In New York, uninsured/underinsured motorist coverage “does not function … to fully compensate … insureds for their injuries.” Weiss v. Tri-State Consumer Ins. Co., 98 A.D.3d 1107, 951 N.Y.S.2d 191 (2d Dep’t 2012). UIM coverage is subject to limits, and those limits are generally reduced by the amount of coverage available to the person who caused the injury. Standard UIM endorsements also provide that coverage “shall not duplicate” payments the insured receives from other sources. But now there are limits to the limits. Last month, in GEICO v. Tramontozzi Sherlock, No. 2015-04208 (N.Y. App. Div., 2d Dep’t, June 8, 2016), an appellate court appears to have overruled the 4-year-old Weiss case, holding that a non-duplication provision will not prevent an insured “from seeking full compensation by combining partial recoveries from several tortfeasors.” In other words, payments from sources other than the underinsured motorist will not reduce UIM benefits, unless the total amount of all payments exceeds the amount of the injury.
Peter Sherlock died in a head-on collision with a car that had crossed into his traffic lane while being pursued by the police. Mr. Sherlock’s automobile insurance policy, issued by GEICO, included a supplemental uninsured/underinsured motorist (SUM) endorsement, with a $250,000 per-person limit of liability. The fugitive’s insurance had a per person liability limit of $50,000.
Mr. Sherlock’s widow, the administrator of his estate, brought a personal injury action against the underinsured driver, the police department of Old Brookville, New York, an individual police officer and several municipal entities. With GEICO’s consent, the claim against the driver was settled for his $50,000 policy limit. The estate settled its claims against the remaining defendants for $425,000, which was payable under the police department’s public risk professional liability policy.
The Insurance Claim
Mr. Sherlock’s estate also submitted a claim for benefits under his SUM endorsement. In denying that claim, the insurer relied on two conditions to the endorsement.
Condition 6, “Maximum SUM Payments,” limited any recovery to the difference between (i) the limit of the SUM endorsement and (ii) “[t]he motor vehicle bodily injury liability insurance or bond payments received … from or on behalf of all persons that may be legally liable for the … [insured’s] injury.” The insurer contended that this condition reduced the SUM benefit available to Mr. Sherlock, from $250,000 to $200,000.
Condition 11, “Non-Duplication,” provided, in part:
This 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.
According to the insurer, this condition required that the $200,000 in available benefits be offset by the $425,000 the estate had recovered from the Old Brookville P.D.
The estate sought to arbitrate its claims pursuant to the terms of Mr. Sherlock’s policy. The insurer responded with an action in New York Supreme Court, seeking a permanent stay of the arbitration.
The insurer’s position was based on Weiss v. Tri-State Consumer Ins. Co., supra. Weiss was an action by the administrators of the estates of a couple that was killed in a collision with a drunk driver. The couple’s auto policy had a SUM endorsement with a $500,000 per accident limit. The estate settled a wrongful death action for the $100,000 limit of the negligent driver’s policy, and for $255,000 that was paid from the liability policies of the bar and diner that had served the driver before the fatal accident.
Applying a Non-Duplication condition that was identical to the one at issue in Tramontozzi Sherlock, the Appellate Division held that the available SUM benefit was only $145,000, because any greater payment would “duplicate” the amount recovered from the dram shop defendants. In Tramontozzi Sherlock, the trial court agreed that Weiss was dispositive, and it permanently stayed the arbitration.
The Appellate Ruling
On appeal, the Appellate Division re-affirmed the portions of the Weiss opinion, which stated that
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’
and, therefore, that
SUM coverage does not function as a stand-alone policy to fully compensate the insureds for their injuries.
The court found that Condition 6, the “Maximum Sum Payments” provision, “furthers this policy by setting the maximum SUM benefit as the difference between the SUM endorsement limit and the tortfeasor’s …. policy limit.”
But the court also found that Condition 11, the “Non-Duplication” provision serves a separate and different purpose—safeguarding against duplicate recoveries for the same injuries. According to the Court:
The key to a proper understanding of condition 11 is the recognition that ‘shall not duplicate’ is not aimed at preventing an insured from seeking full compensation by combining partial recoveries from several tortfeasors, but at preventing double recoveries for their bodily injuries. …
In other words, the court found that UIM or SUM coverage addresses disparities in the coverage provided by automobile insurance policies, but does not otherwise affect the parties’ rights:
Presumably, if the [other driver’s] policy had contained the same $250,000 liability limit that [Mr. Sherlock’s] policy provided, [the estate] would have been able to obtain $250,000 from the [other driver’s] insurer as well as the $425,000 from the [police department’s] insurer. [The plaintiff] seeks only … to be in the same position she would have been in had the [other driver] not been underinsured relative to [Mr. Sherlock’s] policy.
Applying this rationale, the Court concluded that the settlement amounts recovered from the police department did not offset coverage under the SUM endorsement. Accordingly, the insured’s estate was entitled to arbitrate the amount of bodily injury damages suffered, and the trial court’s stay was reversed.
The court did not, however, try to explain why its analysis would not also have applied to the facts in the Weiss case. It simply stated:
To the extent that Weiss can be interpreted to require that the amount of SUM coverage [may] be reduced without regard to the actual amount of bodily injury damages suffered, it should no longer be followed.
The Court’s holding can be summed up as follows: SUM or UIM coverage may be reduced by the amount of automobile liability coverage available to an underinsured motorist. Amounts recovered from other sources will not reduce SUM coverage—except to the extent the insured’s total recovery exceeds the total amount of her bodily injury damages.
Establishing the total amount of bodily injury damages, especially in wrongful death cases, can be extremely contentious, but it is now certain to be at the center of SUM coverage litigation.