12 N.Y.3d 602 (2009)
Supplementary uninsured/underinsured motorists (SUM) coverage is triggered only when the tortfeasor’s bodily injury liability insurance limits are less than the SUM policy’s third-party liability limits, and payments to insureds do not reduce the tortfeasor’s coverage below that threshold.
Summary
This case addresses whether SUM coverage is triggered when multiple claimants are injured in an accident, and the tortfeasor’s insurance policy limits are exhausted by payments to those claimants. The Court of Appeals held that SUM coverage is not triggered if the tortfeasor’s policy limits are equal to the SUM policy’s liability limits, even if payments to multiple claimants reduce the amount available to each individual. The court reasoned that SUM coverage is intended to provide the same level of protection the insured purchased for liability to others, not to provide a greater recovery. A dissenting opinion argued that the regulation’s plain language should allow SUM benefits.
Facts
In Allstate Insurance v. Rivera, Petra Mercado and five passengers were injured by Nilza Rodriguez, whose vehicle was insured by GMAC with $50,000/$25,000 liability limits. GMAC paid out its policy limit: $25,000 to Mercado and $5,000 to each passenger. The passengers sought SUM benefits under Mercado’s Allstate policy, which had the same liability limits as the GMAC policy. Allstate denied the claim.
In Clarendon National Insurance v. Nunez, Francisco Nunez, his wife, and two children were injured by a vehicle insured by Progressive Northwestern Insurance Company, with identical liability limits. Progressive paid out its $50,000 limit: $15,000 to three family members and $5,000 to the fourth. The Nunez family sought SUM benefits under their Clarendon policy. Clarendon denied the claim.
Procedural History
In both cases, the SUM claimants demanded arbitration. The insurers (Allstate and Clarendon) initiated CPLR article 75 proceedings to stay arbitration. The Appellate Division ruled in favor of the insurers, permanently staying arbitration. The Court of Appeals granted leave to appeal and affirmed the Appellate Division’s orders.
Issue(s)
Whether SUM coverage is triggered under Insurance Department Regulations (11 NYCRR) § 60-2.3(f) when multiple claimants exhaust the tortfeasor’s policy limits, even if those limits are equal to the SUM policy’s liability limits.
Holding
No, because SUM coverage is only triggered when the tortfeasor’s bodily injury liability insurance limits are less than the third-party liability limits of the policy under which a party is seeking SUM benefits.
Court’s Reasoning
The court relied on Insurance Law § 3420(f)(2)(A), stating that SUM coverage is triggered only when the tortfeasor’s liability limits are less than the SUM policy’s limits. The Court emphasized that the statute “calls for a facial comparison of the policy limits without reduction from the judgment of other claims arising from the accident” (Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 686 [1994]). The purpose of SUM coverage is to allow policyholders to acquire the same level of protection for themselves as they purchased to protect themselves against liability to others. Allowing co-occupants to deduct payments made to other co-occupants would distort this purpose. The court interpreted 11 NYCRR 60-2.3(f) to mean that “payments to other persons” do not include payments to those insured under the SUM endorsement. The dissent argued that the regulation’s plain language includes co-claimants as “other persons injured in the accident,” triggering SUM coverage when the tortfeasor’s coverage is reduced by payments to them. The dissent also contended that the Superintendent of Insurance has the authority to broaden the definition of an uninsured vehicle and that ambiguous policy language should be construed in favor of the insured. The majority rejected this interpretation, emphasizing that the regulation must be consistent with the enabling statute, Insurance Law § 3420, and that the purpose of SUM coverage is not to provide a greater recovery than the insured made available to third parties. The court reasoned that allowing the claimants to recover SUM benefits in these cases would result in a greater recovery than if the insured vehicle had negligently injured third parties.