In the Matter of the Arbitration between U.S. SPECIALITY INSURANCE CO., Respondent, and FRANK J. DENARDO, Appellant.
Calendar Date: May 2, 2017
Finkelstein & Partners, LLP, Newburgh (George A. Kohl of
counsel), for appellant.
& Mack, LLP, Poughkeepsie (Kimberly Hunt Lee of counsel),
Before: Peters, P.J., McCarthy, Egan Jr., Mulvey and Aarons,
MEMORANDUM AND ORDER
from an order of the Supreme Court (Mott, J.), entered July
12, 2016 in Ulster County, which, among other things, granted
petitioner's application pursuant to CPLR 7503 to
permanently stay arbitration between the parties.
September 26, 2013, respondent, a detective with the Town of
Poughkeepsie Police Department, allegedly sustained certain
injuries when his unmarked police cruiser collided with
another vehicle at an intersection. At the time of the
accident, both respondent and the operator of the other
vehicle were insured under policies issued by the Government
Employees Insurance Company (hereinafter GEICO), and the Town
was covered under an insurance policy issued by petitioner.
On January 14, 2014, respondent submitted a notice of
intention to make a claim for supplementary
uninsured/underinsured motorist (hereinafter SUM) benefits
under the Town's policy . Petitioner acknowledged
receipt of respondent's "potential SUM claim, "
requested certain additional information and advised that any
settlement of respondent's claim against the driver of
the other vehicle would require petitioner's consent.
Respondent subsequently settled that claim (with
petitioner's consent), provided petitioner with requested
medical authorizations and documents and was deposed.
letter dated January 11, 2016, petitioner apprised
respondent's counsel that, consistent with the Court of
Appeals' decision in Matter of State Farm Mut. Auto.
Ins. Co. v Fitzgerald (25 N.Y.3d 799');">25 N.Y.3d 799 ), the police
vehicle that respondent was operating at the time of the
accident was not a "motor vehicle" for purposes of
SUM coverage and, therefore, respondent was not an insured
under the terms of the SUM endorsement. Accordingly,
petitioner advised, should respondent demand arbitration with
respect to his SUM claim, petitioner would seek to
permanently stay such arbitration upon those grounds.
Respondent then served petitioner with a demand for
arbitration and, as promised, petitioner moved by order to
show cause for a permanent stay of arbitration and a
declaration that the policy did not provide coverage for
respondent's SUM claim. Respondent opposed that
application and, among other things, moved for summary
judgment - seeking a declaration that petitioner indeed was
obligated to provide SUM coverage for the subject accident.
Supreme Court granted petitioner's application and denied
respondent's requested relief, prompting this appeal.
crux of respondent's argument upon appeal is that,
notwithstanding the Court of Appeals' decisions in
Fitzgerald and Matter of State Farm Mut. Auto.
Ins. Co. v Amato (72 N.Y.2d 288, 294-295 ), the
policy issued to the Town by petitioner indeed provided SUM
coverage under the circumstances presented here, and, in any
event, petitioner is estopped from disclaiming coverage due
to its two-year delay in doing so. We disagree with both of
these propositions and, therefore, affirm.
endorsement to the Town's insurance policy defines the
term "insured, " in relevant part, as "[a]ny
other person while occupying... [a] motor vehicle insured for
SUM under this policy." The policy does not define the
term "motor vehicle, " but the Court of Appeals has
made clear that, in the absence of a contract provision to
the contrary, the definition of "motor vehicle" set
forth in Vehicle and Traffic Law § 388 (2) controls for
purposes of both uninsured motorist coverage (see Matter
of State Farm Mut. Auto. Ins. Co. v Amato, 72 N.Y.2d at
294-295) and SUM coverage (see Matter of State Farm Mut.
Auto. Ins. Co. v Fitzgerald, 25 N.Y.3d at 808-809).
Inasmuch as "fire and police vehicles" are
expressly excluded from the definition of a motor vehicle
under Vehicle and Traffic Law § 388 (2),  it
necessarily follows that, consistent with the cited cases,
the police vehicle operated by respondent at the time of the
accident did not fall within the scope of the SUM coverage
provided under the Town's policy with petitioner. As the
subject vehicle was not "[a] motor vehicle insured for
SUM under [the] policy, " respondent, in turn, was not a
covered insured under such policy. Thus, petitioner did not
in fact contract to provide SUM coverage to either the Town
or respondent under the circumstances presented here.
effort to circumvent the language employed in the subject SUM
endorsement, the effect of Vehicle and Traffic Law § 388
(2) and the Court's holding in Fitzgerald,
respondent - citing the declarations page for the business
auto coverage portion of the Town's policy and the
designations contained thereon - argues that his unmarked
police vehicle nonetheless qualified as a "covered
auto" for purposes of SUM coverage. In support of this
argument, respondent notes that the policy defines
"[a]uto" as "[a] land motor vehicle,
'trailer' or semitrailer designed for travel on
public roads... or... [a]ny other land vehicle that is
subject to a compulsory or financial responsibility law or
other motor vehicle insurance law where it is licensed or
principally garaged." As reflected on the declarations
page, a covered auto included those autos owned by the Town.
Thus, according to respondent, even if his unmarked police
vehicle is not a "motor vehicle" under Vehicle and
Traffic Law § 388 (2), it nevertheless meets the
definition of a "land vehicle that is subject to a
compulsory or financial responsibility law" and, hence,
qualifies for SUM coverage under the terms of the policy.
flaw in respondent's argument on this point is that, in
defining an "insured" for purposes of SUM coverage,
the SUM endorsement to the policy specifically utilizes the
term "motor vehicle" instead of "auto" or
"covered auto, " and respondent cannot rewrite the
subject policy/SUM endorsement and create coverage that does
not otherwise exist simply by substituting terms and
definitions that are more advantageous to him. To the extent
that respondent argues that the use of these various terms -
auto, covered auto and motor vehicle - create an ambiguity in
the policy that must be construed against petitioner, again,
we disagree. "Although provisions of an insurance policy
drafted by the insurer are generally construed against the
insurer if ambiguous, a policy provision mandated by statute
must be interpreted in a neutral manner consistently with the
intent of the legislative and administrative sources of the
legislation" (Matter of State Farm Mut. Auto. Ins.
Co. v Fitzgerald, 25 N.Y.3d at 804 [citations omitted]).
As petitioner "was required to offer SUM coverage in
compliance with the terms of Insurance Law § 3420 (f)
(2) (A) and Department of Insurance regulations, " the
language employed in the SUM endorsement "must be
interpreted in a neutral manner" (id. at 804).
In short, we agree with Supreme Court that, under the
circumstances presented here, the policy issued by petitioner
did not afford respondent SUM coverage to respondent in the
next contends that, because petitioner failed to disclaim SUM
coverage until two years after he filed his notice of
intention to make a claim, petitioner now is estopped from
doing so. To be sure, where coverage exists under a
particular insurance policy in the first instance and the
carrier unreasonably delays in denying coverage or
disclaiming liability based upon a policy exclusion or
defense, estoppel may apply to prevent the carrier from doing
so - provided the insured can demonstrate that he or she
relied upon the carrier's actions to his or her detriment
and was prejudiced by the carrier's delay in denying or
disclaiming coverage (see Merchants Mut. Ins. Group v
Travelers Ins. Co., 24 A.D.3d 1179, 1182 ;
Mattimore v Patroon Fuels, 103 A.D.2d 981, 982
). That said, where, as here, "the denial of the
claim is based upon lack of coverage, estoppel may not be
used to create coverage regardless of whether or not the
insurance company was timely is issuing its disclaimer"
(Matter of Liberty Mut. Ins. Co. v McDonald, 6
A.D.3d 614, 615 ; see Matter of Worcester Ins. Co.
v Bettenhauser, 95 N.Y.2d 185, 188-189 ;
Zappone v Home Ins. Co., 55 N.Y.2d 131, 135-137
; Nafash v Allstate Ins. Co., 137 A.D.3d 1088,
1089 ). Succinctly stated, "the failure to
disclaim coverage does not create coverage which the policy
was not written to provide" (Zappone v Home Ins.
Co., 55 N.Y.2d at 134), and "a disclaimer is
unnecessary when a claim does not fall within the coverage
terms of [the] insurance policy" (Nafash v Allstate
Ins. Co., 137 A.D.3d at 1089 [internal quotation marks,
brackets and citation omitted]; see Matter of Worcester
Ins. Co. v Bettenhauser, 95 N.Y.2d at 188)
. Applying the cited cases to the
matter before us, it is clear that equitable estoppel is of
no aid to respondent, who was not an insured under the policy
issued by petitioner to the Town (compare General Acc.
Ins. Co. of Am. v Metropolitan Steel Indus., Inc., 9
A.D.3d 254, 254 ). Simply put, inasmuch as respondent
was not an insured under the policy issued by petitioner and
petitioner did not in fact provide SUM coverage to respondent
under the terms of the subject policy, petitioner was under
no concomitant obligation to disclaim (compare Matter of