When the Insured's Shoes Are Bigger Than the Tortfeasor's Shoes

AUTO – SUM COVERAGE – TRIGGER

Gross v. Travelers Ins.
(4th Dept., 7/24/2020)

Gross had an auto policy with Travelers that was written to afford BI and SUM coverage of $300,000 per person and $300,000 per accident.  He and his wife were injured when their vehicle was rear-ended by a vehicle operated by a nonparty tortfeasor, who was insured by The Hartford under a policy affording BI coverage with limits of $100,000 per person and $300,000 per accident.

In other words, the comparative BI coverage limits were:

                                Insured                                         Tortfeasor
Per person               $300,000                                      $100,000
Per accident            $300,000                                       $300,000

Gross settled his underlying personal injury claim for the tortfeasor's $100,000 per person policy limit, and his wife settled her claim for $16,000. Gross submitted a SUM claim to Travelers, which denied it on the ground that plaintiff's SUM coverage was not triggered because the tortfeasor's $300,000 in per accident BI coverage was not less than Gross's $300,000 in per accident BI coverage. Supreme Court agreed, and granted Travelers' motion to dismiss the complaint pursuant to CPLR 3211(a)(1) on that ground.  Gross appealed and the Fourth Department REVERSED, holding:

"Insurance Law § 3420(f)(2) was enacted to allow an insured to obtain the same level of protection for himself [or herself] and his [or her] passengers which he [or she] purchased to protect himself [or herself] against liability to others'" (Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 686 [1994], quoting Mem of St Exec Dept, 1977 McKinney's Session Laws of NY at 2446). It is well settled that, "[u]nder Insurance Law § 3420(f)(2), an insured's [SUM] coverage is triggered when the limit of the insured's bodily injury liability coverage is greater than the same coverage in the tortfeasor's policy" (id. at 684). More particularly, when determining whether SUM coverage is triggered, "[t]he necessary analytical step . . . is to place the insured in the shoes of the tortfeasor and ask whether the insured would have greater bodily injury coverage under the circumstances than the tortfeasor actually has" (id. at 687), which "requires a comparison of each policy's bodily injury liability coverage as it in fact operates under the policy terms applicable to that particular coverage" (id. at 688).  

Here, a comparison of the two policies at issue, in light of the circumstances of this case, demonstrates that plaintiff would be afforded greater coverage under his policy than under the tortfeasor's policy. The tortfeasor's policy would have provided plaintiff with only $100,000 of coverage for bodily injury, whereas plaintiff's policy would have provided him with up to $300,000 of coverage for bodily injury. Although plaintiff's SUM benefits would be reduced by the amount paid to his wife under the policy's $300,000 per accident maximum, he is still afforded more coverage under his policy than under the tortfeasor's policy because the bodily injury limit for an accident in which two people are injured would be $200,000 under the tortfeasor's policy, which is less than the coverage afforded by plaintiff's policy. Consequently, the SUM provision of plaintiff's policy was triggered (see Insurance Law § 3420[f][2][A]; Matter of Government Empls. Ins. Co. v Lee, 120 AD3d 497, 498-499 [2d Dept 2014]; Jones v Peerless Ins. Co., 281 AD2d 888, 889 [4th Dept 2001]).

Okay, you SUM savants.  What's the dispositive difference between the comparative coverage limits in this case and the comparative coverage limits in the seminal, controlling case of Prudential Prop. and Cas. Co. v. Szeli?  Hint: it has to do with swapping the headings in the above table.

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).

It's When the Alleged Harm, Not the Alleged Negligence, Occurs that Triggers Coverage Under an Occurrence-Based Business Liability Policy

CGL – TRIGGER OF COVERAGE – OCCURRENCE – EMOTIONAL DISTRESS CLAIMS
Empire State Shipping Serv., Ltd. v Hanover Ins. Co.
(1st Dept., decided 11/1/2011) 

Interesting trigger of coverage case. The insured plaintiff allegedly mishandled a corpse, but the deceased's mother did not learn of the mishandling of her son's remains until the fall of 2005, more than two years after the plaintiff had cancelled its businessowners insurance policies with Hanover.  The mother sued the plaintiff in an underlying action, alleging in several causes of action that plaintiff's negligence cause her to suffer "severe pain and suffering, severe emotional distress and harm, financial or economic loss, including but not limited to, present and future lost wages, and other damages."  The plaintiff tendered the complaint to Hanover for coverage presumably based on the fact that its alleged negligence occurred during the period of one or more of its business liability policies with Hanover.

Hanover declined coverage because the complaint alleged harm that occurred well after the plaintiff's policies were cancelled, and the insured commenced this declaratory judgment action.  The Supreme Court, Bronx County (Edgar G. Walker, J.) granted Hanover's cross motion for summary judgment, dismissing the complaint.

In unanimously AFFIRMING the motion court's order, the Appellate Division, First Department, held:

The Businessowners Policy provides coverage for "bodily injury" but "only if" it is caused by an "occurrence" and the bodily injury "occurs during the policy period." Supreme Court properly determined that the first and second causes of action in the underlying action, which allege negligent and intentional infliction of emotional distress, do not fall within the scope of "bodily injury" because the earliest that harm is alleged to have occurred is in the fall of 2005, when the plaintiff in the underlying action learned of the alleged mishandling of her son's remains. This was over two years after plaintiff Empire cancelled its policies with defendant, effective June 20, 2003 (see Melfi v Mount Sinai Hosp., 64 AD3d 26 [2009]) .

While we agree with plaintiffs that Supreme Court should not have characterized the only damages alleged in the underlying action as emotional distress, this error was harmless because coverage would not have been triggered in any event. The only causes of action for which this error could have triggered coverage are the third and fifth causes of action for negligence and negligent misrepresentation. It is alleged that the plaintiff in the underlying action "was caused, and shall in the future be caused, to suffer severe pain and suffering, severe emotional distress and harm, financial or economic loss, including but not limited to, present and future lost wages, and other damages." While these causes of action may contain allegations that Empire was negligent during the policy period, there is no allegation that the plaintiff in the underlying action suffered "bodily injury" during the policy period.

New York Court of Appeals Rules that Co-Occupants of Car May Not Reduce the Liability Limits of Offending Vehicle By Payments to Other Co-Occupants to Trigger SUM Coverage

SUM – TRIGGER – INSURANCE LAW § 3420(F)(2)(A) – REGULATION 35-D
Matter of Allstate Ins. Co. v. Rivera
(Ct. Apps., decided 6/4/2009)

New York Insurance Law § 3420(f)(2)(A) provides:

Any [automobile insurance] policy shall, at the option of the insured, also provide supplementary uninsured/underinsured motorists [SUM] insurance for bodily injury, in an amount up to the bodily injury liability insurance limits of coverage provided under such policy . . . [SUM] insurance shall provide coverage . . . if the limits of liability under all . . . insurance policies of another motor vehicle liable for damages are in a lesser amount than the bodily injury liability insurance limits of coverage provided by such policy. . . . As a condition precedent to the obligation of the insurer to pay under the [SUM] insurance coverage, the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgments or settlements.

In this case, the Court of Appeals reviewed appeals regarding two losses and sets of SUM claims:

Mercado (Allstate) with $25,000/$50,000 BI & SUM coverages -- Driver and 5 passengers injured by
Rodriguez (GMAC) with $25,000/$50,000 BI coverage
GMAC paid $25,000 to Mercado and $5,000 to each of 5 passengers.
Five passengers sought SUM coverage from Allstate.
Allstate denied SUM coverage to all passengers based on lack of trigger.

Nunez (Clarendon) with $25,000/$50,000 BI & SUM coverages -- Driver, wife and 2 children injured by
Tortfeasor (Progressive) with $25,000/$50,000 BI coverage
Progressive paid $15,000, $15,000, $15,000 and $5,000 to the four claimants.
Four claimants sought SUM coverage from Clarendon.
Clarendon denied SUM coverage to all claimants based on lack of trigger.

The claimants argued that since each of their recoveries was less than $25,000, SUM coverage was triggered.  In so arguing, they relied on New York Insurance Regulation 35-D, which states that a vehicle is underinsured for purposes of triggering SUM coverage where:

... a motor vehicle ... results in bodily injury to an insured, and for which ....  (3) there is bodily injury liability insurance coverage ... applicable to such motor vehicle at the time of the accident, but ... (ii) the amount of such insurance coverage ... has been reduced, by payments to other persons injured in the accident, to an amount less than the third-party bodily injury liability of this policy (see 11 NYCRR § 60-2.3 [f] [I] [c] [3] [ii]). 

The SUM claimants demanded arbitration, and Allstate and Clarendon each commenced a CPLR article 75 proceeding for a permanent stay of arbitration.  In both cases, the SUM claimants argued that SUM coverage was triggered under Insurance Department regulation 11 NYCRR § 60-2.3 (f) (the prescribed New York supplementary uninsured/underinsured motorists coverage endorsement).  The Appellate Division ruled for petitioner insurers and permanently stayed arbitration in both cases. The Court of Appeals granted the SUM claimants in Matter of Allstate and Matter of Clarendon leave to appeal, and in a 5-2 decision, AFFIRMED in both cases.

In an opinion written by Judge Jones, the majority reasoned that since they were all "insureds" for SUM coverage purposes, co-occupants of a single vehicle were not "other persons" within the meaning of § 60-2.3(f)(I)(c)(3)(ii):

Each co-occupant in the covered vehicles contends that he or she should be allowed to deduct the payments made to other co-occupants, thereby reducing the tortfeasor's bodily injury liability coverage to an amount less than the coverage limits on their vehicle, triggering SUM coverage. The SUM claimants therefore argue that co-occupants constitute "other persons" under the endorsement, even though co-occupants are insureds under the policy. We are unpersuaded. 

The "payments to other persons" that may be deducted from the tortfeasor's coverage limits for purposes of rendering the tortfeasor "uninsured" under a SUM endorsement do not encompass payments made to anyone who is an insured under the endorsement. It is important to note that the phrase "other persons" is used elsewhere in the endorsement to denote persons other than those insured under the policy. The Notice and Proof of Claim condition directs that "the insured or other person making claim" shall give written notice of claim "under this SUM coverage" (11 NYCRR § 60-2.3 [f] [III] [Condition 2]). It is evident that, in the phrase "the insured or other person," the reference to "other person" means someone who is not "the insured." As each claimant here falls within the endorsement's definition of an "insured," which encompasses all passengers in the covered vehicle, claimants are not "other person[s]." Insureds are therefore able to reduce the coverage limits of the tortfeasor's policy only when payments made under the tortfeasor's policy are to individuals — such as occupants of the tortfeasor's vehicle, injured pedestrians or those operating a third vehicle — not covered under the SUM endorsement. This guarantees that those who have purchased SUM coverage will receive the same recovery they have made available to third parties they injure — but no more.

The position of the SUM claimants and the dissent notwithstanding, this is the only construction that is consistent with the plain language of Insurance Law § 3420, the enabling legislation that Regulation 35-D must conform to, and the core principle underlying SUM coverage — that insureds can never use a SUM endorsement to obtain a greater recovery for themselves than is provided under the policy to third parties injured by the insureds (see Raffellini, 9 NY3d at 203-204; Mancuso, 93 NY2d at 492; Szeli, 83 NY2d at 687). To demonstrate this principle, we need only look at what would occur in Matter of Clarendon were we to adopt the claimants' position. The four members of the Nunez family received $50,000 under the tortfeasor's policy and, by each claimant characterizing the other three family members as "other person[s]," the family now seeks to obtain an additional $50,000 under the SUM coverage provided in their own policy, for a total recovery of $100,000. Yet, if the Nunez vehicle was operated negligently, causing an accident that injured four pedestrians, the total recovery those injured parties could obtain under the Clarendon policy would be $50,000, the per accident limit.

Therefore, reading Insurance Law § 3420 (f) (2), our well-settled interpretation of this statute and Regulation 35-D together, we hold that SUM coverage is not available (that is, SUM coverage cannot be triggered) because (1) the bodily injury liability insurance coverage limits provided under the respective tortfeasors' policies were equal to the third-party bodily injury liability limits of the Allstate and Clarendon policies, (2) the payments made to the SUM claimants did not reduce the amount of the bodily injury insurance coverage provided under the tortfeasors' policies to "an amount less than the third-party bodily injury liability limit of [the Allstate and Clarendon policies]" (11 NYCRR § 60-2.3[f][I][c][3][ii]) and (3) allowing such additional coverage would provide an insured/policyholder with more coverage than that provided to an injured third party under his or her policy. 

In her two-judge dissent, Judge Ciparick asserted that Regulation 35-D's plain language, history and the basic purpose of the SUM coverage supported the alternate conclusion that co-occupants could and should be considered "other persons injured in the accident" within the meaning of 60-2.3(f)(I)(c)(3)(ii), entitled to reduce the tortfeasor's bodily injury limits by payments made to another co-occupants in order to trigger SUM coverage.

SUM Not Triggered -- Comparison of Combined Single Limit to Split Limits

SUM – TRIGGER – STAY OF SUM ARBITRATION
Matter of Automobile Ins. Co. of Hartford v. Ray
(2nd Dept., decided 5/13/2008)

I feel like it's math class and we're doing word problems every time I review a SUM trigger question or case. There's nothing new in this Second Department decision, but it's a good review of SUM (Supplementary Uninsured Motorists a/k/a underinsured motorists) coverage trigger rules when comparing a combined single limit (CSL) policy to a split limits policy.

Question:

Ray, Roberts and Gigante were occupants of Gigante's vehicle, which was insured by AICH s/h/a (sued herein as) Travelers under a PAP (personal auto policy) with a $300,000 CSL (combined single limit) for both BI (bodily injury) and PD (property damage). The Gigante PAP also afforded $300,000 in SUM coverage per person/per accident.

The Gigante vehicle collided with a vehicle being driven by Woods (the tortfeasor), which was insured under a PAP with split BI liability limits of $100,000 per person/$300,000 per accident. That policy afforded PD liability coverage in addition to the BI limits (probably $50,000 or $100,000 per accident, although the decision does not say).

The tortfeasor's insurer paid $100,000 to Ray, $100,000 to Roberts, and $100,000 to Gigante, exhausting its BI liability limits. Ray made a claim for and then demanded arbitration of what she contended was $200,000 in available SUM coverage - the difference between the $300K Gigante PAP CSL and the $100K she had received from the tortfeasor's PAP insurer.

Is there a SUM trigger?

Answer:

No, said the Second Department, REVERSING the lower court's denial of AICH's petition to permanently stay Ray's SUM arbitration.

Since the Gigante policy's $300K CSL includes PD, the $300K per accident BI liability limits of the tortfeasor's policy were not less than the BI liability limits of Gigante policy.

In a multiple-victim accident, the Gigante policy would provide a total of $300K in coverage for BI less any amount payable for PD. By contrast, the tortfeasor's policy would provide $300K for BI plus any amount payable for property damage. Thus, the tortfeasor is not underinsured for purposes of Insurance Law § 3420(f)(2)(A).

Therefore, $300,000 BI/PD CSL < $100,000 BI person/$300,000 BI accident/$100,000 PD accident. No SUM trigger.