Petitioner Allstate Insurance Company ("Allstate") moves by Order to Show Cause, pursuant to CPLR § 7503(b) and § 7502(b), permanently staying any arbitration proceeding with respondent ELRAC, Inc. d/b/a. Enterprise Rent-A-Car Company ("ELRAC").

The present petition arises from a motor vehicle accident which occurred on September 7, 2007, when a rental vehicle owned by ELRAC, rented by Alla Shikiryansky, who was not in the vehicle at the time of the accident, and operated by Timur Shikiryansky, collided with a vehicle owned by Igor Kofman, and operated by Arthur Shapiro. According to the ELRAC rental agreement signed by Ms. Shikiryansky, anyone other than the renter was prohibited from operating the rental vehicle. The rental agreement also contained an indemnification provision obligating Alla Shikiryansky to idemnify and defend ELRAC against, inter alia, claims for property damage. As a result of the accident, Mr. Shapiro's insurer asserted a property damage claim by Igor Kaufman, which ELRAC settled on September 27, 2007. On October 10, 2008, ELRAC filed for arbitration seeking to recoup $9,101.48, which is the amount paid by ELRAC to settle the property damage claim.

Allstate seeks a permanent stay of arbitration on the grounds that Timur Shikiryansky is a permissive user of ELRAC's vehicle. It maintains that he is an insured of ELRAC, and that ELRAC has an obligation under Vehicle and Traffic Law § 370(1)(b) to provide insurance up to the minimum statutory limit. Accordingly, Allstate argues that ELRAC is barred by the anti-subrogation rule from attempting to have Timur Shikiryansky indemnify it.

In opposition, ELRAC contends that Allstate's petition for stay was untimely under CPLR § 7503(c). ELRAC also argues that Allstate has failed to demonstrate that Timur Shikiryansky was a permissive user of the vehicle at the time of the accident. According to ELRAC, it is a self-insured rental company seeking indemnification from an unauthorized driver and, as such, VTL § 370 cannot be relied upon to prevent ELRAC from enforcing the contractual indemnification clause.

In its reply, Allstate maintains that the petition is timely, and that CPLR 7503(c) does not apply where the notice does not contain the 20 day demand. In addition, Allstate argues that Vehicle and Traffic Law § 388(1) creates a presumption of permissive use by drivers involved in collisions and that ELRAC has presented no evidence to rebut this presumption. Finally, Allstate contends that VTL § 370 imposes the same requirements on rental companies such as ELRAC, regardless of whether they self-insure or purchase outside insurance.At the outset, the Court rejects ELRAC's contention that Allstate's petition is untimely. CPLR § 7503(c) requires a demand or notice of arbitration to explicitly state that "unless the party served applies to stay the arbitration within twenty days after such service he shall thereafter be precluded from objecting that a valid agreement was not made or has not been complied with and from asserting in court the bar of a limitation of time." The demand for arbitration issued to Allstate did not contain the mandatory 20-day preclusion [*2]language, and fails to meet the express notice requirements of CPLR § 7503(c) to commence the 20-day statutory time period for an application to stay arbitration.

Vehicle and Traffic Law § 388(1) provides that an owner of a vehicle used or operated in New York "shall be liable and responsible for . . . injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of the owner." Section 388(1) creates a presumption that a vehicle is being operated with the permission of the owner, a presumption that may subsequently be rebutted with substantial evidence sufficient to show that the vehicle was not operated with the owner's consent (see Murdza v Zimmerman, 99 NY2d 375 [2003]; Morris v Snappy Car Rental, 84 NY2d 21 [1994]). Where the lessee of a rental vehicle permits another person to operate it, the rental company is deemed to have constructively consented to such use, even in circumstances where the lessee violated the rental agreement by entrusting the rental car to another (see Lancer Ins. Co. v Republic Franklin Ins. Co., 304 AD2d 794 [2003]; Murdza v Zimmerman, 99 NY2d 375 [2003]; Forte v. New York City Trans. Auth., 2 AD3d 489 [2003]). Although Vehicle and Traffic Law § 388 creates a strong presumption that the driver of a vehicle is operating it with the owner's consent, which can only be rebutted by substantial evidence, the issue of permissive use normally presents a question of fact for the jury (Rodriguez v Primack, 122 AD2d 936, 937 [1986]; see also Rooney v. Myers,132 AD2d 839 [1987]).

"As a commercial lessor of vehicles, ELRAC is deemed to have constructively consented to the operation of its vehicle by anyone using it with the lessee's permission" (Bernstein v Diaz, 27 AD3d 602 [2006][citations omitted]). ELRAC has presented no evidence presented to establish that Timur Shikiryansky was operating the vehicle without Alla Shikiryansky's permission. The fact that Alla Shikiryansky was the only authorized driver under the rental agreement, and that she was not in the vehicle at the time of the accident, is insufficient to rebut the statutory presumption of permissive use.

ELRAC further argues that a rental company may indemnify the renter when a rental vehicle was driven by an unauthorized driver at the time of the accident. It also contends that one who is not a permissive driver according to the rental agreement may not enjoy the benefits of the insurance provided by a rental company. However, the Court of Appeals has unequivocally held that a rental company, as the owner of the vehicle, is to be held "liable to injured third parties under section 388," and that an indemnification clause cannot be used to avoid insurance requirements under the Vehicle and Traffic Law (Ward, 96 NY2d at 58, citing Morris v. Snappy Car Rental, Inc, 84 NY2d 21 [1994]). ELRAC cannot be permitted to avoid its responsibilities to third-parties under the Vehicle and Traffic Laws. Accordingly, the Court turns to the applicable insurance coverage requirements for car rental companies under Vehicle and Traffic Law §370(1)(b).

The 2002 amendment to Vehicle and Traffic Law § 370 provides that owners of vehicles are required to maintain insurance with a minimum liability of $10,000 for property damage. Section 370 imposes the same requirement for minimum coverage on rental companies renting or leasing vehicles, "regardless of whether they self-insure or purchase outside insurance" (Ward, 96 NY2d at 74; see also AIU Insurance Co. v ELRAC, Inc., 287 AD2d 668 [2001]["The fact that ELRAC, Inc . . . is a self-insured company does not excuse it from providing minimum coverage"]). Further, the coverage provided under this section must "inure to the benefit of any permissive user of the vehicle" (Lancer Ins. Co. v Republic Franklin Ins. Co., 304 AD2d 794 [2003]).

Timur Shikiryansky is a permissive user of the vehicle and the coverage provided by the rental agreement between ELRAC and Alli Shikiryansky must inure to his benefit, irrespective of language in the rental agreement stating otherwise (Id). ELRAC filed for arbitration in an attempt to recoup money that it paid to settle the property damage claim of $9,101.48, nevertheless, ELRAC is precluded from seeking indemnification from him up to the minimum property damage liability limit of $10,000. Accordingly, Allstate's application is granted, and the arbitration is permanently stayed. Petitioner shall provide a copy of this judgment on the arbitral tribunal with 10 days.

The foregoing constitutes the decision and judgment of the court.

E N T E R, [*3]

Yvonne LewisJ. S. C.