New York Law Review

Tag: Livery Exclusion

  • Liberty Mutual Insurance Company v. Goddard, 81 N.Y.2d 509 (1993): Enforceability of Livery Exclusion in Uninsured Motorist Coverage

    Liberty Mutual Insurance Company v. Goddard, 81 N.Y.2d 509 (1993)

    A “livery exclusion” in the uninsured motorists coverage endorsement of a personal automobile liability policy is unenforceable because it is not based on statute or regulation and is inconsistent with the purpose of mandatory uninsured motor vehicle statutes and public policy.

    Summary

    Liberty Mutual sought to stay arbitration of an uninsured motorist claim, arguing that its policy with the vehicle’s owner, Karim, validly excluded coverage for vehicles used to carry persons for a fee (a “livery exclusion”). The respondents were passengers injured when Karim’s livery vehicle collided with another car. The Court of Appeals held the livery exclusion in the uninsured motorist endorsement unenforceable, as it contravened public policy and lacked statutory authorization, upholding the lower courts’ decisions to compel arbitration.

    Facts

    John Karim owned and operated a vehicle as a livery. Respondents were passengers in Karim’s vehicle. Karim’s vehicle ran a stop sign and collided with a vehicle owned by Jeannette Williams and operated by Frank Venable. Liberty Mutual insured Karim’s vehicle under a policy that excluded coverage for vehicles used to carry persons for a fee, both in the liability coverage and uninsured motorists coverage endorsement. Liberty Mutual denied coverage based on the livery exclusion after respondents sued Karim for personal injuries. The other vehicle was insured.

    Procedural History

    Respondents demanded arbitration from Liberty Mutual under the uninsured motorists coverage. Liberty Mutual commenced a proceeding to stay arbitration, arguing the livery exclusion applied. Supreme Court denied the stay and dismissed the petition. The Appellate Division affirmed for the same reasons. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether a “livery exclusion” contained in the uninsured motorists coverage endorsement of a personal automobile liability policy is invalid and unenforceable.

    Holding

    Yes, because the livery exclusion is not based on any statute or regulation and is inconsistent with the purpose of the mandatory uninsured motor vehicle statutes and the public policy of New York State.

    Court’s Reasoning

    The court reasoned that Insurance Law § 3420 mandates uninsured motorist coverage in every auto insurance policy. Unlike regulations for liability, no-fault, and supplemental uninsured/underinsured coverage, there is no statute or regulation that expressly permits a livery exclusion for uninsured motorist coverage. The Court emphasized that the absence of explicit authorization is critical: “when the Legislature and the State want to allow exclusions, they say so.”

    The Court stated, quoting Rosado v Eveready Ins. Co., 34 NY2d 43, 49, “its obligation, with the exception of permitted exclusions, [arises] by operation of law and [is] as broad as the requirements of the applicable statutes.”

    The court further reasoned that enforcing such an exclusion would undermine the public policy of ensuring compensation for innocent victims of motor vehicle accidents. The purpose of compulsory uninsured motorist coverage is to protect insured persons injured by financially irresponsible motorists. Exclusions narrow the scope of coverage mandated by statute, and are viewed with disfavor. The court quoted Matter of Country-Wide Ins. Co. v Wagoner, 45 NY2d 581, 586, saying that the goal is “to make the prescribed compensation available in all such cases, calls for a policy of inclusion rather than exclusion in determining whom it covers”.

    The court dismissed Liberty Mutual’s argument that the Superintendent of Insurance’s inaction on the livery exclusion constituted tacit approval. While agency interpretations are given weight, courts retain the duty to interpret statutes reasonably. The court also found questionable whether a claim to the Motor Vehicle Accident Indemnification Corporation (MVAIC) is an adequate remedy, especially considering notice requirements. To allow the insurer to escape liability would unjustly enrich the insurer at the public’s expense.

  • Liberty Mutual Insurance Co. v. Hogan, 82 N.Y.2d 57 (1993): Enforceability of Livery Exclusion in Uninsured Motorist Coverage

    82 N.Y.2d 57 (1993)

    A “livery exclusion” in the uninsured motorists coverage endorsement of a personal automobile liability policy is unenforceable because it is not based on statute or regulation and is inconsistent with the purpose of mandatory uninsured motor vehicle statutes and public policy.

    Summary

    This case addresses the validity of a “livery exclusion” in an uninsured motorist policy. Passengers in a car operating as a livery were injured in an accident. The car’s insurance policy, issued by Liberty Mutual, contained a “livery exclusion,” denying coverage when the vehicle is used to carry persons for a fee. Liberty Mutual sought to stay arbitration of the passengers’ uninsured motorist claim, arguing the exclusion was valid. The New York Court of Appeals held the livery exclusion in the uninsured motorist endorsement was unenforceable, as it contradicted the purpose of mandatory uninsured motorist coverage and lacked statutory or regulatory basis. This decision ensures innocent accident victims can seek compensation.

    Facts

    Milicent Hogan and others were passengers in a vehicle owned and operated by John Karim. Karim’s vehicle was operating as a livery when it collided with another car after running a stop sign. Liberty Mutual insured Karim’s vehicle under a policy that contained a “livery exclusion” in both the liability coverage and the uninsured motorists coverage endorsement. The policy excluded coverage for vehicles used to carry persons for a fee. Liberty Mutual disclaimed coverage, citing the livery exclusion.

    Procedural History

    The respondents demanded arbitration from Liberty Mutual under the uninsured motorists coverage. Liberty Mutual then commenced a proceeding to stay arbitration. The Supreme Court denied Liberty Mutual’s application to stay arbitration and dismissed the petition. The Appellate Division affirmed the Supreme Court’s decision. Liberty Mutual appealed to the New York Court of Appeals.

    Issue(s)

    Whether a “livery exclusion” contained in the uninsured motorists coverage endorsement of a personal automobile liability policy is invalid, requiring arbitration of an uninsured motorist claim.

    Holding

    Yes, because the exclusion is not based on statute or regulation and is inconsistent with the purpose of the mandatory uninsured motor vehicle statutes and the public policy of New York State.

    Court’s Reasoning

    The court reasoned that Insurance Law § 3420 mandates uninsured motorist coverage in every auto insurance policy. Unlike regulations for liability, no-fault, and supplemental uninsured/underinsured coverage, there are no regulations that specify permissible exclusions for uninsured motorist coverage. The Court drew the conclusion that the absence of express authorization suggests the exclusion is not permissible.

    The court applied the rule established in Rosado v Eveready Ins. Co., stating that an insurer’s obligation is as broad as the applicable statutes, except for permitted exclusions. If an exclusion is not permitted by law, the insurer’s liability cannot be limited. The court emphasized the public policy of ensuring innocent victims of motor vehicle accidents are compensated, citing Matter of Allstate Ins. Co. v Shaw. Enforcing a livery exclusion would reduce the scope of coverage required by statute.

    Liberty Mutual argued that the Superintendent of Insurance’s inaction implied approval of the livery exclusion because Insurance Law § 3110 allows the Superintendent to withdraw approval if the policy contravenes public policy. The court rejected this, stating that the courts retain the duty to interpret statutes reasonably, regardless of the Superintendent’s inaction. The court questioned whether a claim to the Motor Vehicle Accident Indemnification Corporation (MVAIC) would be an adequate remedy.

    Chief Judge Kaye concurred, suggesting the livery exclusion authorized by 11 NYCRR 60-1.2(a) could apply to uninsured motorists coverage. However, because Liberty Mutual did not contest the Supreme Court’s holding that the exclusion was limited to liability coverage, she concurred in the result. The concurrence emphasized that the MVAIC was created to fill gaps in insurance coverage and that the passengers should have sought a remedy there. However, the majority found that even with the existence of the MVAIC, allowing the insurer to escape liability would unjustly enrich them.

    The court stated: “[O]nce an insurance company issues a liability policy to an insured, ‘its obligation, with the exception of permitted exclusions, [arises] by operation of law and [is] as broad as the requirements of the applicable statutes.’ If an attempted exclusion is not permitted by law, the insurer’s liability under the policy cannot be limited.”