New York Law Review

Tag: Matarasso v. Continental Cas. Co.

  • Matter of Matarasso v. Continental Cas. Co., 56 N.Y.2d 264 (1982): Enforcing Timeliness in Objecting to Arbitration

    56 N.Y.2d 264 (1982)

    A motion to stay arbitration is only permissible outside the 20-day statutory period when the basis of the motion is that the parties never agreed to arbitrate, not when the claim involves the validity or enforceability of an existing arbitration agreement due to non-compliance with its conditions.

    Summary

    This case concerns the timeliness of a motion to stay arbitration. Matarasso served a demand for arbitration on Continental Casualty Company (Continental). Continental moved to stay the arbitration after 60 days, arguing that the parties never agreed to arbitrate. The New York Court of Appeals held that Continental’s motion was permissible despite being filed outside the 20-day window prescribed by CPLR 7503(c), because the basis of the motion was that no agreement to arbitrate existed. The court distinguished this from situations where an arbitration agreement exists but is claimed to be invalid or unenforceable.

    Facts

    Matarasso served a demand for arbitration upon Continental Casualty Company. Continental moved for a stay of arbitration 60 days after the demand was served. Continental argued that the parties had never agreed to arbitrate.

    Procedural History

    The lower court’s decision regarding the stay of arbitration is not explicitly detailed in this memorandum opinion. The New York Court of Appeals reviewed the case to determine whether the motion to stay arbitration was timely, given that it was filed outside the 20-day period specified in CPLR 7503(c).

    Issue(s)

    Whether a motion to stay arbitration may be entertained outside the 20-day period of CPLR 7503(c) when the basis of the motion is that the parties never agreed to arbitrate.

    Holding

    Yes, because a motion to stay arbitration may be entertained outside the 20-day period of CPLR 7503(c) when its basis is that the parties never agreed to arbitrate, as opposed to situations where an arbitration agreement exists but is claimed to be invalid or unenforceable due to non-compliance with its conditions.

    Court’s Reasoning

    The court focused on interpreting CPLR 7503(c), which requires a party served with a demand for arbitration to move to stay such arbitration within 20 days or be precluded from objecting. The court created an exception to this rule, stating that a motion to stay is permissible outside the 20-day period when the moving party argues that no agreement to arbitrate ever existed. The court reasoned that the 20-day rule is designed to prevent parties from delaying arbitration based on challenges to the validity or enforceability of an existing agreement. However, it should not bar challenges to the very existence of an agreement to arbitrate, since such a challenge goes to the heart of whether arbitration is proper at all. The court distinguished between arguing that an arbitration agreement is invalid (e.g., due to fraud or duress) and arguing that no such agreement was ever formed. The court emphasized the importance of upholding the statutory framework for arbitration while also recognizing the fundamental right to challenge whether an agreement to arbitrate exists in the first place. According to the court, “a motion [to stay arbitration] may be entertained when, as here, its basis is that the parties never agreed to arbitrate, as distinct from situations in which there is an arbitration agreement which is nevertheless claimed to be invalid or unenforceable because its conditions have not been complied with”.

  • Matarasso v. Continental Cas. Co., 56 N.Y.2d 264 (1982): Untimely Motion to Stay Arbitration Based on Lack of Agreement

    Matarasso v. Continental Cas. Co., 56 N.Y.2d 264 (1982)

    A motion to stay arbitration may be entertained outside the 20-day period specified in CPLR 7503(c) when the basis for the motion is that the parties never agreed to arbitrate.

    Summary

    Claimants sought uninsured motorist benefits under a commercial umbrella liability policy after recovering the maximum benefits from their primary policy. The insurer, Continental Casualty, moved to stay arbitration, arguing it never agreed to arbitrate such claims. Claimants argued the motion was untimely under CPLR 7503(c). The New York Court of Appeals held that the 20-day time limit to move for a stay of arbitration does not apply when the moving party argues that no agreement to arbitrate exists at all. In such cases, a motion to stay can be entertained even after the 20-day period expires.

    Facts

    Claimants were injured in an automobile accident involving an uninsured vehicle.

    They received the maximum benefits under their primary automobile insurance policy’s uninsured motorist indorsement.

    Claimants then sought to recover excess damages under Continental Casualty’s commercial umbrella policy.

    The umbrella policy covered Daniel Matarasso and A. Matarasso & Co., Inc. for general, automobile, and employer liability above the limits of underlying policies.

    One underlying policy was the automobile liability policy from which claimants already received uninsured motorist benefits.

    Procedural History

    Claimants served a demand for arbitration on Continental Casualty.

    Continental Casualty moved to stay arbitration, arguing no agreement to arbitrate existed.

    Special Term granted the stay.

    The Appellate Division affirmed.

    The Court of Appeals granted leave to appeal and affirmed the Appellate Division’s order.

    Issue(s)

    Whether a motion to stay arbitration can be entertained outside the 20-day period specified in CPLR 7503(c) when the moving party argues that no agreement to arbitrate exists between the parties.

    Holding

    Yes, because the 20-day preclusion in CPLR 7503(c) only applies when there is an existing agreement to arbitrate and a party is arguing the agreement is invalid or unfulfilled, but does not apply when a party argues no agreement to arbitrate ever existed.

    Court’s Reasoning

    The court emphasized that CPLR 7503(c) speaks in terms of “parties,” implying the statute targets parties to an arbitration agreement. The court reasoned that the legislature did not intend to bind individuals to arbitration by mere inaction when no agreement to arbitrate has ever been made.

    The court distinguished between challenging the validity or compliance of an existing arbitration agreement (which requires a timely motion to stay) and arguing that no agreement to arbitrate exists at all. The 20-day time limit applies only when an agreement to arbitrate exists.

    The court noted that the umbrella policy contained no arbitration provision. The court also determined that the mandatory uninsured motorist indorsement of section 167 of the Insurance Law, requiring uninsured motorist coverage in automobile liability policies, does not apply to the umbrella policy, because it is an excess liability policy covering various insurance types, not solely an automobile liability policy.

    The court cited Aetna Life & Cas. Co. v Stekardis, 34 NY2d 182 to reinforce the strictness of the 20 day rule where an agreement to arbitrate exists. However, here the court emphasized that the statute’s wording implies it is directed towards actual parties to an agreement. The court stated, “Given the ease with which a broader class of persons could have been included within the statute’s ambit, we cannot impute to the Legislature an intent to bind persons to the arbitral process by their mere inaction for 20 days where no agreement to arbitrate has ever been made.”