New York Law Review

Tag: SUM Coverage

  • Fitzgerald v. State Farm Mutual Automobile Ins. Co., 24 N.Y.3d 801 (2014): SUM Coverage and Police Vehicles

    24 N.Y.3d 801 (2014)

    Supplementary Underinsured/Uninsured Motorist (SUM) coverage, mandated by Insurance Law, does not extend to police vehicles.

    Summary

    In Fitzgerald v. State Farm, the New York Court of Appeals addressed whether a police officer injured while riding in a police vehicle could recover under the SUM endorsement of his colleague’s auto insurance policy. The court held that SUM coverage, like uninsured motorist coverage, does not apply to police vehicles. The decision reaffirmed the court’s prior ruling in Matter of State Farm Mut. Auto. Ins. Co. v. Amato, which established that police vehicles are not considered “motor vehicles” under Insurance Law § 3420(f), and that the same interpretation applies to SUM coverage under Insurance Law § 3420 (f)(2)(A). The Court reasoned that the historical context, legislative intent, and stare decisis supported the exclusion of police vehicles from SUM coverage.

    Facts

    Police Officer Patrick Fitzgerald was injured while riding in a police vehicle driven by Officer Michael Knauss when their vehicle was struck by an underinsured motorist. Knauss had a State Farm auto insurance policy with a SUM endorsement. Fitzgerald sought SUM benefits under Knauss’s policy, but State Farm denied the claim, arguing that a police vehicle was not a covered “motor vehicle” under the policy. State Farm filed a petition to stay arbitration, which was granted by the trial court. The Appellate Division reversed, holding that the police car was a “motor vehicle” under the SUM endorsement based on Vehicle and Traffic Law §125.

    Procedural History

    The Supreme Court granted State Farm’s petition to stay arbitration, ruling that SUM coverage did not apply to Fitzgerald because he was occupying a police vehicle. The Appellate Division reversed the Supreme Court’s decision. The New York Court of Appeals granted a stay and leave to appeal, ultimately reversing the Appellate Division and reinstating the Supreme Court’s decision.

    Issue(s)

    1. Whether the police vehicle in which Fitzgerald was riding constitutes a “motor vehicle” under the SUM endorsement of Knauss’s automobile insurance policy.
    2. Whether Insurance Law § 3420(f)(2)(A), which governs SUM coverage, incorporates the definition of “motor vehicle” to exclude police vehicles.

    Holding

    1. No, because the term “motor vehicle” in Insurance Law § 3420 (f) does not encompass police vehicles.
    2. Yes, because Insurance Law § 3420(f)(2)(A) limits coverage to the same class of motor vehicles defined in § 3420(f)(1), which excludes police vehicles.

    Court’s Reasoning

    The court relied heavily on its prior decision in Amato. It emphasized that Insurance Law § 3420(f), providing for uninsured motorist coverage, does not apply to police vehicles. The court reasoned that SUM coverage, a form of uninsured motorist coverage, should be interpreted consistently with the legislative intent. The court analyzed the legislative history of the relevant statutes and found a consistent pattern of excluding police vehicles from coverage. The court highlighted that SUM coverage is an extension of uninsured motorist coverage and the same definition of “motor vehicle” should apply to both. The court also applied the doctrine of stare decisis, noting that there was no compelling justification to overturn the precedent established in Amato. The court noted that the legislature had amended the Insurance Law multiple times after Amato without altering the exclusion of police vehicles.

    Practical Implications

    This case clarifies that police officers injured in police vehicles are generally not eligible for SUM benefits under their colleagues’ policies. Attorneys handling similar cases should be aware of the court’s interpretation of “motor vehicle” within the context of Insurance Law § 3420(f) and Vehicle and Traffic Law § 388(2) and assess whether their client can receive SUM benefits under their own policy. This decision reinforces the limited scope of SUM coverage, particularly regarding vehicles with government immunity. Businesses and insurers should consider this ruling when drafting and interpreting insurance policies, and they need to take this exclusion into account when assessing the financial risks associated with potential claims. Furthermore, subsequent litigation should acknowledge that a police vehicle is not a “motor vehicle” under SUM coverage, and focus on alternative avenues of recovery, such as those provided under No-Fault law or the insured’s own coverage.

  • Allstate Insurance Co. v. Rivera, 12 N.Y.3d 602 (2009): Determining When SUM Coverage is Triggered

    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.

  • Raffellini v. State Farm Mut. Auto. Ins. Co., 9 N.Y.3d 196 (2007): Enforceability of Serious Injury Exclusion in SUM Endorsements

    Raffellini v. State Farm Mut. Auto. Ins. Co., 9 N.Y.3d 196 (2007)

    A “serious injury” exclusion in a supplementary uninsured/underinsured motorist (SUM) endorsement to an automobile liability policy is enforceable, aligning with the intent of SUM coverage to provide the same protection the insured would provide others.

    Summary

    Raffellini was injured in a car accident and received the policy limit from the other driver’s insurance. He then sought additional damages under his SUM endorsement with State Farm. State Farm denied the claim, asserting Raffellini did not sustain a “serious injury” as defined by New York Insurance Law. The New York Court of Appeals held that the serious injury exclusion in the SUM endorsement is enforceable. This decision aligns with the regulatory framework and the underlying purpose of SUM coverage, ensuring insureds receive the same level of protection they would provide to others under their policy.

    Facts

    Nicholas Raffellini sustained back injuries in a car accident caused by another driver who ran a red light. Raffellini’s medical expenses were covered by no-fault insurance. He settled with the other driver’s insurance company for the policy limit of $25,000. Raffellini then sought $75,000 in additional damages from his own insurer, State Farm, under a SUM endorsement providing up to $100,000 coverage. State Farm denied the claim, arguing that Raffellini had not sustained a “serious injury.”

    Procedural History

    Raffellini sued State Farm for breach of contract. The Supreme Court granted Raffellini’s motion to strike State Farm’s “serious injury” defense. The Appellate Division affirmed. State Farm appealed to the New York Court of Appeals, which reversed the Appellate Division’s order, reinstating State Farm’s “serious injury” defense.

    Issue(s)

    Whether a “serious injury” exclusion in a supplementary uninsured/underinsured motorist endorsement to an automobile liability policy is enforceable.

    Holding

    Yes, because the regulation requiring the exclusion is consistent with the purpose of SUM coverage, which is to provide insureds with the same level of protection they would provide to others were they the tortfeasors.

    Court’s Reasoning

    The court reasoned that Insurance Law § 3420(f)(2), which addresses SUM benefits, is silent on whether a “serious injury” is required for recovery. However, Regulation 35-D (11 NYCRR 60-2.3[f][EXCLUSIONS][3]) mandates that SUM endorsements exclude coverage for non-economic loss unless the insured sustained a “serious injury.” The court emphasized that the Superintendent of Insurance has broad authority to interpret and implement legislative policy through regulations, provided they are consistent with the statute. The court reasoned that the legislative history indicates that SUM coverage was intended as an extension of mandatory uninsured motorist coverage. The court noted, “The purpose of supplementary benefits was ‘to provide the insured with the same level of protection he or she would provide to others were the insured a tortfeasor in a bodily injury accident’ (Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 687 [1994]).” Since a third party injured by the insured would have to demonstrate serious injury to recover non-economic loss under the insured’s policy, the insured must also meet the serious injury requirement to recover under the SUM endorsement. The Court stated, “Since the purpose of supplementary coverage is to extend to the insured the same level of coverage provided to an injured third party under the policy, the insured must also meet the serious injury requirement before entitlement to supplementary benefits.”

  • Matter of New York Central Mutual Fire Insurance Company v. Aguirre, 11 N.Y.3d 772 (2008): Insurer’s Duty to Disclaim Coverage Promptly

    Matter of New York Central Mutual Fire Insurance Company v. Aguirre, 11 N.Y.3d 772 (2008)

    An insurer must disclaim liability or deny coverage as soon as reasonably possible after learning of grounds for doing so, even if the insured’s actions provide a basis for denial.

    Summary

    This case addresses the timeliness of an insurer’s disclaimer of coverage. Aguirre and others were injured in a car accident involving an unidentified hit-and-run driver and sought supplementary uninsured/underinsured motorist (SUM) benefits under a policy issued by New York Central Mutual. The insurer requested completion of proof-of-claim forms but the claimants never returned them. The insurer then sought to stay arbitration based on this failure. The Court of Appeals held that the insurer’s delay in disclaiming coverage, after becoming aware that the forms were not returned, was unreasonable as a matter of law, precluding an effective disclaimer.

    Facts

    Jorge Aguirre, Rosa, and Amanda Alzate were injured on August 4, 2002, while in a parked car that was struck by another vehicle driven by an unidentified hit-and-run driver.

    The injured parties sought benefits under the Supplementary Uninsured/Underinsured Motorists (SUM) coverage of the car owner’s insurance policy with New York Central Mutual Fire Insurance Company.

    On August 15, 2002, the claimants’ attorney notified the insurer of the claim and enclosed no-fault insurance applications.

    On September 3, 2002, the insurer acknowledged the claim and requested the immediate completion and return of “Notice of Intention to Make Claim” forms.

    The claimants never returned the requested forms.

    In May 2003, the claimants filed a request for uninsured motorist arbitration.

    Procedural History

    New York Central Mutual petitioned the Supreme Court to stay arbitration based on the claimants’ failure to return the completed proof-of-claim forms.

    The Supreme Court granted the petition, finding that the return of the forms was a condition precedent to coverage.

    The Appellate Division affirmed the Supreme Court’s decision.

    The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether New York Central Mutual disclaimed liability or denied coverage “as soon as reasonably possible” within the meaning of Insurance Law § 3420 (d), given that the basis for denial (failure to return proof-of-claim forms) was known to the insurer well before it sought to stay arbitration.

    Holding

    Yes, because the insurer had knowledge of the basis for denying coverage (failure to return the proof-of-claim forms) significantly before petitioning to stay arbitration and failed to disclaim coverage in a timely manner.

    Court’s Reasoning

    The Court of Appeals reasoned that the requirement to fill out and return a proof-of-claim form is a condition of coverage.

    The court emphasized that under Insurance Law § 3420 (d), an insurer must disclaim liability or deny coverage “as soon as reasonably possible.” The timeliness is measured from when the insurer first learns of the grounds for disclaimer.

    Quoting First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 67 (2003), the court stated, “An insurer’s failure to provide notice as soon as is reasonably possible precludes effective disclaimer, even [where] the policyholder’s own notice of the incident to its insurer is untimely.”

    The court found that the insurer was aware of the claimants’ failure to return the forms, and thus the basis for denying coverage, well before it filed the petition to stay arbitration. The insurer’s letter demanding “immediate completion and return” of the forms indicated that the insurer expected prompt compliance.

    The court concluded that the delay between the insurer’s awareness of the missing forms and its attempt to stay arbitration was unreasonable as a matter of law. The fact that the insurer did not set a precise deadline for the return of the forms did not excuse its delay.

    The court noted that if the insurer suspected fraud, it could still contest the claim on that basis during arbitration.