SUM Insurer Not Required to Consent to High-Low Arbitration of Insured's Underlying Bodily Injury Claim

SUM – TRIGGER – SUBROGATION AGAINST TORTFEASOR – CONSENT TO HIGH-LOW ARBITRATION
Matter of Ducz v Progressive Northeastern Ins. Co.
(2nd Dept., decided 1/29/2014)

Interesting twist on the consent-to-settle condition of the New York SUM (supplementary uninsured motorists) coverage endorsement.

Before settling with a tortfeasor (at-fault party), SUM claimants must obtain the SUM insurer's consent.  A SUM insurer might not consent because it believes a subrogation claim against the tortfeasor for what it might have to pay in SUM coverage benefits to its insured is viable and collectible.  But what if instead of seeking to settle its bodily injury claim with the tortfeasor, the SUM claimant want to proceed with a high-low arbitration to decide that BI claim?  Must the SUM insurer give or not give its consent to that?  No, says the Second Department:

In a letter dated January 26, 2012, the respondent declined to consent to the arbitration, and indicated that it would not waive its right to subrogation against the alleged tortfeasor. Thereafter, the petitioner commenced the instant proceeding, and moved to compel the respondent to consent to the high-low arbitration and to direct the respondent to proceed to arbitration of the petitioner's claim for SUM benefits. The Supreme Court denied the petitioner's motion.

"As a condition precedent to the obligation of the insurer to pay under the supplementary uninsured/underinsured motorists insurance coverage, the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be [*2]exhausted by payment of judgments or settlements" (Insurance Law § 3420[f][2][A]). Contrary to the petitioner's contention, she failed to establish that she exhausted the alleged tortfeasor's policy through settlement (see Garcia v State Farm Ins. Co., 232 AD2d 488, 489; cf. Matter of State Farm Mut. Auto. Ins. Co. [Perez], 94 AD3d 1314, 1315-1316). Therefore, the Supreme Court properly denied that branch of the petitioner's motion which was to compel the respondent to proceed to arbitration of the petitioner's claim for SUM benefits.

The Supreme Court also properly denied that branch of the petitioner's motion which was to compel the respondent to consent to the high-low arbitration between the petitioner and the alleged tortfeasor's insurer, as that relief may not be sought in a CPLR article 75 proceeding (see CPLR 7503).