New York Law Review

Tag: Supplemental Uninsured Motorist Coverage

  • Matter of Carlin v. Allstate Insurance Co., 74 N.Y.2d 931 (1989): Enforceability of Contractual Offsets in Supplemental Uninsured Motorist Coverage

    Matter of Carlin v. Allstate Insurance Co., 74 N.Y.2d 931 (1989)

    Contractual offsets in supplemental uninsured motorist (SUM) endorsements, reducing recovery by the amount of workers’ compensation awards, are enforceable when the contract is approved by the Commissioner of Insurance and no statute prohibits such offsets, even if it leads to the insurer avoiding all SUM benefit payments for non-economic loss.

    Summary

    Carlin sought to recover for pain and suffering under a supplemental uninsured motorist (SUM) endorsement. The contract included a standard clause offsetting the recovery by the amount of workers’ compensation received. The New York Court of Appeals held that this offset was enforceable. Because supplemental coverage is optional, and no statute prohibits the offset, the parties can agree to reduce the SUM recovery by amounts received from workers’ compensation. The court acknowledged the potentially anomalous result of the insurer avoiding SUM payments for non-economic loss if the workers’ compensation award equals or exceeds the SUM coverage, but stated that any change to this rule must come from the Legislature.

    Facts

    The petitioner, Carlin, sought to recover for pain and suffering under the supplemental uninsured motorist endorsement of his insurance policy with Allstate Insurance Co.
    The insurance contract contained a clause expressly providing for an “offset,” reducing the recovery by the amount of workers’ compensation awarded to Carlin.
    The insurance contract containing the offset clause had been approved by the Commissioner of Insurance.
    Carlin’s workers’ compensation award equaled or exceeded the amount he sought for pain and suffering under the SUM coverage.

    Procedural History

    The lower courts held that Carlin’s recovery under the SUM endorsement should be reduced by the amount of the workers’ compensation award.
    The New York Court of Appeals affirmed the lower court’s decision.

    Issue(s)

    Whether a contractual offset in a supplemental uninsured motorist endorsement, which reduces recovery by the amount of a workers’ compensation award, is enforceable when the contract has been approved by the Commissioner of Insurance and no statute prohibits such an offset.

    Holding

    Yes, because supplemental coverage is optional, and nothing in the relevant statute (Insurance Law § 3420 [f] [2]) prohibits the parties from agreeing to reduce the supplemental recovery by amounts received pursuant to the workers’ compensation laws.

    Court’s Reasoning

    The court reasoned that unlike the minimum coverage mandated by law (Insurance Law § 3420 [f] [1]), supplemental coverage is optional. Since Insurance Law § 3420 (f)(2) doesn’t prohibit reducing supplemental recovery by workers’ compensation amounts, the parties are free to contractually agree to such offsets. The court cited Fox v. Atlantic Mut. Ins. Co., 132 A.D.2d 17 in support of its reasoning. The court acknowledged that this offset could lead to an insurer avoiding all payment of supplemental benefits for non-economic loss (not covered by workers’ compensation) if the workers’ compensation award equals or exceeds the amount sought under the SUM coverage. However, the Court emphasized it is “bound to enforce the contract as written,” and that any argument to change this rule must be addressed to the Legislature, which has the power to proscribe such contractual terms. The court distinguished this case from Matter of Napolitano [MVAIC], 21 N.Y.2d 281. The Court stated, “In the absence of such a statutory restriction, the court is bound to enforce the contract as written.”