Willful and Avowed Obstruction -- SUM Arbitration Not Stayed for Claimant's Mistaken Refusal to Submit to Second IME

AUTO – SUM – MULTIPLE IMEs – COOPERATION
Matter of New York Cent. Mut. Fire Ins. Co. v. Bradfield
(3rd Dept., decided 4/9/2009)

Claimant was injured while a passenger in a one-car accident in January 2006.  She was covered under her parents' policy with New York Central Mutual, which included a UM/SUM endorsement.  She settled her personal injury claim against the tortfeasor with NYCM's consent, and submitted to an IME requested by NYCM in January 2007. She refused, through counsel, however, to appear for a second IME in both November 2007 and April 2008, claiming that NYCM was not entitled to multiple examinations.  She subsequently demanded arbitration of her SUM claim, and NYCM commenced this special proceeding to stay that arbitration based on its contention that claimant had violated a condition precedent to coverage by refusing to submit to a second IME.  Ulster Supreme denied the application and NYCM appealed.

The SUM endorsement at issue required claimant to "submit to physical examinations by physicians we select when and as often as we may reasonably require."  When NYCM scheduled claimant's first IME in January 2007, her attorney advised NYCM that claimant's treatment was ongoing and suggested that the IME await the completion of treatment. Claimant's attorney further indicated that if NYCM insisted upon an IME at that time, claimant would not participate in a second IME.  According to the claimant's attorney, this refusal was based on his incorrect belief that NYCM was not entitled to more than one IME.

In AFFIRMING the motion court's denial of NYCM's petition for a stay of the SUM arbitration, the Third Department agreed with the lower court that NYCM had not met its

heavy burden of showing "that it acted diligently in seeking to bring about [respondent's] co-operation; that the efforts employed by [petitioner] were reasonably calculated to obtain [respondent's] co-operation; and that the attitude of [respondent], after [her] co-operation was sought, was one of 'willful and avowed obstruction'" (Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 168-169 [1967], quoting Coleman v New Amsterdam Cas. Co., 247 NY 271, 276 [1928] [citations omitted]; see Matter of St. Paul Travelers Ins. Co. [Kreibich D'Angelo], 48 AD3d 1009, 1010 [2008]). 

According to the decision, when claimant's attorney received NYCM's show cause application on April 15, 2008 and became aware that the included SUM endorsement permitted multiple physical examinations, he contacted NYCM's attorney and advised him that the claimant was willing to submit to the second IME, which had been rescheduled to April 21, 2008.  NYCM's attorney, however, declined the offer and proceeded with the application to stay the SUM arbitration based on the claimant's asserted breach of the policy's IME condition.

Characterizing the claimant's attorney's mistaken assumption that NYCM was not entitled to multiple IMEs and his failure to request a copy of the policy "no more unreasonable than [NYCM]'s failure to offer a copy of the policy in the face of [his] obvious misunderstanding", the Third Department held:

In our view, even assuming that petitioner acted diligently and employed reasonable efforts to secure respondent's cooperation, Supreme Court properly determined that petitioner failed to demonstrate that respondent's lack of cooperation rose to the level of willful and avowed obstruction (see Baust v Travelers Indem. Co., 13 AD3d 788, 790 [2004]; Ingarra v General Acc./PG Ins. Co. of N.Y., 273 AD2d 766, 767 [2000]). Although respondent's earlier refusals to submit to a second examination were unequivocal, there is no evidence that either she or her attorney was in possession of the policy and, therefore, aware of the provision permitting multiple examinations ^[FN2]. Furthermore, respondent did submit to one physical examination, answered questions under oath for three hours and provided petitioner with copies of medical records, as well as numerous authorizations for healthcare providers, employers and insurance companies. Once she was aware of her obligation to submit to a second physical examination, she immediately indicated her willingness to do so. Overall, there is ample evidence that respondent's attitude was one of cooperation and that her conduct was not an unreasonable attempt to obstruct discovery (see Baust v Travelers Indem. Co., 13 AD3d at 790). Therefore, Supreme Court properly denied petitioner's application to stay arbitration. 

The "willful and avowed obstruction" or "Thrasher" standard has always been a high one to prove for insurers in New York.  Conceptually speaking, bona fide ignorance of a policy condition or requirement could, in the right circumstances, be mutually exclusive of willfulness.  In this case, there certainly was "avowed" obstruction -- in that claimant's counsel made his client's refusal to attend a second IME clear and unequivocal -- and yet seemingly missing, at least in the opinion of the motion and appellate courts, was the claimant's willfulness, given her attorney's mistaken assumption or belief that the insurance policy did not permit more than one IME.  If faced with the appearance of such mistake, misunderstanding or ignorance, insurers might consider quoting the policy conditions or providing a copy of the applicable endorsement, to avoid any dispute over what the policy obliges the claimant to do.  Especially in the Third Department.