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SUM Appellate Decision of Note

December 23, 2014
By: Frank Scahill

Q. Driver "A" is a driving car insured under his sister's out-of-state policy which provided SUM benefits of 100/300. The policy specifically excluded from the definition of an "insured" for SUM coverage, any person who is insured for uninsured motor vehicle coverage under another vehicle policy. Driver "A" has his own policy with another carrier which provided SUM Benefits. Can the primary insurance carrier, who insured the vehicle, disclaim coverage in New York for SUM benefits?

A. NO---see Matter of Government Employees Ins. Co. v Johnson (2014 NY Slip Op 08433) decided on December 3, 2014 Appellate Division, Second Department.

"[I]nsurance policies, like all contracts, should be enforced according to their terms unless they are prohibited by public policy, statute or rule" (Liberty Mut. Ins. Co. v. Aetna Cas. & Sur. Co., 168 A.D.2d 121, 131). "If an attempted exclusion is not permitted by law, the insurer's liability under the policy cannot be limited" (Matter of Liberty Mut. Ins. Co. [Hogan], 82 N.Y.2d 57, 60). Here, the exclusion contained in the uninsured motorist coverage endorsement of [the] personal automobile liability policy is not permitted by law. "Insurance Law § 3420(f)(1) requires that every automobile insurance policy contain an uninsured motor vehicle endorsement. Neither that statute nor any regulations applicable to it mentions any exclusions" (Matter of Liberty Mut. Ins. Co. [Hogan], 82 N.Y.2d at 60; cf. 11 NYCRR 60-1.1[c][3][i]; Ohio Revised Code 3937.18). Since the exclusion is "without the approval or protection of the law" (Rosado v. Eveready Ins. Co., 34 N.Y.2d 43, 48), it should not be given effect (see Matter of Liberty Mut. Ins. Co. [Hogan], 82 N.Y.2d at 58; Matter of Progressive Northeastern Ins. Co. v. Yeger, 30 AD3d 524, 525-526). Further, where as here, the policy does not contain a term stating that coverage is limited to the statutory minimum, if such exclusion is found to be invalid, no such limitation will be read into the policy (see Royal Indem. Co. v. Providence Washington Ins. Co. 92 N.Y.2d 653, 659; cf. Connecticut Indem. Co. v. Hines, 40 AD3d 903). Consequently, [the] policy must be read as affording liability up to its full limits."

Read the decision here.

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