The following papers and the attachments and exhibits thereto have been read on this petition:

Notice of Petition1 [*2]

Notice of Cross Petition2

Reply Affirmation3

Reply Affirmation4

Petitioner Country-Wide Insurance Company ("Country-Wide") moves for an order, pursuant to CPLR 7503, permanently staying arbitration, or, alternatively, temporarily staying arbitration pending a "framed-issue" hearing or the completion of discovery. Respondent, Jose R. Ramirez ("Ramirez") "cross-petitions" for an order denying the petition and sanctioning Country-Wide pursuant to 22 NYCRR 130-1.1[a] for "wilfully frivolous and wasteful litigation practice".

For the reasons that follow, the petition for a permanent stay of arbitration is granted and the "cross-petition" is denied.

On June 10, 2011, Ramirez, while operating a motorcycle, was involved in an accident in which he sustained personal injuries. The motorcycle was insured by GMAC Insurance Company. At the time of the accident, Ramirez also had a policy of insurance with Country-Wide covering a 2002 Acura car (Petition at ¶¶ 3-7; Ex. "E" to Petition). The offending vehicle was insured pursuant to a policy of insurance with Geico Insurance Company ("Geico") (Petition at ¶ 7).^[FN1]

By letter dated June 14, 2011 and received by Country-Wide on June 17, 2011, Ramirez advised Country-Wide of his intention to proceed with a claim pursuant to the Supplemental Underinsured Motorists ("SUM") provision of the Country-Wide policy (Ex. "2" to Cross-Petition). The letter stated, in relevant part:

We believe that there is existing Uninsured/Underinsured coverage to which our client, the above referenced Claimant, is entitled with relation to the above claimed accident. Pursuant to Regulation 35D, and pursuant to CPLR 7503(c), Claimant intends to demand arbitration you will be precluded from raising the objection, inter alia, that a valid agreement had not been made or complied with unless you have applied to stay arbitration within 20 days after receipt of the notice. You may consider this letter as formal claim to you of our intention to pursue Uninsured/Underinsured benefits of said policy. . . . (Ex. "2" to Cross-Petition).

On July 8, 2011, Ramirez again informed Country-Wide that he "intends to proceed with his claims pursuant to that portion of Country-Wide's Supplemental Underinsured Motorist policy provisions" (Ex. "5" to Cross-Petition). [*3]

By letter dated August 15, 2011, Country-Wide denied and disclaimed coverage because "the bodily injury for which [Ramirez] seeks SUM compensation occurred while riding a vehicle that he owned which was not insured for SUM coverage under the policy of insurance that he had with Country-Wide" (Ex. "F" to Petition). The denial letter was premised on Country-Wide's policy language which provides, insofar as the policy relates to uninsured motorists coverage, as follows:

INSURING AGREEMENT

We will pay compensatory damages which an insured' is legally entitled to recover from the owner or operator of an uninsured motor vehicle' because of bodily injury'

1. Sustained by an insured' and

2. Caused by an accident.

* * * *

EXCLUSIONS

A. We do not provide Uninsured Motorists Coverage for bodily injury' sustained:

1. By an insured' while occupying' or when struck by any motor vehicle owned by that insured' which is not insured for this coverage under this policy . . . .

(Ex. "A" to Petition at p. 6).

On August 18, 2011, Country-Wide received from Ramirez an American Arbitration Association demand ("AAA Demand") for SUM arbitration (Ex. "B" to Petition; Petition at ¶ 5). The AAA Demand stated, in relevant part:

Please take further notice that, pursuant to § 7503 (c) of the Civil Procedure Law and Rules, unless, within twenty (20) days after service of this Demand for Arbitration or Notice of Intention to Arbitrate, you apply to stay arbitration; you will 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 (Ex. "B" to Petition) (emphasis in original).

By Notice of Petition filed on September 2, 2011, Country-Wide commenced the instant proceeding seeking, inter alia, to stay the arbitration. In support of its petition, Country-Wide argues that there is no SUM coverage in light of the exclusion contained in the policy.

In his "cross petition", Ramirez seeks an order denying the petition and sanctioning Country-Wide pursuant to 22 NYCRR 130-1.1[a] for "wilfully frivolous and wasteful litigation practice."

In reply, Country-Wide argues that the June 14 letter "did not constitute a proper notice of [*4]intention to arbitrate a SUM claim so as to trigger Country-Wide's obligation to move for a stay of arbitration within 20 days of receipt thereof" because the "letter was deceptive, misleading and ostensibly intended to prevent Country-Wide from contesting the issue of arbitrability" (Country-Wide Reply Affirmation at ¶ 4). Country-Wide claims that it did not interpret the June 14 letter as a "formal notice of intention to arbitrate", but rather, "mere notice of a SUM/Underinsured claim under Country-Wide's policy" (Country-Wide Reply Affirmation at ¶ 6). In this regard, Country-Wide asserts that the phrase "after receipt of the notice" implied that formal notice of intention to arbitrate would be served in the future.

Pursuant to CPLR 7503(c):

A party may serve upon another party a demand for arbitration or a notice of intention to arbitrate, specifying the agreement pursuant to which arbitration is sought and the name and address of the party serving the notice . . . and stating 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 courts the bar of a limitation of time . . . . An application to stay arbitration must be made by the party served within twenty days after service upon him of the notice or demand, or he shall be so precluded. . . .

"CPLR 7503 provides a mechanism whereby a party demanding arbitration may limit the opposing party's right to object to arbitration . . . . Thus, the statute mandates that to preclude the opposing party the notice or demand must contain specific information. If the notice fails to comply, there can be no preclusion under CPLR 7503" (Government Employees Insurance Co. v Kozlowski, 62 AD2d 1056 [2d Dept 1978]; Sleepy Hollow Development & Community Improvement Housing Development Fund Co., Inc. v DeAngelis, 51 AD2d 267 [3d Dept 1976]).

The court finds that the June 14, 2011 letter does not comply with CPLR 7503(c). In this regard, the recitals contained in the letter are ambiguous and precatory:

Claimant intends to demand arbitration you will be precluded from raising the objection, inter alia, that a valid agreement had not been made or complied with unless you have applied to stay arbitration within 20 days after receipt of the notice. You may consider this letter as formal claim to you of our intention to pursue Uninsured/Underinsured benefits of said policy. . . . " (Emphasis added).

The italicized language suggests that a notice demanding arbitration would be sent in the future and that waiver of objection thereto will arise if objection is not made within 20 days of receipt of such notice. Viewed in conjunction with the precatory statement that Country-Wide "may consider this letter as formal claim * * * of our intention * * *", thereby implying that it need not consider the letter as a "formal claim", the letter did not adequately comport with CPLR 7503(c). The ambiguity is underscored by reference to the AAA Demand served on August 18, [*5]2011 which contained a verbatim recital of the required statutory language.

" [O]ne who would require strict compliance' with the provisions of CPLR article 75 must be held to the fullest standards of practice' . . . . Since [t]he expiration of this 20-day period terminates a party's right to contest the obligation to arbitrate * * * the validity of the 20-day limitation period depends on the sufficiency of the notice'" (Northern Assurance company of America v Bollinger, 256 AD2d 580, 581 [2d Dept 1998]). Moreover, any ambiguity in the wording contained in the June 14 letter must be construed against the drafter (see Quality King Distributors, Inc. v E & M ESR, 36 AD3d 780 [2d Dept 2007]). Accordingly, Ramirez' argument, that Country-Wide's petition to stay arbitration was untimely under CPLR 7503, has no merit.

Furthermore, it is undisputed that Ramirez, an insured under the Country-Wide policy, was operating a motorcycle not insured pursuant to the Country-Wide policy. Thus, Ramirez is precluded from recovering uninsured motorists benefits pursuant to the SUM exclusion in Country-Wide's policy. Country-Wide's disclaimer dated August 15, 2011, which was based on the aforementioned exclusion, was timely, having been issued within two weeks of obtaining information that the vehicle driven by Ramirez at the time of the accident was not covered under the Country-Wide policy (Reply Affidavit in Support of Petition at ¶ 9).^[FN2]

Based on the foregoing, Country-Wide's petition for a permanent stay of arbitration, made within 20 days of Ramirez' demand for arbitration, is granted; and the "cross-petition" is denied.

This constitutes the decision and order of the court. [*6]

Dated: January 11, 2012

_____________________________

Hon. Vito M. DeStefano, J.S.C.

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