Bodily Injury Recovery from Non-Motor Vehicle Defendant Reduces SUM Coverage Recovery

SUM – OFFSET FOR BODILY INJURY RECOVERY – NON-DUPLICATION CONDITION – MAXIMUM SUM PAYMENT 
Redeye v. Progressive Ins. Co.
(4th Dept., decided 11/13/2015)

Condition 11 of the prescribed New York Supplementary Uninsured/Underinsured Motorists (SUM) Endorsement (11 NYCRR § 60-2.3[f]) provides

11.  Non-Duplication: This SUM coverage shall not duplicate any of the following: 

(a) benefits payable under workers' compensation or other similar laws;

(b) non-occupational disability benefits under article nine of the Workers' Compensation Law or other similar law;

(c) any amounts recovered or recoverable pursuant to article fifty-one of the New York Insurance Law or any similar motor vehicle insurance payable without regard to fault;

(d) any valid or collectible motor vehicle medical payments insurance; or

(e) any amounts recovered as bodily injury damages from sources other than motor vehicle bodily injury liability insurance policies or bonds.

Plaintiff was a pedestrian who was injured after a vehicle operated by a drunk driver collided with a parked vehicle, which was propelled into plaintiff and two other pedestrians. Plaintiff commenced an action against the driver of the vehicle as well as a fire company that allegedly served the driver alcoholic beverages prior to the accident, and he received a settlement from both, the cumulative total of which exceeded plaintiff's SUM coverage limit with Progressive.

Contending that only his settlement from the vehicle's driver should reduce his SUM recovery, plaintiff claimed SUM coverage benefits from Progressive.  Progressive denied the SUM claim on the ground that plaintiff's SUM coverage was exhausted by the recovery from both the driver and the fire company, prompting plaintiff to commence this action.  Progressive moved for summary judgment, which Supreme Court granted.

In AFFIRMING summary judgment to Progressive, the Appellate Division, Fourth Department, rejected plaintiff's argument that Progressive improperly reduced his SUM coverage by the amount he had received in settlement from the fire company's general liability insurer:

Supreme Court properly granted defendant's motion for summary judgment seeking, inter alia, to dismiss the complaint. Plaintiff does not dispute that the SUM coverage is properly reduced by the amount he recovered from the driver's insurer. He contends, however, that it was improper to reduce the SUM coverage from the amount he received from the fire company under its general liability insurance policy. We reject that contention. Condition 11 (e) of the SUM endorsement under defendant's policy provided that SUM coverage "shall not duplicate . . . any amounts recovered as bodily injury damages from sources other than motor vehicle bodily injury liability insurance policies or bonds." Here, the payment plaintiff received from the fire company's insurer was for bodily injury damages, and thus the amount of SUM benefits available to plaintiff was properly reduced by that amount (see Weiss v Tri-State Consumer Ins. Co., 98 AD3d 1107, 1110-1111).

Condition 6 of the prescribed SUM endorsement also provides:

6.  Maximum SUM Payments: Regardless of the number of insureds, our maximum payment under this SUM endorsement shall be the difference between:

(a) the SUM limits; and

(b) the motor vehicle bodily injury liability insurance or bond payments received by the insured or the insured's legal representative, from or on behalf of all persons that may be legally liable for the bodily injury sustained by the insured. 

The SUM limit shown on the Declarations is the amount of coverage for all damages due to bodily injury in any one accident.3 (The SUM limit shown on the Declarations for “Each Person” is the amount of coverage for all damages due to bodily injury to one person. The SUM limit shown under “Each Accident” is, subject to the limit for each person, the total amount of coverage for all damages due to bodily injury to two or more persons in the same accident).4

Plaintiff also argued that the SUM endorsement of his policy with Progressive was ambiguous because Condition 11 conflicted with Condition 6 of that endorsement.  In rejecting that argument, the appellate court held:

Contrary to plaintiff's contention, the policy is not ambiguous and condition 11 does not conflict with condition 6 of the SUM endorsement (see generally Dean v Tower Ins. Co. of N.Y., 19 NY3d 704, 708; White v Continental Cas. Co., 9 NY3d 264, 267). Condition 6 provides that the maximum payment under the SUM endorsement is the difference between the SUM limit and any payments received from a motor vehicle bodily injury liability policy. It does not state that the difference is "the" SUM payment that is to be given to plaintiff, but rather it states that the difference is the "maximum" payment, which the average insured would understand to mean that it could be further reduced (see generally Dean, 19 NY3d at 708). Condition 6 and condition 11 together resulted in a reduction in the SUM benefits available by the total settlement received by plaintiff in his prior action.

Maximum is not the.  The is not maximum.  Got it.

Second Department Holds that SUM Limit Is To Be Reduced by Recovery from All Tortfeasors

UNDERINSURED MOTORISTS COVERAGE – OFFSET – NON-DUPLICATION PROVISION 
Weiss v. Tri-State Consumer Ins. Co.
(2nd Dept., decided 9/26/2012)

$250,000 per person/$500,000 per accident SUM limits.
Two deaths in insured vehicle.
Drunk driver and two Dram Shop defendants.
Drunk driver's auto insurer pays $100,000 limit to settle.
Dram Shop defendants and their insurers pay $255,000 to settle.
Total settlement of wrongful death action = $355,000.

Question:  What's the recoverable SUM coverage limit?
Answer:  $145,000.

Plaintiffs successfully argued to Supreme Court that the recoverable SUM limit was $400,000 because only the $100,000 settlement amount from the drunk driver's motor vehicle liability insurer was to be deducted from the $500,000 per accident SUM limit.   In REVERSING the Supreme Court's denial of summary judgment to defendant Tri-State, the Second Department reasoned:

The subject policy contained the standard SUM endorsement prescribed by the Superintendent of Insurance in Regulation No. 35-D (11 NYCRR 60-2.3[c], [f]). Two conditions in the endorsement are directly at issue in this appeal. Condition 6 provides:

6. Maximum SUM Payments. Regardless of the number of insureds, our maximum payment under this SUM endorsement shall be the difference between:

a) The SUM limits; and

b) The motor vehicle bodily injury liability insurance or bond payments received by the insured or the insured's legal representative, from or on behalf of all persons that may be legally liable for the bodily injury sustained by the insured.

The SUM limit shown on the Declarations for "Each Person" is the amount of coverage for all damages due to bodily injury to one person. The SUM limit shown under "Each Accident" is, subject to the limit for each person, the total amount of coverage for all damages due to bodily injury to two or more persons in the same accident.

Condition 11 provides:

11. Non-Duplication. This SUM coverage shall not duplicate any of the following:

(a) Benefits payable under workers' compensation or other similar laws; 

(b) Non-occupational disability benefits under article nine of the Workers' Compensation Law or other similar law;

(c) Any amounts recovered or recoverable pursuant to article fifty-one of the New York Insurance Law or any similar motor vehicle insurance payable without regard to fault;

(d) Any valid or collectible motor vehicle medical payments insurance; or

(e) Any amounts recovered as bodily injury damages from sources other than motor vehicle bodily injury liability insurance policies or bonds.

SUM coverage in New York is a converse application of the golden rule; its purpose is "to provide the insured with the same level of protection he or she would provide to others were the insured a tortfeasor in a bodily injury accident" (Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 687; see Matter of Allstate Ins. Co. v Rivera, 12 NY3d 602, 608; Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196, 204; see generally Norman H. Dachs and Jonathan A. Dachs, SUM Insurance Dilemma Hits the Mainstream, NYLJ, Sept. 19, 2012 at 3, col 1). With this limited purpose, SUM coverage does not function as a stand-alone policy to fully compensate the insureds for their injuries (cf. Bauter v Hanover Ins. Co., 247 NJ Super 94, 96-97, 588 A2d 870, 872, cert denied 126 NJ 335, 598 A2d 893). The conditions quoted above make this clear, as do other conditions not directly at issue in this case.

Here, the maximum SUM coverage of the subject policy was $500,000 per accident. The amount payable under that coverage was reduced, under Conditions 6(a) and 6(b), by the $100,000 paid by McGibbon's insurer, inasmuch as that amount constituted a "motor vehicle bodily injury liability insurance . . . payment[ ]" that the plaintiffs received (11 NYCRR 60-2.3 [f]). Further, the Dram Shop claims were settled for a total of $255,000. The Dram Shop recovery constitutes, under Condition 11(e), an amount "recovered as bodily injury damages from sources other than motor vehicle bodily injury liability insurance policies or bonds." Condition 11 does not allow duplicate recovery of such damages. Consequently, under the terms of the SUM endorsement, the plaintiffs' receipt of the Dram Shop recovery reduces, by that same $255,000, the amount payable under the SUM endorsement. The plaintiffs are not penalized by this reduction, since they received the maximum amount for which they are covered under the SUM endorsement: $100,000 from McGibbon's policy, $255,000 from or on behalf of the Dram Shop defendants, and $145,000 from Tri-State.