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Novak v. Liberty Mutual Insurance Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


November 28, 2007

ELIZABETH NOVAK, PLAINTIFF-RESPONDENT,
v.
LIBERTY MUTUAL INSURANCE COMPANY, DEFENDANT-APPELLANT.

On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-2910-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 11, 2007

Before Judges Lisa and Lihotz.

Defendant Liberty Mutual Insurance Company (Liberty) appeals from a Law Division order denying its motion to confirm and granting plaintiff's motion to vacate an arbitration award for personal injury protection (PIP) benefits, and denying Liberty's motion for reconsideration. The motion judge vacated the award citing procedural deficiencies. We reverse.

Plaintiff Elizabeth Novak was injured in an automobile accident on March 11, 2002. Novak submitted requests for PIP benefits totaling $249,707.45. Liberty disputed that the medical treatment was not necessary or was not causally related to Novak's accident. Novak submitted a demand for arbitration under the rules of the American Arbitration Association (AAA). N.J.S.A. 39:6A-5(g).

The arbitration hearing was held on June 8, 2005. By agreement, the case was left open to allow submission of additional materials. The arbitrator closed the case on October 6, 2005, and on December 6, 2005, rendered an award to Novak of $1,475 plus counsel fees and costs. The AAA served the award on March 2, 2006.

Novak challenged the award in the Law Division, generally asserting legal errors in the arbitrator's determination. Also, she argued that the award was issued more than forty-five days from the close of the hearing, rendering it null and void. Liberty filed its answer and a motion to confirm the award. Addressing the alleged untimeliness of the award, Liberty cited N.J.S.A. 2A:23A-13(c)(4), noting that Novak had not raised the jurisdictional issue or objected to the untimely receipt of the award prior to its issuance. N.J.S.A. 2A:23A-12(b).

The motion judge did not rule on Novak's substantive claims. Instead, he determined that the award was not issued in accordance with AAA Rule 28, requiring an award to be rendered within forty-five days of the close of the hearing. The arbitrator had requested an extension of time, which was not granted. As a result, the motion judge concluded the arbitrator lost jurisdiction to render a determination. The judge vacated the award and required arbitration to begin anew. Thereafter, the motion judge denied Liberty's motion for reconsideration. Liberty requested that future arbitration filings be stayed to allow Liberty to file an appeal, which was granted after further hearing on September 8, 2006.

On appeal, Liberty maintains, as it did before the Law Division, that although the award was issued beyond the forty-five days provided in the AAA rules, Novak failed to object and continued with the proceeding, thus, waiving the procedural irregularity. N.J.S.A. 2A:23A-12(b). Novak counters, arguing that pursuant to N.J.S.A. 2A:23A-18, there is no right to appeal a Superior Court determination of a PIP arbitration dispute.

Neither party disputes that the PIP arbitration at issue is governed by the provisions of the Alternative Procedure for Dispute Resolution Act, N.J.S.A. 2A:23A-1 to -30 (APDRA); see also N.J.S.A. 39:6A-5.1 and N.J.A.C. 11:3-5.1 to -5.12. APDRA provides a voluntary procedure for alternative dispute resolution, operable only upon voluntary agreement of the parties. Mt. Hope Dev. Assoc. v. Mt. Hope Waterpower, 154 N.J. 141, 145 (1998). An issued arbitration award becomes final unless a party commences "a summary application in the Superior Court for its vacation, modification or correction within 45 days after the award is delivered to the applicant." N.J.S.A. 2A:23A-13(a).

Plaintiff correctly points out "[t]here shall be no further appeal or review of the judgment or decree" entered to confirm, modify or correct an award pursuant to the APDRA. N.J.S.A. 2A:23A-18(b). "But the statutory denial of a right to appeal to this court is based on the assumption that the trial judge will decide the case by applying the principles dictated by the Legislature." Morel v. State Farm Ins. Co., ___ N.J. Super. ___, ___ (2007) (slip op. at 6). Thus, "when parties proceed under the APDRA, there may be other limited circumstances where public policy would require appellate court review." Mt. Hope, supra, 154 N.J. at 152. Specifically, the statute does not obviate the exercise of our supervisory powers. Allstate Ins. Co. v. Sabato, 380 N.J. Super. 463, 472 (App. Div. 2005); Weinstock v. Weinstock, 377 N.J. Super. 182, 189 (App. Div. 2005).

In analyzing plaintiff's objection to the timeliness of the award, the judge applied N.J.S.A. 2A:24-7*fn1 of the Arbitration Act, N.J.S.A. 2A:24-1 to -11 (Act), reasoning:

Looking at the statute [N.J.S.A. 2A:24-7] it seems to me that the March 2nd, 2006 date is the appropriate date. N.J.S.A. 2A:24-7, which deals with a statute of limitations to confirm or to vacate an arbitration award . . .

Now[,] if that particular statute of limitation does not start to run until the parties received the award, then it seems logical that in this matter plaintiff should not have had to object to the award until it was received. So[,] I find that the defendant's argument that plaintiff continue[d] with the proceedings after the entry of the award and can't be covered under N.J.S.A. 2A:23A-13(c)(4) is incorrect. In my view that section states that the award can be vacated based on a procedural error . . . ["]unless the party applying to vacate the award continue with the proceedings with notice of defect and without objection.["] It appears to me that this language is designed to protect against a situation where during an arbitration a procedural error occurs, but the parties allow the arbitration to continue until its conclusion without objection at which point one of the parties unhappy with the result seeks to vacate the award.

That's clearly not the case here as the procedural error in question occurred at the conclusion of all the proceedings. Whether you look at it as being June 8th . . . that the last time that evidence was taken, or whether you -- you look at it as being the October date where the AAA said the proceedings are closed, the decision was late and beyond the 45 days and therefore you have a loss of jurisdiction.

Since the parties did not agree to extend the time for the . . . arbitrator to render his decision and . . . since that decision came with[in] 16 days after the period allowed under the statute or 160 days, the decision is void and the award should be vacated.

In his analysis, the judge ignored the application of N.J.S.A. 2A:23A-12(b), which provides, in pertinent part:

An award shall be made within the time fixed by the agreement for alternative resolution . . . . A party waives the right to object that an award was not made within the time required unless the party notifies the umpire of the party's objection prior to the delivery of the award.

Certainly, this statutory provision obviates Novak's argument to vacate the award because it was not timely issued. The trial judge's application of the Act, rather than the APDRA, must be reversed. Nevertheless, there remains a need for the Superior Court to review Novak's substantive claims objecting to confirmation of the arbitration award.

Reversed and remanded for further proceedings consistent with this opinion.


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