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Winifred K. Day, Plaintiff-Respondent v. One Beacon Insurance

June 29, 2012

WINIFRED K. DAY, PLAINTIFF-RESPONDENT,
v.
ONE BEACON INSURANCE, DEFENDANT-APPELLANT.



Appeal from an order of the Supreme Court, Erie County (Russell P. Buscaglia, A.J.), entered July 29, 2011 in a breach of contract action.

Day v One Beacon Ins.

Decided on June 29, 2012

Appellate Division, Fourth Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

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

PRESENT: SCUDDER, P.J., SMITH, FAHEY, LINDLEY, AND MARTOCHE, JJ.

The order, insofar as appealed from, granted plaintiff's motion to dismiss defendant's first through fifth affirmative defenses and denied defendant's cross motion for summary judgment dismissing the amended complaint.

It is hereby ORDERED that the order insofar as appealed from is unanimously reversed on the law without costs, plaintiff's motion is denied, defendant's cross motion is granted and the amended complaint is dismissed.

Memorandum

Plaintiff commenced this breach of contract action seeking supplementary underinsured motorist (SUM) coverage under an automobile insurance policy issued by defendant. Plaintiff was a passenger in a Ford Windstar van driven by her husband that collided with a pickup truck that had failed to yield the right-of-way at an intersection. Upon impact, plaintiff's car seat detached from the floor of the minivan and plaintiff became airborne as the vehicle spun out of control. She allegedly sustained severe and permanent injuries as a result of the accident. The driver of the pickup truck (motorist tortfeasor) had liability coverage of $100,000. The minivan in which plaintiff was riding was insured by defendant pursuant to a policy with plaintiff and her husband, with SUM coverage of $500,000. Plaintiff timely placed defendant on notice of her potential SUM claim, and commenced the underlying personal injury action against, inter alia, the motorist tortfeasor, sounding in negligence, and against Ford Motor Company (Ford), sounding in strict products liability. Following mediation, the motorist tortfeasor's insurer offered to settle for the policy limits of $100,000, and Ford, which was self-insured, offered to settle for $475,000.

In the meantime, plaintiff commenced the instant action, which the parties had agreed to hold in abeyance pending settlement discussions in the underlying action. Upon learning of plaintiff's potential settlement with the motorist tortfeasor and Ford, defendant wrote to plaintiff and her attorney "to remind" plaintiff that, pursuant to the release or advance and subrogation protection conditions of the SUM endorsement, settlement of plaintiff's claims against the motorist tortfeasor and Ford without defendant's consent would vitiate plaintiff's right to SUM coverage. Shortly thereafter, plaintiff formally notified defendant of the settlement offers and stated that she intended to accept the offers unless defendant advanced the full amount of the settlement offers, i.e., $575,000, within 30 days. Defendant responded that, pursuant to the release or advance condition of the SUM endorsement, it was obligated to advance only the $100,000 limit of the motorist tortfeasor's policy and that, pursuant to the release or advance and subrogation conditions of that endorsement, plaintiff could not thereafter settle her action against the motorist tortfeasor. Defendant further responded that those conditions further prohibited plaintiff from settling her action against Ford without defendant's consent, which it refused to provide. After its initial response to plaintiff, defendant repeatedly offered to advance the $100,000 limit of the motorist tortfeasor's policy, but plaintiff rejected those offers and proceeded to settle her underlying action against the motorist tortfeasor and Ford for $100,000 and $475,000, respectively, issuing general releases to both parties.

Plaintiff then pursued this action seeking, inter alia, $400,000 in SUM coverage from defendant, and she thereafter moved to dismiss defendant's affirmative defenses of failure to satisfy the release or advance and subrogation provisions of the SUM endorsement. Defendant cross-moved for summary judgment dismissing the amended complaint. We agree with defendant that Supreme Court erred in denying its cross motion.

Exclusion 1 of the SUM endorsement provides that, except as provided by Condition 10, "if [an] insured . . . without [defendant's] written consent, settles any lawsuit against any person or organization that may be legally liable for such injury," coverage is excluded. Condition 10, the standard "release or advance" condition, provides that "[i]n accidents involving the insured and one or more negligent parties, if such insured settles with any such party for the available limit of the motor vehicle bodily injury liability coverage of such party, release may be executed with such party after thirty calendar days actual written notice to [defendant], unless within this time period [defendant] agree[s] to advance such settlement amounts to the insured in return for the cooperation of the insured in [defendant's] lawsuit on behalf of the insured . . . An insured shall not otherwise settle with any negligent party, without [defendant's] written consent, such that [defendant's] rights would be impaired."

Finally, Condition 13, the standard subrogation provision of the policy, provides that, where defendant makes a payment under the SUM endorsement, it has "the right to recover the amount of this payment from any person legally responsible for the bodily injury or loss of the person to whom, or for whose benefit, such payment was made to the extent of the payment." It further provides that "[t]he insured . . . must do whatever is necessary to transfer this right ...


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