An appellate court in New York, reversing a trial court's decision, has ruled that an insurance company's disclaimer letter was evidence that it insured a vehicle allegedly involved in an automobile accident, which required a stay of an arbitration proceeding seeking underinsured motorist ("UIM") benefits against a second insurer.
The Case
A vehicle owned and operated by Jose O. Santos, in which Harly Henriquez and Sandy Rodriguez were passengers, allegedly was struck in the rear by a vehicle owned by Lakerham Singh, which allegedly then fled the scene.
Santos, Henriquez, and Rodriguez made a claim for coverage from Singh's insurance carrier, National General Insurance Online, Inc.
In response, National General disclaimed coverage on the ground that an investigation revealed that "our insured's vehicle was report[ed] stolen" at the time of the accident.
After Santos, Henriquez, and Rodriguez made a demand for arbitration of their claim for UIM benefits against Santos' insurance carrier, Country-Wide Insurance Company, Country-Wide asked a New York court to stay arbitration.
The trial court denied Country-Wide's petition, and the insurer appealed.
The Appellate Court Decision
The appellate court reversed.
In its decision, the appellate court ruled that Country-Wide had established that, at the time of the accident, the Singh vehicle was covered by an insurance policy issued by National General.
The appellate court reasoned that National General's disclaimer letter constituted "prima facie evidence as to the existence of a policy of insurance covering Singh's vehicle at the time of the accident."
According to the appellate court, that same letter was sufficient to raise a triable issue of fact as to the validity of National General's disclaimer.
The appellate court pointed out that New York Vehicle and Traffic Law Section 388 created a "strong presumption" that the driver of a vehicle was operating it with the owner's consent, which only could be rebutted by "substantial evidence demonstrating that the vehicle was not operated with the owner's permission."
Evidence that a vehicle was stolen at the time of an accident could overcome the presumption of permissive use, the appellate court said. It then concluded that, under these circumstances, a framed-issue hearing was necessary to determine whether National General had properly disclaimed coverage of Singh's vehicle, to be followed by a new determination on Country-Wide's petition to permanently stay the arbitration.
The case is Matter of Country-Wide Ins. Co. v. Santos, No. 2018-07598 (N.Y. App. Div. 2d Dep't Sept. 25, 2019). Attorneys involved include: Jaffe & Velazquez, LLP, New York, NY (Jean H. Kang of counsel), for appellant. Roe & Associates, New York, NY (Jason A. Ciluffo of counsel), for proposed additional respondents-respondents.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].