State Farm Insurance v. Credle

CPLR 7511 provides that an arbitration award should be vacated where an arbitrator exceeds the limits of his powers and the rights of a party are prejudiced. An award made in excess of the contractual limits of an insurance policy is an action in excess of authority (see, Matter of Sagona v State Farm Ins. Co., 218 AD2d 660, 661; Matter of Mele v General Acc. Ins. Co., 198 AD2d 731, 732). In this case, an award of $10,000 was made to each of three claimants, occupants of an automobile with uninsured motorist coverage, while the express terms of the contract limited the liability of the petitioner to $10,000 per person/$20,000 per occurrence (see, State Farm Mut. Auto Ins. Co. v Basile, 48 AD2d 868). Payments were made on a chronological basis, and while it was arguably negligent for the petitioner to have paid out proceeds to the first two applicants, exhausting the policy limits after respondent had filed her claim, such action did not rise to the level of "gross disregard” so as to constitute bad faith (see, Pavia v State Farm Mut. Auto. Ins. Co, 82 NY2d 445, 454). The award is vacated. Concur—Rosenberger, J. P., Wallach, Nardelli and Williams, JJ.