Appellate Win Vacates Million-Dollar SUM Arbitration Award
Case Study

Appellate Win Vacates Million-Dollar SUM Arbitration Award

July 10, 2012

Goldberg Segalla successfully represented an insurer in a complex coverage matter that culminated in a New York appellate court victory that sets favorable new precedent for insurers.

The matter began in 2006 as a petition for a permanent stay of a New York State Supplementary Uninsured/Underinsured Motorist (SUM) Arbitration before the American Arbitration Association between our insurer client and the employee-driver of its New York insured’s tractor-trailer, which was involved in an accident in Pennsylvania. The tortfeasor vehicle’s primary insurer was placed into liquidation after the accident, leaving it with only $300,000 in coverage limits, which would now only be available as excess. The tortfeasor vehicle’s excess insurer has $1 million limits, which matched the insured’s SUM limits. The claimant commenced the SUM arbitration before settling with or obtaining a judgment against the tortfeasor vehicle, so our team petitioned for a permanent stay of the arbitration on the grounds that the tortfeasor vehicle was not underinsured because it had $1 million in excess coverage available to it.

A Goldberg Segalla team led by partner Paul D. McCormick handled the case since the 2006 arbitration filing, including multiple petitions, motions and appeals, an arbitration hearing (which resulted in the $1 million award), and framed issue hearings before trial and intermediate appellate courts. Last year, the lower court granted a temporary stay of the arbitration or any pursuit of SUM payments from our client pending payment by the tortfeasor vehicle’s excess carrier to the claimant, which would become a permanent stay should this excess carrier pay him $1 million or more.

The remanded case automatically went back up to the Fourth Department, which was now in a position to finally determine the initial trial court’s affirmance of the SUM arbitration award. Paul  represented our client before the appellate court and argued, inter alia, that the mere existence and availability of the excess policy removed the tortfeasor vehicle from the definition of “uninsured motor vehicle” under the applicable SUM endorsement and, as a result, our client’s SUM limits were never “triggered” under New York’s SUM coverage statute, Insurance Law § 3420(f)(2)(A).

On July 6, 2012, the Fourth Department reversed the lower court order confirming the $1 million arbitration award (the SUM policy limits) and vacated the award. Before this decision, no case to date had specifically ruled on the applicability of excess or umbrella policies on the defendant/tortfeasor’s side of the trigger comparison. The court found that although the evidence in the record established that the tortfeasor vehicle’s primary insurer was insolvent and that no benefits would be afforded to claimant by the guaranty association which assumed the liabilities of that insolvent company, the evidence also established that there was an excess policy and that the excess insurer did not disclaim coverage. As a result, the court held that our client’s $1 million in SUM coverage was not implicated.