New York Law Review

Tag: uninsured motorist coverage

  • ELRAC, Inc. v. Exum, 16 N.Y.3d 320 (2011): Employee’s Right to Uninsured Motorist Benefits From Self-Insured Employer

    ELRAC, Inc. v. Exum, 16 N.Y.3d 320 (2011)

    An employee of a self-insured employer is entitled to uninsured motorist benefits from that employer, despite receiving workers’ compensation benefits, because the right to uninsured motorist coverage stems from a quasi-contractual obligation.

    Summary

    Birtis Exum, an employee of ELRAC, Inc. (Enterprise Rent-A-Car), was injured in a car accident while driving an ELRAC vehicle in the course of his employment. The other driver was uninsured. ELRAC, as a self-insured entity, sought to avoid arbitration for uninsured motorist benefits, arguing that workers’ compensation was Exum’s exclusive remedy. The Court of Appeals held that Exum could pursue uninsured motorist benefits from ELRAC, notwithstanding the exclusivity provision of the Workers’ Compensation Law, reasoning that the obligation to provide uninsured motorist coverage is essentially contractual, and thus not barred by workers’ compensation exclusivity. The court likened the situation to the employer writing an insurance policy to itself.

    Facts

    Birtis Exum was employed by ELRAC, Inc., a subsidiary of Enterprise Rent-A-Car Company.
    While driving a car owned by ELRAC in the course of his employment, Exum was involved in an accident with an uninsured driver.
    ELRAC was self-insured under Vehicle and Traffic Law § 370 (3) and did not have a separate insurance policy for the vehicle Exum was driving.
    Exum sought uninsured motorist benefits from ELRAC and served a notice of intention to arbitrate.
    Exum was also entitled to workers’ compensation benefits from ELRAC.

    Procedural History

    Exum served a notice of intention to arbitrate on Elrac, seeking uninsured motorist benefits.
    ELRAC petitioned the Supreme Court to stay the arbitration, which was initially granted.
    The Appellate Division reversed the Supreme Court’s decision, allowing the arbitration to proceed. (Matter of ELRAC, Inc. v Exum, 73 AD3d 431 [1st Dept 2010]).
    The Appellate Division granted leave to appeal to the Court of Appeals.

    Issue(s)

    Whether a self-insured employer is liable to its employee for uninsured motorist benefits when the employee is injured in a work-related automobile accident, despite the exclusivity provision of the Workers’ Compensation Law.

    Holding

    Yes, because an action against a self-insurer to enforce the liability for uninsured motorist coverage is essentially contractual, and is therefore not barred by Workers’ Compensation Law § 11.

    Court’s Reasoning

    The Court relied on its prior holding in Matter of Allstate Ins. Co. v Shaw, 52 NY2d 818 (1980), which established that self-insurers have the same liability for uninsured motorist coverage as insurance companies.
    The court found that there was no reason to diminish Exum’s uninsured motorist protection simply because he was driving a self-insured vehicle.
    Addressing the workers’ compensation exclusivity argument, the court acknowledged Workers’ Compensation Law § 11, which states that an employer’s liability for workers’ compensation is exclusive and replaces any other liability.
    However, the Court stated that the seemingly all-inclusive language of the statute cannot be taken literally, citing Billy v Consolidated Mach. Tool Corp., 51 NY2d 152 (1980).
    The Court reasoned that the right to uninsured motorist benefits is akin to a contractual right, as if the employer had written an insurance policy to itself with the required uninsured motorist provision. The court stated, “The situation is as though the employer had written an insurance policy to itself, including the statutorily-required provision for uninsured motorist coverage.”
    Therefore, the action to enforce this quasi-contractual right is not barred by the exclusivity provision of the Workers’ Compensation Law. The Court distinguished this situation from a tort action directly arising from the injury, which would be barred. The court also referenced Matter of Country-Wide Ins. Co. (Manning), 62 NY2d 748 (1984), which involved similar facts.

  • Matter of State Farm Mutual Automobile Insurance Company, 20 N.Y.3d 352 (2012): Intentional Acts and Uninsured Motorist Coverage

    Matter of State Farm Mutual Automobile Insurance Company, 20 N.Y.3d 352 (2012)

    Uninsured Motorist (UM) coverage does not apply when the injuries result from an intentional act, assessed from the tortfeasor’s perspective, even though the insured is an innocent victim.

    Summary

    The New York Court of Appeals addressed whether an injury resulting from an intentional act constitutes an “accident” under an uninsured motorist (UM) policy. Spicehandler died from injuries sustained when Popadich intentionally drove his car into him. State Farm denied UM benefits, arguing the death wasn’t an “accident.” The court held that because the act was intentional from the tortfeasor’s viewpoint, it was not an “accident” covered under the UM policy. The court emphasized the purpose of UM coverage is to put the insured in the same position as if the tortfeasor had been insured, and an intentional act would not be covered under a standard liability policy. This ruling reinforces that UM coverage is not a form of general accident insurance but is tied to the nature of the tortfeasor’s actions.

    Facts

    Spicehandler died as a result of injuries he sustained when Popadich intentionally drove his vehicle into him.
    Spicehandler was insured under a policy issued by State Farm that included uninsured motorist (UM) coverage.
    Spicehandler’s estate sought UM benefits under the State Farm policy.
    State Farm denied the claim, contending that the death was not the result of an “accident” as required by the policy’s UM endorsement.

    Procedural History

    The initial court likely ruled on the UM coverage claim.
    The Appellate Division’s decision was appealed to the New York Court of Appeals.
    The New York Court of Appeals modified the order, effectively denying UM coverage, reversing the determination that UM coverage applied.

    Issue(s)

    Whether an injury caused by an intentional act constitutes an “accident” within the meaning of an uninsured motorist (UM) endorsement, where the act is intentional from the perspective of the tortfeasor but not from the perspective of the injured party.

    Holding

    No, because UM coverage is intended to put the insured in the same position they would have been in if the tortfeasor had been insured; a standard liability policy would not cover intentional acts. Thus, the incident does not qualify as an “accident” under the UM policy.

    Court’s Reasoning

    The court reasoned that the term “accident” must be analyzed from the perspective of the tortfeasor. Since Popadich intentionally caused the injuries, it was not an accident. The court stated that “uninsured motorist coverage was created ‘to afford the insured motorist with the same financial protection he would have had if the offending vehicle had been insured.’”
    The court distinguished UM coverage from other types of insurance, noting that UM coverage is specifically designed to provide compensation when the tortfeasor is uninsured. This contrasts with general accident insurance, which focuses on the insured’s perspective. The court stated: “The purpose of UM coverage is to place the insured in the same position as if the tortfeasor had been insured.”
    The court relied on the principle that insurance policies generally do not cover intentional acts. Permitting UM coverage in this situation would expand the scope of UM coverage beyond its intended purpose.
    The court also distinguished the case from situations involving supplementary uninsured/underinsured motorist (SUM) coverage, where a different analysis might apply due to the specific language and intent of those policies. The court stated: “The explicit purpose of UM coverage is to protect persons injured by financially irresponsible motorists.”
    The dissenting opinion argued that the focus should be on the insured’s perspective, and from Spicehandler’s viewpoint, the event was an accident. The dissent cited McCarthy v Motor Veh. Acc. Indent. Corp., arguing that the majority’s attempt to distinguish it was unpersuasive. The dissent further suggested the possibility of modifying the rule against covering intentional torts in cases of compulsory insurance but found it unnecessary to address that issue in this case.

  • 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.”

  • American Transit Ins. Co. v. Abdelghany, 80 N.Y.2d 162 (1992): Out-of-State Minimum Coverage Mandate

    American Transit Ins. Co. v. Abdelghany, 80 N.Y.2d 162 (1992)

    New York law mandates that automobile insurance policies provide at least the minimum amount and kind of uninsured motorist coverage required by the state in which the insured vehicle is being used or operated.

    Summary

    These cases address whether New York insurance law requires every New York automobile insurance policy to provide the minimum uninsured motorist coverage mandated by another state when the insured vehicle is involved in an accident in that state. The New York Court of Appeals held that it does, based on Insurance Law § 5103(e) and related regulations. This means New York insureds receive the benefit of the other state’s minimum coverage requirements, even if those requirements exceed what New York law typically mandates. This decision ensures protection for New York drivers venturing into other states with different insurance laws.

    Facts

    In Abdelghany, a New York resident was involved in an accident with an uninsured vehicle in New Jersey. His New York policy limited uninsured motorist coverage to accidents within New York. In Finker, a New York resident driving in New Jersey was forced off the road by an unidentified vehicle, but there was no physical contact. New Jersey law, unlike New York law, allows uninsured motorist coverage without physical contact in hit-and-run scenarios.

    Procedural History

    In Abdelghany, the Supreme Court initially granted a stay of arbitration, then reversed and denied the stay. The Appellate Division affirmed, holding that New Jersey’s minimum coverage must be read into the New York policy. The Court of Appeals granted leave to appeal.
    In Finker, the Supreme Court granted a stay of arbitration based on First Department precedent. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether Insurance Law § 5103(e) and the implementing regulation (11 NYCRR 60-1.1(e)) require that every New York automobile insurance policy must provide the minimum uninsured motorist coverage mandated by the law of another State when the insured automobile is involved in an accident in that State.

    Holding

    Yes, because Insurance Law § 5103(e) mandates that New York insurance policies provide at least the minimum amount and kind of coverage required by the state where the accident occurs.

    Court’s Reasoning

    The Court relied on the plain language of Insurance Law § 5103(e), which states that policies must provide “insurance coverage for such motor vehicle at least in the minimum, amount required by the laws of that state.” The court also cited the implementing regulation (11 NYCRR 60-1.1[e]), specifying policies must “provide at least the minimum amount and kind of coverage which is required in such cases under the laws of such other jurisdiction.” The legislative history of section 5103 demonstrates the purpose was to assure that the carriers provide not only the amount of coverage but “that type of coverage minimally required by the state in which [the insured] is visiting”.

    The court distinguished Matter of Sentry Ins. Co. (Amsel), noting that it concerned a different section of the Insurance Law (former § 167 [2-a], recodified as § 3420 [f] [2]) which required uninsured motorist coverage for accidents “occurring in this state.” Unlike § 5103(e), the former section did not have a provision requiring coverage equivalent to that mandated by the foreign state where the accident occurs.

    The court also rejected the argument that § 3420(f)(2), which permits optional uninsured motorist coverage for out-of-state accidents, is inconsistent with the mandate of § 5103(e). “Permitting optional uninsured motorist coverage for accidents in all foreign States, including those which do not require such coverage, is in no way inconsistent with a provision mandating uninsured motorist coverage only in those States which do require it.”

    The Court emphasized that the purpose of Insurance Law § 5103(e) is to protect New York insureds by ensuring that the minimum insurance coverage required under the laws of the accident’s location will apply, even if it differs from New York law. The court noted that to accept the insurer’s argument would defeat the salutary concept of section 5103(e), i.e., looking to the laws of other jurisdictions if those jurisdictions require “different, and perhaps higher, minimum liability levels”.

  • Valente v. Prudential Property & Casualty Insurance, 77 N.Y.2d 894 (1991): Enforceability of Offsets in Supplemental Uninsured Motorist Coverage

    77 N.Y.2d 894 (1991)

    Parties can contractually agree to offset supplemental uninsured motorist coverage by the amount of workers’ compensation benefits received, even if this results in the insurer avoiding payment for non-economic losses not covered by workers’ compensation.

    Summary

    Louis Valente sought recovery for pain and suffering under a supplemental uninsured motorist endorsement. The insurance contract contained a clause offsetting this recovery by the amount received from workers’ compensation. The New York Court of Appeals addressed whether this offset was enforceable, even though it prevented Valente from receiving any supplemental benefits for his non-economic loss (pain and suffering) because the workers’ compensation award equaled or exceeded the amount sought for pain and suffering. The Court held that the contractual offset was enforceable because the supplemental coverage was optional and the contract term had been approved by the Commissioner of Insurance, even if it produced an anomalous result.

    Facts

    Louis Valente was injured in an accident with an uninsured motorist. He received workers’ compensation benefits as a result of the injury. Valente also sought recovery for pain and suffering under the supplemental uninsured motorist endorsement of his insurance policy with Prudential. The policy contained a clause that expressly provided for an offset, reducing recovery under the supplemental coverage by the amount of workers’ compensation benefits received. Because the workers’ compensation benefits equaled or exceeded the amount sought for pain and suffering, the offset effectively eliminated any supplemental recovery.

    Procedural History

    The lower courts held that Valente’s recovery for pain and suffering under the supplemental uninsured motorist endorsement should be reduced by the amount of the workers’ compensation award. Valente appealed to the Court of Appeals of the State of New York.

    Issue(s)

    Whether a contractual offset in a supplemental uninsured motorist insurance policy, which reduces recovery by the amount of workers’ compensation benefits received, is enforceable even if it results in the insurer avoiding all payment for non-economic losses not covered by the workers’ compensation award.

    Holding

    Yes, because the supplemental coverage is optional, the contract term has been approved by the Commissioner of Insurance, and there is no statutory prohibition against such offsets.

    Court’s Reasoning

    The Court reasoned that unlike the minimum uninsured motorist coverage mandated by Insurance Law § 3420(f)(1), supplemental coverage is optional under Insurance Law § 3420(f)(2). The statute does not prohibit parties from agreeing to reduce supplemental recovery by amounts received pursuant to workers’ compensation laws. The Court distinguished this case from situations involving mandatory minimum coverage, where such offsets might be against public policy. The Court acknowledged the seemingly unfair result, stating, “Under these circumstances there is no basis for holding the contractual offset unenforceable with respect to the supplemental coverage although, as petitioner notes, it produces the anomalous result of permitting the insurer to avoid all payment of supplemental benefits for petitioner’s noneconomic loss, which was not covered by the workers’ compensation award, simply because the amount of that award equals or exceeds the amount sought here for pain and suffering.” The Court emphasized that any changes to this contractual freedom must come from the legislature: “Petitioner’s argument, that such offsets should only be permitted when the insured would otherwise obtain a duplicate award, must be addressed to the Legislature, which alone has the power to proscribe contractual terms in that manner. In the absence of such a statutory restriction, the court is bound to enforce the contract as written.”

  • Allstate Ins. Co. v. Walsh, 74 N.Y.2d 908 (1989): Uninsured Motorist Coverage Requires Involvement of Another Vehicle

    Allstate Ins. Co. v. Walsh, 74 N.Y.2d 908 (1989)

    Under both New York and New Jersey law, some involvement of another vehicle is a prerequisite for uninsured motorist coverage.

    Summary

    This case concerns a dispute over uninsured motorist coverage following an accident. The New York Court of Appeals affirmed the Appellate Division’s order, holding that regardless of whether New York or New Jersey law applied, uninsured motorist coverage was not available because there was no evidence of involvement by any vehicle other than the claimant’s. The court sidestepped the conflict between the First and Second Departments regarding the applicability of New Jersey law, as the factual finding of no other vehicle’s involvement was determinative under both states’ laws.

    Facts

    The claimant was involved in a single-vehicle accident. The claimant sought uninsured motorist coverage from Allstate Insurance Company. There was no evidence presented indicating the involvement of any other vehicle in the accident. The lower court found that there was “no evidence of involvement by any vehicle other than the one being operated by the claimant and no evidence of any contact with any other vehicle.”

    Procedural History

    The Appellate Division certified a question to the New York Court of Appeals regarding a conflict between the First and Second Departments on whether New Jersey law applies to the uninsured motorist coverage. The Court of Appeals affirmed the Appellate Division’s order without answering the certified question, finding it unnecessary based on the factual record.

    Issue(s)

    1. Whether uninsured motorist coverage is available when there is no evidence of involvement by another vehicle, regardless of whether New York or New Jersey law applies.

    Holding

    1. Yes, because under both New York and New Jersey law, some involvement of another vehicle is a prerequisite to uninsured motorist coverage.

    Court’s Reasoning

    The Court of Appeals based its decision on the factual finding that no other vehicle was involved in the accident. The court noted that both New York and New Jersey law require some involvement of another vehicle as a prerequisite for uninsured motorist coverage. The court stated, “Under both New York and New Jersey law, some involvement of another vehicle is a prerequisite to uninsured motorist coverage.” The court acknowledged the conflict between the First and Second Departments regarding the application of New Jersey law, specifically citing Matter of Allstate Ins. Co. v Walsh, 99 AD2d 987, and Allcity v Williams, 120 AD2d 1. However, the court avoided resolving this conflict because the lack of involvement by another vehicle was determinative under either state’s law. The court emphasized that the affirmed finding of fact regarding the absence of another vehicle’s involvement was supported by the record. Because the result was the same under either New York or New Jersey law, the court found it unnecessary to address the choice-of-law issue. The court implicitly affirmed the importance of establishing the involvement of another vehicle to trigger uninsured motorist coverage, highlighting a key threshold requirement for such claims. The court also cited relevant New York and New Jersey statutes, Insurance Law § 5217, NJ Stat Annot §§ 17:28-1.1, and 39:6-76.

  • Matter of Travelers Ins. Co., 70 N.Y.2d 950 (1988): Enforceability of Trial De Novo Clause in Supplementary Uninsured Motorist Coverage

    Matter of Travelers Ins. Co., 70 N.Y.2d 950 (1988)

    When an insured purchases supplementary uninsured motorist coverage with a clause allowing a trial de novo if the arbitration award exceeds the standard statutory limits, the entire award is subject to review, not just the excess above those limits.

    Summary

    Travelers Insurance Co. appealed an order regarding supplementary uninsured motorist coverage. The insured had purchased additional coverage beyond the standard statutory limits, which included a provision allowing either party to seek a trial de novo if an arbitration award exceeded those standard limits. After an arbitration award exceeded the statutory limits, Travelers sought to limit the trial de novo to only the excess amount. The New York Court of Appeals held that the trial de novo clause applied to the entire award, not just the portion exceeding the standard limits. The court found no ambiguity in the policy and enforced the plain meaning of the agreement.

    Facts

    An insured purchased supplementary uninsured motorist coverage from Travelers Insurance Co., exceeding the standard $50,000/$100,000 statutory limits. The policy included an endorsement that allowed either party to seek a trial de novo if an arbitration award exceeded the standard coverage limits. The insured made a claim, and the arbitration award was set at $100,000.

    Procedural History

    After the arbitration award, Travelers sought to limit the trial de novo to only the amount exceeding the standard statutory limit of $50,000. The lower courts rejected this argument, holding that the trial de novo applied to the entire award. Travelers appealed to the New York Court of Appeals.

    Issue(s)

    Whether a trial de novo clause in a supplementary uninsured motorist insurance policy, triggered by an arbitration award exceeding standard statutory limits, applies to the entire award or only to the excess above those limits?

    Holding

    No, the trial de novo clause applies to the entire award because the policy language provides for a review of all issues when the award exceeds the standard statutory limits.

    Court’s Reasoning

    The Court of Appeals reasoned that the supplementary uninsured motorist coverage endorsement, authorized by the Motor Vehicle Accident Indemnification Corporation (MVAIC) and approved by the Superintendent of Insurance, explicitly provided for a trial de novo of all issues if the arbitration award exceeded the standard $50,000/$100,000 limitation. The court found no support in the statute or logic for Travelers’ argument that only the excess amount should be subject to review. The court stated, “In addition to contradicting the express provisions of the indorsement, appellant’s argument that the first $50,000 of an award is binding and unassailable and that the de nova trial should be limited to the excess awarded above that amount finds no support in the statute or in logic.” Furthermore, the court found no ambiguity in the policy requiring strict construction against the insurer. The policy’s face sheet clearly indicated coverage extending up to $100,000/$300,000, amounts only available through supplementary coverage, further supporting the interpretation that the entire award was subject to the trial de novo provision. The court emphasized that the supplementary coverage is still considered “uninsured motorist insurance” and is governed by the same statutory framework, albeit with expanded coverage and the trial de novo option. The court reasoned that the insured purchased and paid for the right to a de novo trial, and the court should not rewrite the contract. The court emphasized the importance of enforcing contracts as written, absent ambiguity. The court also noted the policy clearly indicated that, with respect to uninsured motorists, coverage would extend up to $100,000/$300,000 per accident, amounts only available pursuant to a supplementary uninsured motorist coverage indorsement since they are in excess of the maximum uninsured motorist coverage of $50,000/$100,000 required by Insurance Law § 3420.

  • Buckner v. Motor Vehicle Acc. Indemnification Corp., 66 N.Y.2d 211 (1985): Corporate Insurance and Family Member Coverage

    Buckner v. Motor Vehicle Acc. Indemnification Corp., 66 N.Y.2d 211 (1985)

    A business automobile insurance policy issued to a corporation does not extend uninsured motorist coverage to the son of the corporation’s officers and sole shareholders when the son is injured while not acting on behalf of the corporation.

    Summary

    Robert Buckner, son of the officers and sole shareholders of Buckner Associates, Inc., was injured by a hit-and-run driver while riding his bicycle. Buckner Associates had a business automobile policy with Liberty Mutual. Robert’s claim for first-party benefits was denied. He then sought benefits from the Motor Vehicle Accident Indemnification Corporation (MVAIC). After arbitration, a declaratory judgment action ensued against Liberty Mutual and MVAIC. The lower court ruled in favor of MVAIC, but the Appellate Division reversed, finding Robert covered under the Liberty Mutual policy due to ambiguities in the policy’s language regarding “family member” coverage. The New York Court of Appeals reversed the Appellate Division, holding that the policy, when read as a whole, did not provide coverage to the son in this situation.

    Facts

    Robert Buckner, a college student, resided with his parents. His parents were the officers and sole shareholders of Buckner Associates, Inc., a family-owned real estate business. Robert performed some part-time work for the corporation. He was injured by a hit-and-run driver while riding his bicycle and was not engaged in any business of the corporation at the time of the accident.

    Procedural History

    Robert Buckner’s application for insurance benefits under Buckner Associates, Inc.’s Liberty Mutual policy was denied. He then applied to MVAIC. After arbitration, Robert initiated a declaratory judgment action against both Liberty Mutual and MVAIC. Special Term granted summary judgment against MVAIC, denying it against Liberty Mutual, and declared Robert a qualified person entitled to benefits from MVAIC. The Appellate Division reversed, declaring Robert an insured person under the Liberty Mutual policy. Liberty Mutual appealed to the New York Court of Appeals.

    Issue(s)

    Whether a business automobile insurance policy issued to a corporation provides uninsured motorist coverage for the son of the corporation’s officers and sole shareholders, who resides with them, when he is injured by a hit-and-run driver while not acting on behalf of the corporation.

    Holding

    No, because reading the policy as a whole, the average person would not understand the phrase “You or any family member” in the uninsured motorist endorsement to extend coverage to the son of the corporation’s officers and shareholders in this situation.

    Court’s Reasoning

    The court reasoned that the determination of coverage hinges on a comprehensive reading of the entire insurance policy, not merely isolated sections of the uninsured motorist endorsement. The court stated that the key question is whether an average person, applying common speech, would understand the words “Who is insured 1. You or any family member” to encompass the son of the corporation’s officers. The court emphasized that the insured was a corporation, which cannot suffer personal injuries or have a family in the conventional sense. The court cited several cases from other jurisdictions supporting this view, noting that “it is obvious, even to a casual reader, that the insured was to be a corporation which could not possibly have personal injuries or family” (Dixon v Gunter, 636 SW2d 437, 441 [Tenn]).

    The court highlighted that the policy’s declarations explicitly state that the “Named insured is corporation.” Part 1 (A) defines “You” as “the person or organization shown as the named insured in item one of the declarations.” Part 1 (F) states that ” ‘Insured’ means any person or organization qualifying as an insured in the who is insured section of the applicable insurance.” This language leads to the conclusion that the insured is Buckner Associates, Inc., and therefore the “family member” definition in the endorsement does not apply. The court also noted that the uninsured motorist coverage is not rendered meaningless by this interpretation, as it would still cover individuals occupying a company-owned vehicle or operating a vehicle on behalf of the corporation. Furthermore, the court found that the no-fault endorsement did not alter the conclusion because it defined “named insured” as “the person or organization named in the declarations” and “relative” in a way that would not be construed to apply to a corporation.

  • Country-Wide Ins. Co. v. City of New York, 64 N.Y.2d 799 (1985): Municipality’s Exemption from Uninsured Motorist Coverage

    Country-Wide Ins. Co. v. City of New York, 64 N.Y.2d 799 (1985)

    Municipalities are exempt from the requirement to maintain uninsured motorist coverage for their vehicles because the Legislature has expressly exempted them from various financial responsibility requirements under the Vehicle and Traffic Law.

    Summary

    This case addresses whether the City of New York, as a municipality, is required to provide uninsured motorist (UM) coverage for its vehicles. The Court of Appeals held that the city is exempt from this requirement. The court reasoned that the Legislature has explicitly exempted municipalities from the financial responsibility requirements of the Vehicle and Traffic Law, except in specific instances such as no-fault benefits. Requiring the city to provide UM coverage would contradict the Legislature’s intent and disrupt the established statutory scheme. The dissent argued that the majority failed to recognize the distinction between entities entirely exempt from liability insurance requirements and those permitted to self-insure.

    Facts

    Daisy Manning sustained injuries in an accident involving an uninsured motorist. At the time of the accident, Manning was covered by an insurance policy issued by Country-Wide Insurance Company. The City of New York owned and operated the other vehicle involved in the accident. Country-Wide sought to compel the City to provide uninsured motorist coverage. The City argued it was exempt from this requirement as a municipality.

    Procedural History

    The Supreme Court, New York County, initially ruled in favor of the City, holding that it was not required to provide uninsured motorist coverage. The Appellate Division reversed this decision, compelling the City to provide coverage. The Court of Appeals then reversed the Appellate Division’s order, reinstating the Supreme Court’s original judgment.

    Issue(s)

    Whether the City of New York, as a municipality, is required to provide uninsured motorist coverage for its vehicles under New York law.

    Holding

    No, because the New York State Legislature has expressly exempted municipalities from the financial responsibility requirements of the Vehicle and Traffic Law, including the requirement to provide uninsured motorist coverage, except in certain specified circumstances.

    Court’s Reasoning

    The Court of Appeals relied on the comprehensive legislative scheme governing motor vehicle insurance and financial responsibility in New York. The Court highlighted that the Financial Security Act explicitly exempts “any motor vehicle owned by the United States, any state or any political subdivisions of any state” from its requirements. Similarly, the Safety Responsibility Act does not apply to vehicles owned by the state or its political subdivisions. The Court noted that the Legislature has been selective in applying financial responsibility requirements to governmental vehicles, demonstrating awareness of how to subject them to such requirements when intended. Specifically, the court stated, “Legislative policy with respect to the maintenance of insurance covering motor vehicle accidents is contained in Vehicle and Traffic Law, article 6 (Financial Security Act), article 7 (Safety Responsibility Act), article 8, covering passenger for hire vehicles, and article 48-A (Registration of Limited Use Vehicles), in Insurance Law, article 7 (Insurance Contract), article 18 (Comprehensive Automobile Insurance Reparations Act [commonly referred to as “no-fault”]), and article 52 (Motor Vehicle Accident Indemnification Corporation [MVAIC] Act) and in PRHPL 25.13. Perusal of the pertinent sections of those enactments makes indelibly clear that, with but few and quite explicit exceptions, the Legislature has expressly exempted from their coverage the State and any political subdivision of the State.”

    The Court distinguished its prior holding in Matter of Allstate Ins. Co. v Shaw, 52 N.Y.2d 818 (1981), noting that the Shaw case pertained to non-governmental vehicles. The Court reasoned that extending the Shaw rationale to municipal vehicles would contradict the Legislature’s express exemptions. The court emphasized that requiring the city to provide UM coverage would shift the burden of compensation from Manning’s own insurer, Country-Wide, to the city, contrary to legislative intent. The practical effect of the ruling is that individuals injured by uninsured motorists in accidents involving municipal vehicles must seek compensation from their own insurance policies, rather than from the municipality directly.