SUM of the Parts Not Needed to Pursue a Whole SUM Claim

AUTO – SUM – EXHAUSTION OF TORTFEASORS' POLICY LIMITS – ACQUIESCENCE TO SETTLEMENT – STAY OF ARBITRATION
Matter of Hertz Claim Mgt. Corp. v. Kulakowich
(2nd Dept., decided 7/15/2008)

Two-car accident. Driver of Car 2, the tortfeasor, was not its owner (owner's auto policy would afford primary BI liability coverage; driver's policy would afford excess coverage).

Question: Must plaintiff in Car 1 exhaust the BI liability coverage limits of both the owner and the driver of Car 2 to pursue SUM coverage under his own policy or just the owner's limits? Answer: Just the owner's.

In REVERSING Westchester Supreme's granting of petitioner's application for a permanent stay of that SUM arbitration, the Second Department held that the insured must exhaust only the owner's limits:

It is undisputed that the petitioner's insured exhausted, through settlement, the bodily injury policy limits under the policy of the owner of the offending vehicle, which was less than the liability coverage provided under the petitioner's policy. The petitioner's insured was not required to exhaust the liability coverage limits under a separate insurance policy of the operator of the offending vehicle prior to pursuing a claim for underinsured motorist benefits from the petitioner (see Matter of Liberty Mut. Ins. Co. v Doherty, 13 AD3d 629).

Hertz Claim Management apparently also denied SUM coverage based on the insured claimant's alleged failure to notify it of the underlying settlement. In rejecting that defense, the Second Department ruled that "the petitioner's failure to respond to a letter notifying it of an offer to settle for the policy limits of the owner of the offending vehicle and affording it the opportunity to consent to or reject such offer may be deemed an acquiescence to the offer to settle[.]"