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Do Payments Received from Non-Automobile Liability Defendants Reduce the Limits of SUM Coverage?

Posted in on June 28, 2016

The required SUM (Supplementary Uninsured/Underinsured) Endorsement provides Condition 6, which dictates the maximum amount recoverable and Condition 11, which is a “Non-Duplication” provision.

In relevant part, those sections provide as follows:

  1. Maximum SUM Payments: Regardless of the number of insureds, our maximum payment under this SUM endorsement shall be the difference between:

(a) the SUM limits; and

(b) the motor vehicle bodily injury liability insurance or bond payments received by the insured or the insured’s legal representative, from or on behalf of all persons that may be legally liable for the bodily injury sustained by the insured.

  1. Non-Duplication. This SUM coverage shall not duplicate any of the following:

 (e) any amounts recovered as bodily injury damages from sources other than motor vehicle bodily injury liability insurance policies or bonds.

The Second Department, in Weiss v Tri-State Consumer Ins. Co. 98 AD3d 1107, previously held that under Conditions 6 and 11(e) of the SUM endorsement, the SUM coverage was reduced and offset by the payments received from the tortfeasors liability policy as well as the amounts received from the non-auto liability defendants who settled Dram Shop claims.  The holding in Weiss was adopted by the Fourth department in Redeye v. Progressive 2015 NY Slip Op 73775.

In a decision rendered on June 8, 2016, the Second Department decided GEICO v. Tramontozzi, which appears to have reversed its prior holding in Weiss, by finding that the non-duplication provision did not require that the amounts received be reduced from the SUM limit, but rather that those non-auto liability payments would be reduced from the total damages that the plaintiff sustained and if SUM limits were left over, the plaintiff could recover those amounts.

In Tramontozzi, Peter Sherlock was killed on Pine Hollow Road in Oyster Bay, when the vehicle he was driving collided head-on with a car driven by Jose Maldonado. Maldonado, who was being pursued by the Old Brookville police, failed to negotiate a curve in the road and crossed the center line of Pine Hollow Road into the path of Sherlock’s vehicle.

New York Central Mutual, the insurer for Maldonado, paid out it’s $50,000 liability limit and the Old Brookville Police Department (non-auto liability defendant), paid out $425,000 under it’s Public Risk Professional Liability policy.  Sherlock had SUM coverage with GEICO and presented a claim for SUM benefits.  GEICO relying on Weiss denied the claim.  The GEICO SUM policy carried $250,000 in SUM limits and plaintiff argued, and the Second Department agreed, that plaintiff was entitled to the same amount of coverage and protection as he purchased for himself in coverage, that is $250,000.

While Sherlock agreed that GEICO would get an offset for the $50,000 paid from the auto tortfeasor, pursuant to the “Offset” provisions of the SUM endorsement (Condition 6), the argument was that the “Non-Duplication” provision in section 11(e) did not require an offset for the non-auto liability payments from the SUM limit’s, it simply required an offset from the total amount of damages and if the plaintiff’s damages were in the millions, as alleged, the estate would be entitled to $200,000.

In other words, if the plaintiff was found to have sustained $1,000,000 in damages and the $425,000 paid by the police was reduced from that amount, the amount of damages remaining would be $575,000, well in excess of the SUM limit and therefore the plaintiff was entitled to recover the remaining limits after the offset for the tortfeasor’s policy, $200,000.

The Second Department agreed, and now we arguably have a split in decisions between the Second Department and the Fourth Department, creating a right to appeal to the Court of Appeals!  We will keep you posted.

By Rosa M. Feeney, Esq.
rmfeeney@lewisjohs.com

 

 

 

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