In claims involving motor vehicle accidents, the motorists’ insurers often go head to head to recover for damages paid to the drivers.  That was the case in Geico General Ins. Co. v. Class 1 Transport.

Geico sought to recover $6,330.60 it paid on behalf of its insured due to property damage stemming from a motor vehicle accident.  Initially, Geico tried to recover from the defendant driver’s insurer through mandatory loss-transfer arbitration with Arbitration Forums, Inc. (AFI).  The arbitrator determined Geico was not entitled to recover because it could not prove that the defendant driver was negligent.

Geico then commenced a subrogation action alleging that the defendant driver was negligent.  The defendants moved for summary judgment arguing collateral estoppel based on the arbitrator’s decision.  Geico opposed the motion by referring to a clause in AFI’s Personal Injury Protection Rule that states, “A decision of an arbitrator on the liability issue is conclusive only of the controversy in the claim submitted to the arbitrator by the same parties and has no legal effect on any other claim or suit arising out of the same accident or occurrence between different parties.”

The Second Department held that generally claim and issue preclusion apply to awards of arbitration, but explicit restrictions in the arbitration rules may limit the carry-over effect of the arbitration ruling.  Thus, the AFI’s rule limiting its preclusion effect precluded application of collateral estoppel.

While arbitration rulings can have a preclusive effect on subsequent litigation, if an arbitration rule clearly dictates otherwise, collateral estoppel may not apply.

Thanks to Moya O’Connor for her contribution to this post.