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[.]"

Petition to Stay SUM Arbitration Denied

SUM – "UNDERINSURED" – SPECIAL PROCEEDING TO STAY ARBITRATION
Matter of Allstate Ins. Co. v. Dawkins
(2nd Dept., decided 6/24/2008)

Dawkins was injured in a three-car accident. After the tortfeasor's insurer, AIG, offered to settle with three victims of the accident (including Dawkins) for the full amount of the tortfeasor's policy, Dawkins demanded arbitration of his claim for SUM (underinsured motorist) benefits from his own insurer, Allstate. Allstate commenced this special proceeding for a permanent stay of that arbitration, asserting that the tortfeasor's vehicle was not "underinsured" because the limits for bodily injury under the AIG policy were the same as those in the Allstate policy. In opposition, Dawkins argued that he was entitled to benefits pursuant to 11 NYCRR 62-1.8(f)(c)(3)(ii) because the coverage available under the AIG policy had been reduced by payments made to other persons injured in the accident to an amount less than the bodily injury liability limit of his policy with Allstate.

In AFFIRMING the Queens County Supreme Court's denial of Allstate's petition for a permanent stay of arbitration, the Second Department held:

Contrary to Allstate's contention on appeal, the Supreme Court properly declined to address its argument, made for the first time in its reply papers, that there was an issue of fact as to whether AIG made any payments on its policy. The function of reply papers is to address arguments made in opposition to the position taken by the movant, not to permit the movant to introduce new arguments or new grounds for the requested relief (citations omitted). * * * Finally, we decline Allstate's invitation, made for the first time on appeal, to reconsider our case law in this area and hold that the Superintendent of Insurance exceeded his authority in promulgating 11 NYCRR 62-1.8(f)(c)(3)(ii) (citation omitted).