrary or capricious, and not to conduct a de novo review.