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Case Study

Paul McCormick preserves $1 million SUM policy for insurer

May 31, 2011
Paul D. McCormick

Paul McCormick, Special Counsel in the Buffalo office specializing in UM/UIM/SUM coverage disputes, won a long and arduous battle to preserve the $1 million SUM policy of one of Goldberg Segalla’s insurer clients.

The history of the case is tortured, but briefly the claimant commenced a tort action in Pennsylvania seeking damages for injuries he sustained as a result of a motor vehicle accident in that state.  He subsequently submitted a claim for SUM benefits pursuant to his employer’s insurance policy with Goldberg Segalla’s insurer client.  After years of litigating the tort action but before it went to trial or judgment, he sought SUM arbitration against our client before the American Arbitration Association (“AAA”).  In a special proceeding, Paul sought a permanent stay of the arbitration on the basis that the tortfeasor vehicle was not underinsured because it had excess coverage in an amount equal to our client’s SUM coverage and appealed when the lower court only granted a temporary stay to allow for discovery.  The appellate court at that time ordered that the arbitration should be stayed, not permanently, but pending the determination of the issues of insurance coverage.  While that prior appeal was pending, we commenced a declaratory judgment action in Pennsylvania seeking a declaration with respect to the insurance coverage issues.  That declaratory judgment action was still pending when, after the Pennsylvania tort action went to verdict but before judgment was entered, and at the request of the claimant, AAA rescheduled the arbitration date.  Paul commenced a second special proceeding to stay that arbitration based, inter alia, on the ground that it would be conducted in violation of the appellate court’s prior order staying the arbitration pending the determination of the insurance coverage issues.  The lower court denied that petition.  Based on that order, the arbitration was conducted the claimant was awarded $1 million plus interest.  Paul appealed both the order allowing the hearing to proceed and the order confirming the subsequent arbitration award.

Last year, Paul won in the intermediate appellate court.  The court reversed the lower court on the first appeal, finding in favor of our client, and remanded the case back down for a framed issue hearing on the issues of coverage, most importantly the threshold issue of whether the tortfeasor vehicle was underinsured.  The lower court was also directed to join all necessary parties, presumably one or more of the parties and their carriers in declaratory judgment action.  Also among the issues to be resolved by the lower court is whether there should be a permanent stay of the arbitration, such that if the lower court decides that the tortfeasor vehicle was not underinsured, a permanent stay of the arbitration should have been ordered.  The appellate court reserved on the second appeal concerning the confirmation of the arbitration award until after the results of the framed issue hearing, which was held this past March.

On the decision arising out of the framed issue hearing, which was issued May 25, 2011, the lower court found that the tortfeasor’s excess policy provided coverage to the claimant in an amount equal to our client’s SUM coverage limits, that the tortfeasor’s excess policy and payments made thereunder would be primary over any SUM coverage to which the claimant might be entitled under our client’s policy, and that once the tortfeasor’s excess carrier pays its available coverage, the clamant will have no recourse against our client.  Based thereon, the court temporarily stayed the arbitration hearing (albeit retroactively) or pursuit of SUM payments from our client pending payment by the tortfeasor’s excess carrier to the claimant, which stay will become permanent if the tortfeasor’s excess carrier pays its limits.