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Allstate Insurance Co. v. Rivera

June 4, 2009

IN THE MATTER OF ALLSTATE INSURANCE COMPANY, RESPONDENT,
v.
NYDIA RIVERA, ET AL., APPELLANTS.
IN THE MATTER OF CLARENDON NATIONAL INSURANCE COMPANY, RESPONDENT,
v.
FRANCISCO NUNEZ, SR., ET AL., APPELLANTS.



The opinion of the court was delivered by: Jones, J.

This opinion is uncorrected and subject to revision before publication in the New York Reports.

At issue in both of these appeals is whether supplementary uninsured/underinsured motorists (SUM) coverage was triggered. In both appeals, we conclude that it was not.

In the first appeal, Allstate Insurance Company issued an automobile insurance policy to Petra Mercado that provided bodily injury liability and SUM coverage of $25,000 per person/$50,000 per accident. In July 2005, while the policy was in effect, Mercado and five passengers in her car were injured when they were struck by a vehicle driven by Nilza Rodriguez and insured by GMAC Insurance Company, which provided the same bodily injury liability coverage as the Allstate policy. GMAC tendered its coverage limit of $50,000, paying $25,000 to Mercado and $5,000 to each of her five passengers. Subsequently, the five passengers sought SUM benefits under the Allstate policy. By letter dated February 20, 2007, Allstate denied SUM coverage, stating that "[s]ince the $50,000 liability policy of Nilza Rodriguez is an offset to our Uninsured Motorist coverage, we will not be able to honor any claims for Uninsured Motorist coverage under [the Allstate] policy."

In the second appeal, Clarendon National Insurance Company issued an automobile policy to Francisco Nunez with bodily injury liability and SUM coverage of $25,000 per person/$50,000 per accident. In June 2001, while the policy was in effect, Nunez, his wife, and their two children were injured when they were struck by a vehicle insured by Progressive Northwestern Insurance Company, which provided the same liability coverage as the Clarendon policy. Progressive tendered its policy limit of $50,000, paying $15,000 each to three of the family members and $5,000 to the fourth family member. The Nunez family then sought SUM benefits under the Clarendon policy. By letter dated October 7, 2005, Clarendon denied SUM coverage, stating that "[s]ince the amount the four claimants will receive from Progressive ($50,000) is equal to the SUM limits of the Clarendon policy ($50,000)[,] the four claimants are not entitled to receive any SUM benefits."

The SUM claimants under the Allstate and Clarendon policies demanded arbitration. Allstate and Clarendon (petitioner insurers) each commenced a CPLR article 75 proceeding for a permanent stay of arbitration. In both cases, the SUM claimants (respondents) argued that SUM coverage was triggered under Insurance Department regulation 11 NYCRR § 60-2.3 (f).

The Appellate Division ruled for petitioner insurers and permanently stayed arbitration in both cases. We granted the SUM claimants in Matter of Allstate and Matter of Clarendon leave to appeal, and now affirm in both cases.

Insurance Law § 3420 provides, in pertinent part: "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" (Insurance Law § 3420 [f] [2] [A] [emphasis added]). The plain language of Insurance Law § 3420, therefore, provides that SUM coverage is only triggered where the bodily injury liability insurance limits of the policy covering the tortfeasor's vehicle are less than the third-party liability limits of the policy under which a party is seeking SUM benefits.

This statute "calls for a facial comparison of the policy limits without reduction from the judgment of other claims arising from the accident" (Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 686 [1994] [held that "underinsured motorist 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"]). Further, section 3420 (f) (2) "was enacted to allow policyholders to acquire the same level of protection for themselves and their passengers as they purchased to protect themselves against liability to others" (Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso (93 NY2d 487 [1999], citing Mem of State Executive Dept, 1977 McKinney's Session Laws of NY, at 2445, 2446; see also Raffellini v State Farm Mutual Automobile Ins. Co., 9 NY3d 196, 203-204 [2007]; Szeli, 83 NY2d at 685-686).

The Legislature may authorize an administrative agency "to fill in the interstices in the legislative product by prescribing rules and regulations consistent with the enabling legislation" (Matter of Medical Socy. of State of NY v Serio, 100 NY2d 854, 865 [2003], quoting Matter of Nicholas v Kahn, 47 NY2d 24, 31 [1979]). "In so doing, an agency can adopt regulations that go beyond the text of that legislation, provided they are not inconsistent with the statutory language or its underlying purposes" (Matter of General Elec. Capital Corp. v New York State Div. of Tax Appeals, Tax Appeals Trib., 2 NY3d 249, 254 [2004]). "A duly promulgated regulation that meets these criteria has the force of law" (Raffellini, 9 NY3d at 201). However, "if [a] regulation runs counter to the clear wording of a statutory provision, it should not be accorded any weight" (Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459 [1980] [citation omitted]). As relevant here, the Legislature has vested the Superintendent of Insurance with "broad power to interpret, clarify, and implement the legislative policy" by promulgating regulations (Medical Socy., 100 NY2d at 863-864, quoting Ostrer v Schenck, 41 NY2d 782, 785 [1977]).

In 1992, the Superintendent of Insurance promulgated Insurance Department Regulation 35-D, codified at 11 NYCRR § 60-2, which requires that "[e]very SUM endorsement issued shall be the [SUM] Endorsement prescribed by subdivision (f) of this section" (11 NYCRR 60-2.3 [c]).*fn1 Under Regulation 35-D, the term "insured" means:

(1) you, as the named insured and, while residents of the same household, your spouse and the relatives of either you or your spouse;

(2) any other person while occupying:

(i) a motor vehicle insured for SUM under this policy; or

(ii) any other motor vehicle while being operated by you or ...


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