Friday, June 13, 2008

Non-Cooperation by Insured In Defense of Personal Injury Action Justified Disclaimer, Leaving Injured Party Uninsured

Matter of Allstate Ins. Co. v. Gardaner
(2nd Dept., decided 6/10/2008)

Allstate brought this CPLR article 75 proceeding to permanently stay the arbitration of its insured's UM claim stemming from an motor vehicle accident the claimant had with a vehicle insured by Travelers. Travelers apparently had disclaimed liability coverage to its named insured and insured driver after the commencement of a personal injury action based on the named insured's breach of the policy's cooperation clause. The plaintiff then presumably made a UM claim to Allstate and demanded arbitration. After a framed hearing, Kings Supreme denied Allstate's petition and ordered that the UM arbitration proceed.

In AFFIRMING the lower court's order, the Second Department held that Travelers was justified in disclaiming insurance coverage for its insured because of his failure to cooperate in the defense of an action against him:
Under the circumstances of this case, where there was no cooperation by the insured, the insured could not be located after a diligent search, and there had been misrepresentations made by the insured when applying for insurance, there was a breach of the cooperation clause (citations omitted). Additionally, inasmuch as the driver of the insured's vehicle supplied the police with a nonexistent address, Travelers' failure to serve a separate disclaimer on the driver did not render the original disclaimer ineffective (see Matter of Allstate Ins. Co. v Rico, 28 AD3d 353, 354).
The key in supporting a disclaimer based on an insured's non-cooperation in the defense of a pending personal injury action is the insurer making and documenting diligent but unsuccessful efforts calculated to bring about the insured's cooperation. In this case, Travelers apparently tossed in the insured's application misrepresentations as yet more evidence of its insured's non-cooperation.

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