Source: https://www.law.cornell.edu/nyctap/I09_0088.htm
Timestamp: 2017-04-26 02:07:29
Document Index: 134741164

Matched Legal Cases: ['§ 3420', '§ 3420', '§ 60', '§ 60', '§ 60', '§ 60', '§ 3420', '§ 60', '§ 3420']

2009 NY Int. 88
2009 NY Slip Op 04300
Decided on June 4, 2009
In the Matter of Allstate Insurance Company, Respondent, Nydia Rivera, et al., Appellants.
In the Matter of Clarendon National Insurance Company,
Respondent, v
Francisco Nunez, Sr., et al.,
Case No. 89: Jonathan A. Dachs, for appellants. Marshall D. Sweetbaum, for respondent. New York State Trial Lawyers' Association and New York Insurance Association; amici curiae. Case No. 90: Jonathan A. Dachs, for appellants. John R. Casey, for respondent. New York State Trial Lawyers' Association, amicus curiae.
"Any [automobile insurance] policy shall, at the option of the insured, also provide supplementary uninsured/underinsured motorists [SUM] insurance for bodily injury, in an amount up to the bodily injury liability insurance limits of coverage provided under such policy . . . [SUM] insurance shall provide coverage . . . if the limits of liability under all . . . insurance policies of another motor vehicle liable for damages are in a lesser amount than the bodily injury liability insurance limits of coverage provided by such policy. . . . As a condition precedent to the obligation of the insurer to pay under the [SUM] insurance coverage, the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgments or settlements"
Insurance Law § 3420 [f] [2] [A] [emphasis added]). The plain language of Insurance Law § 3420, therefore, provides that SUM coverage is only triggered where the bodily injury liability insurance limits of the policy covering the tortfeasor's vehicle are less than the third-party liability limits of the policy under which a party is seeking SUM benefits.
This 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] [held that "underinsured motorist coverage is triggered when the limit of the insured's bodily injury liability coverage is greater than the same coverage in the tortfeasor's policy"]). Further, section 3420 (f) (2) "was enacted to allow policyholders to acquire the same level of protection for themselves and their passengers as they purchased to protect themselves against liability to others" (Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso 93 NY2d 487 [1999], citing Mem of State Executive Dept, 1977 McKinney's Session Laws of NY, at 2445, 2446; see also Raffellini v State Farm Mutual Automobile Ins. Co., 9 NY3d 196, 203-204 [2007]; Szeli, 83 NY2d at 685-686).
In 1992, the Superintendent of Insurance promulgated Insurance Department Regulation 35-D, codified at 11 NYCRR § 60-2, which requires that "[e]very SUM endorsement issued shall be the [SUM] Endorsement prescribed by subdivision (f) of this section" (11 NYCRR 60-2.3 [c])1. Under Regulation 35-D, the term "insured" means:
(11 NYCRR § 60-2.3 [f] [I] [a]). Further, Regulation 35-D defines an "uninsured motor vehicle" as
"a motor vehicle that, through its ownership, maintenance or use, results in bodily injury to an insured, and for which . . . (3) there is a bodily injury liability insurance coverage or bond applicable to such motor vehicle at the time of the accident, but; . . . (ii) the amount of such insurance coverage or bond has been reduced, by payments to other persons injured in the accident, to an amount less than the third-party bodily injury liability limit of this policy"
(11 NYCRR § 60-2.3 [f] [I] [c] [3] [ii]).
The "payments to other persons" that may be deducted from the tortfeasor's coverage limits for purposes of rendering the tortfeasor "uninsured" under a SUM endorsement do not encompass payments made to anyone who is an insured under the endorsement. It is important to note that the phrase "other persons" is used elsewhere in the endorsement to denote persons other than those insured under the policy. The Notice and Proof of Claim condition directs that "the insured or other person making claim" shall give written notice of claim "under this SUM coverage" (11 NYCRR § 60-2.3 [f] [III] [Condition 2]). It is evident that, in the phrase "the insured or other person," the reference to "other person" means someone who is not "the insured." As each claimant here falls within the endorsement's definition of an "insured," which encompasses all passengers in the covered vehicle, claimants are not "other person[s]." Insureds are therefore able to reduce the coverage limits of the tortfeasor's policy only when payments made under the tortfeasor's policy are to individuals — such as occupants of the tortfeasor's vehicle, injured pedestrians or those operating a third vehicle — not covered under the SUM endorsement. This guarantees that those who have purchased SUM coverage will receive the same recovery they have made available to third parties they injure — but no more.
The position of the SUM claimants and the dissent notwithstanding, this is the only construction that is consistent with the plain language of Insurance Law § 3420, the enabling legislation that Regulation 35-D must conform to, and the core principle underlying SUM coverage — that insureds can never use a SUM endorsement to obtain a greater recovery for themselves than is provided under the policy to third parties injured by the insureds (see Raffellini, 9 NY3d at 203-204; Mancuso, 93 NY2d at 492; Szeli, 83 NY2d at 687). To demonstrate this principle, we need only look at what would occur in Matter of Clarendon were we to adopt the claimants' position. The four members of the Nunez family received $50,000 under the tortfeasor's policy and, by each claimant characterizing the other three family members as "other person[s]," the family now seeks to obtain an additional $50,000 under the SUM coverage provided in their own policy, for a total recovery of $100,000. Yet, if the Nunez vehicle was operated negligently, causing an accident that injured four pedestrians, the total recovery those injured parties could obtain under the Clarendon policy would be $50,000, the per accident limit.
In Matter of Allstate, six claimants were occupants of a vehicle injured in a car accident. The driver of the non-offending vehicle had an insurance policy issued by Allstate. The offending vehicle was insured by non-party GMAC Insurance. The GMAC policy provided a coverage amount of $ 50,000 per accident and $ 25,000 per person. GMAC paid $ 25,000 to the driver of the struck vehicle and $ 5,000 to each of the five other claimants, thereby totaling the $ 50,000 maximum coverage amount per accident.
Similarly, in Matter of Clarendon, four claimants were riding in a vehicle struck by an offending vehicle insured by non-party Progressive Northwestern Insurance Company. After accepting liability for the accident, Progressive paid out of its $ 50,000 per accident coverage $ 15,000 each to three of the claimants and $ 5,000 to the fourth claimant, thereby totaling its $ 50,000 cap per accident. In both cases, the owners of the non-offending vehicles in which claimants rode had contracted and paid for an insurance plan providing for SUM coverage. Claimants, in both cases, sought SUM coverage for the inadequately recompensed injured persons, but Allstate and Clarendon, respectively, denied their claims.
"a motor vehicle . . . results in bodily injury to an insured, and for which . . . there is bodily injury liability insurance coverage . . . applicable to such motor vehicle at the time of the accident, but . . . the amount of such insurance coverage . . . has been reduced, by payments to other persons injured in the accident, to an amount less than the third-party bodily injury liability of this policy" (see 11 NYCRR § 60-2.3 [f] [3] [c] [3] [ii]).
The majority concludes that co-vehicle occupants are not "other persons injured in the accident" by reading into the regulation a meaning excluding co-claimants as "other persons" and classifying them as "insureds." Co-claimants, however, meet all of the criteria required by the plain language of the regulation to trigger SUM coverage: they are indeed injured parties in a car accident; the drivers/owners of the vehicles had bodily injury liability coverage; and claimants' coverage was reduced by payments made to co-claimants —- "other persons." Put simply, when a tortfeasor's coverage is reduced by payments to others —- either co-claimants or strangers —- less coverage is available under that policy to compensate them. Accordingly, under Regulation 35-D, claimants must be considered "other persons injured in the accident."
In my view, the language of the SUM provisions is clearly, straightforwardly and unambiguously in favor of triggering SUM coverage for claimants, but to the extent that it can be read as having any ambiguity, the legal consequences of any such lack of clarity in the substance of these insurance contracts should not militate against claimants (see e.g. Matter of Mostow v State Farm Ins. Co., 88 NY2d 321, 325-327 [1996]; Sperling v Great Am. Indem. Co., 7 NY2d 442, 447-449 [1960]; Mutal Life Ins. Co. v Hurni Packing Co., 263 US 167
[1923]). In this regard, insurers have not challenged the regulatory language at issue here at any point as improper, unfair or unauthorized, even when other portions of Regulation 35-D were challenged.
Words of an insurance policy, furthermore, must be viewed from the position of an average person applying common speech (see Buckner v Motor Veh. Acc. Indem. Co., 66 NY2d 211, 213-214 [1985]; Ace Wire & Cable Co. v Atena Cas. & Sur. Co., 60 NY2d 390, 398 [1983]). "The language employed in a contract of insurance must be given its ordinary meaning, such as the average policyholder of ordinary intelligence, as well as the insurer, would attach to it" (City of Albany v Std. Acc. Ins. Co., 7 NY2d 422, 430 [1960]; see also Album Realty Corp. v Am. Home Assur. Co., 80 NY2d 1008, 1010 [1992]). Here, claimants would not have reasonably expected the language "other persons injured in the accident" to refer to any persons other than those —- like themselves —- who were injured in a motor vehicle accident. Nor were the owners of the policies in a position to have their form contracts amended, if they so chose, or to otherwise alter the text of Regulation 35-D.
With that purpose in mind, SUM coverage "is designed to increase the level of protection afforded to policyholders injured by negligent drivers who lack adequate liability insurance" (Matter of Metro. Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487, 492 [1999]). It was devised to mitigate the liability coverage deficit caused by an inadequately insured vehicle —- underinsured vehicles. It was not meant to be restricted to uninsured motorists. Here, where there appears to be a parity between the policies, in a motor vehicle accident involving numerous passengers, the tortfeasor's liability will be dramatically less than the per person coverage under the claimant's policy. SUM coverage was meant to alleviate this liability gap.
In each case: Order affirmed, with costs. Opinion by Judge
Jones. Judges Graffeo, Read, Smith and Pigott concur. Judge Ciparick dissents and votes to reverse in an opinion in which Chief Judge Lippman concurs.
Decided June 4, 2009
1 As Insurance Law § 3420 (f) (2) and Regulation 35-D are in derogation of the common law, they must be narrowly construed.