SUPREME COURT OF THE STATE OF NEW YORK

Appellate Division, Fourth Judicial Department

782 

CA 11-02291 

PRESENT: SCUDDER, P.J., SMITH, FAHEY, LINDLEY, AND MARTOCHE, JJ. 

 

WINIFRED K. DAY, PLAINTIFF-RESPONDENT, 

V MEMORANDUM AND ORDER

ONE BEACON INSURANCE, DEFENDANT-APPELLANT. 

 

HURWITZ & FINE, P.C., BUFFALO (DAN D. KOHANE OF COUNSEL), FOR

DEFENDANT-APPELLANT. 

BRIAN P. FITZGERALD, P.C., BUFFALO (BRIAN P. FITZGERALD OF COUNSEL),

FOR PLAINTIFF-RESPONDENT.

Appeal from an order of the Supreme Court, Erie County (Russell

P. Buscaglia, A.J.), entered July 29, 2011 in a breach of contract

action. The order, insofar as appealed from, granted plaintiff’s

motion to dismiss defendant’s first through fifth affirmative defenses

and denied defendant’s cross motion for summary judgment dismissing

the amended complaint. 

It is hereby ORDERED that the order insofar as appealed from is

unanimously reversed on the law without costs, plaintiff’s motion is

denied, defendant’s cross motion is granted and the amended complaint

is dismissed. 

Memorandum: Plaintiff commenced this breach of contract action

seeking supplementary underinsured motorist (SUM) coverage under an

automobile insurance policy issued by defendant. Plaintiff was a

passenger in a Ford Windstar van driven by her husband that collided

with a pickup truck that had failed to yield the right-of-way at an

intersection. Upon impact, plaintiff’s car seat detached from the

floor of the minivan and plaintiff became airborne as the vehicle spun

out of control. She allegedly sustained severe and permanent injuries

as a result of the accident. The driver of the pickup truck (motorist

tortfeasor) had liability coverage of $100,000. The minivan in which

plaintiff was riding was insured by defendant pursuant to a policy

with plaintiff and her husband, with SUM coverage of $500,000. 

Plaintiff timely placed defendant on notice of her potential SUM

claim, and commenced the underlying personal injury action against,

inter alia, the motorist tortfeasor, sounding in negligence, and

against Ford Motor Company (Ford), sounding in strict products

liability. Following mediation, the motorist tortfeasor’s insurer

offered to settle for the policy limits of $100,000, and Ford, which

was self-insured, offered to settle for $475,000. 
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CA 11-02291 

In the meantime, plaintiff commenced the instant action, which

the parties had agreed to hold in abeyance pending settlement

discussions in the underlying action. Upon learning of plaintiff’s

potential settlement with the motorist tortfeasor and Ford, defendant

wrote to plaintiff and her attorney “to remind” plaintiff that,

pursuant to the release or advance and subrogation protection

conditions of the SUM endorsement, settlement of plaintiff’s claims

against the motorist tortfeasor and Ford without defendant’s consent

would vitiate plaintiff’s right to SUM coverage. Shortly thereafter,

plaintiff formally notified defendant of the settlement offers and

stated that she intended to accept the offers unless defendant

advanced the full amount of the settlement offers, i.e., $575,000,

within 30 days. Defendant responded that, pursuant to the release or

advance condition of the SUM endorsement, it was obligated to advance

only the $100,000 limit of the motorist tortfeasor’s policy and that,

pursuant to the release or advance and subrogation conditions of that

endorsement, plaintiff could not thereafter settle her action against

the motorist tortfeasor. Defendant further responded that those

conditions further prohibited plaintiff from settling her action

against Ford without defendant’s consent, which it refused to provide. 

After its initial response to plaintiff, defendant repeatedly offered

to advance the $100,000 limit of the motorist tortfeasor’s policy, but

plaintiff rejected those offers and proceeded to settle her underlying

action against the motorist tortfeasor and Ford for $100,000 and

$475,000, respectively, issuing general releases to both parties. 

Plaintiff then pursued this action seeking, inter alia, $400,000

in SUM coverage from defendant, and she thereafter moved to dismiss

defendant’s affirmative defenses of failure to satisfy the release or

advance and subrogation provisions of the SUM endorsement. Defendant

cross-moved for summary judgment dismissing the amended complaint. We

agree with defendant that Supreme Court erred in denying its cross

motion. 

Exclusion 1 of the SUM endorsement provides that, except as

provided by Condition 10, “if [an] insured . . . without [defendant’s]

written consent, settles any lawsuit against any person or

organization that may be legally liable for such injury,” coverage is

excluded. Condition 10, the standard “release or advance” condition,

provides that “[i]n accidents involving the insured and one or more

negligent parties, if such insured settles with any such party for the

available limit of the motor vehicle bodily injury liability coverage

of such party, release may be executed with such party after thirty

calendar days actual written notice to [defendant], unless within this

time period [defendant] agree[s] to advance such settlement amounts to

the insured in return for the cooperation of the insured in

[defendant’s] lawsuit on behalf of the insured . . . An insured shall

not otherwise settle with any negligent party, without [defendant’s]

written consent, such that [defendant’s] rights would be impaired.” 

Finally, Condition 13, the standard subrogation provision of the

policy, provides that, where defendant makes a payment under the SUM

endorsement, it has “the right to recover the amount of this payment

from any person legally responsible for the bodily injury or loss of
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CA 11-02291 

the person to whom, or for whose benefit, such payment was made to the

extent of the payment.” It further provides that “[t]he insured . . .

must do whatever is necessary to transfer this right of recovery to

[defendant]. Except as permitted by Condition 10, such person shall

do nothing to prejudice this right.” 

Here, we conclude that plaintiff violated Conditions 10 and 13 by

settling with the motorist tortfeasor without defendant’s consent. 

Pursuant to Condition 10, defendant was obligated either to consent to

the settlement with the motorist tortfeasor or to advance the $100,000

settlement funds offered by that tortfeasor’s insurer. That release

or advance condition, however, applies only to settlements “for the

available limit of the motor vehicle bodily injury liability coverage

of such party,” and therefore does not apply to the settlement offer

by Ford, which was not based upon a motor vehicle bodily injury

policy. Thus, defendant satisfied its obligation to plaintiff under

Condition 10 by offering to advance the $100,000 offered by the

motorist tortfeasor (see generally Matter of Central Mut. Ins. Co.

[Bemiss], 12 NY3d 648, 654-655) and was not obligated to advance the

$475,000 offered by Ford, as plaintiff had demanded. 

We further conclude that plaintiff violated Conditions 10 and 13

by settling with Ford without defendant’s written consent. Condition

10 provides that plaintiff “shall not otherwise settle with any

negligent party, without [defendant’s] written consent” (emphasis

added). Similarly, Condition 13 gives the SUM carrier the subrogation

right to recover a SUM payment from “any person legally responsible

for the bodily injury or loss” (emphasis added). Thus, although

defendant was not obligated to advance the settlement offer made by

Ford, Ford was nevertheless “legally responsible” for plaintiff’s

injuries, and defendant therefore had subrogation rights against Ford

to the extent that its SUM payments represented payment for injuries

for which Ford was legally responsible. 

We reject plaintiff’s contention that the last sentence of

Condition 10, which provides that the insured “shall not otherwise

settle with any negligent party, without [defendant’s] written

consent,” applies only to motorist tortfeasors, not to settlement with

non-motorists such as Ford. The provision on its face plainly refers

to settlements with “any negligent party,” and does not refer merely

to motorist tortfeasors. We thus reject plaintiff’s “strained,

unnatural and unreasonable” interpretation of that policy condition

(Progressive Northeastern Ins. Co. v State Farm Ins. Cos., 81 AD3d

1376, 1378, appeal dismissed 16 NY3d 891, lv dismissed 17 NY3d 849;

see Central Mut. Ins. Co., 12 NY3d at 658-659). Plaintiff’s

interpretation would require the replacement of the word “motorist”

for “party” in the last sentence of Condition 10, such that the phrase

would read “negligent motorist” rather than “negligent party.” Had

the sentence been intended to read in the manner suggested by

plaintiff, it would have been easy enough to phrase it that way. 

We thus conclude that, by settling with Ford and the motorist

tortfeasor in violation of Conditions 10 and 13, plaintiff prejudiced

defendant’s subrogation rights and thereby vitiated her right to SUM
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CA 11-02291 

coverage (see Weinberg v Transamerica Ins. Co., 62 NY2d 379, 381-382). 

In view of our determination, we need not address the parties’

remaining contentions. 

Entered: June 29, 2012 Frances E. Cafarell

Clerk of the Court