An insightful defense waged by Goldberg Segalla partner Paul D. McCormick led to a New York state appellate court upholding a lower court decision to stay an arbitration against an insurance company represented by our firm.

The arbitration stemmed from a personal injury motor-vehicle case involving an alleged underinsured motorist.

The claimant argued the supplementary uninsured motorist endorsement — or SUM — had been triggered because the cumulative liability coverages available to the tortfeasor under both his underlying policy and his excess policy, totaling $1.3 million, were less than the cumulative liability coverages available to the claimant under the underlying policy and the excess policy, totaling $5.25 million.

The claimant filed an arbitration with the American Arbitration Association. That arbitration was stayed at by the court in a special proceeding, but then appealed to the New York State Supreme Court, Appellate Division, First Department, which ultimately upheld the lower court’s decision.

In defending our client, Paul successfully argued that the claimant’s proposed trigger comparison not only improperly combined the liability limits of the insured’s underlying policy with those of the insured’s excess policy but also failed to combine the liability limits of the tortfeasor’s underlying policy with those of the tortfeasor’s excess policy.

Agreeing with Paul’s argument, the First Department, in upholding the lower court’s stay order, spared our client considerable cost since exposure under the SUM endorsement of our client’s excess policy was $1 million, and the settlement demand was $500,000.

Paul’s success in securing the appellate court’s affirmance is also seen as an important victory for uninsured motorists/SUM insurers in New York as it serves as a bookend to a previous appellate decision Paul won more than a decade ago.

In that case of first impression, the Appellate Division, Fourth Department held the SUM endorsement at issue was not triggered on the tortfeasor’s end of the trigger comparison because the tortfeasor’s excess insurance, which exceeded the claimant’s bodily injury liability limits, should be included in the trigger comparison. Now, in this latest case, the First Department held that the SUM endorsement was not triggered on the claimant’s end of the trigger comparison because the insured’s excess insurance should not be included in the trigger comparison.