Opinion
402474/2008.
September 30, 2009.
DECISION AND ORDER
This proceeding pursuant to CPLR Article 75 arises from an automobile accident that occurred on November 21, 2006, on the Henry Hudson Parkway in Manhattan. Respondent Vernon B. Coles (Vernon) was alone in his car on the way to work when he was struck by a drunk driver. His car overturned. It exploded just after he was rescued from it. Vernon suffered permanent personal injuries. His wife, Anita Coles (Anita), asserts a claim for loss of consortium.
Respondents filed a demand before the American Arbitration Association in New York County for arbitration of their claim for underinsured motorist coverage (ex. A to petition). Petitioner Encompass Indemnity Company (Encompass) brings this petition seeking a permanent stay of arbitration (CPLR 7503 [c]). The petition also seeks a framed issue hearing to determine whether respondents are entitled to underinsured benefits pursuant to their policy with Encompass.
The drunk driver, Michael Rush (Rush), carried a $25,000 policy that was tendered to respondents. A passenger in Rush's vehicle died as a result of the accident. Respondents obtained a judgment against Rush after inquest in the amount of $3 million in favor of Vernon, and $500,000 for Anita. The judgment debtor is incarcerated.
According to the petition, Encompass issued a "Deluxe-Package Policy" (ex. B) to respondents, covering their automobiles, including the Ford Explorer involved in the accident. The underinsured motorist limits in the Encompass policy are $250,000 per individual and $500,000 per occurrence.
Encompass paid the $50,000 first-party no fault benefits that it is required to offer as an out-of-state carrier authorized to do business in New York.
Encompass has offered to settle respondents' claim for underinsured motorist coverage for $175,000, which is $75,000 less than the per-individual limit. The $75,000 setoff is comprised of the $50,000 that respondents received from Encompass for New York no-fault benefits, plus the $25,000 that respondents received from the Rush policy.
The petition seeks an order (i) permanently staying the arbitration; and/or (ii) directing that a framed issue hearing be held to determine whether respondents are entitled to receive underinsured motorist benefits from Encompass.
The petition is granted to the extent of ordering a permanent stay of the arbitration, and is otherwise denied. Respondents cross-move for a declaration that they are entitled to the full amount of the policy limits for underinsured motorist coverage without deduction, and to dismiss the petition, with costs and attorneys' fees. The cross motion is denied.
The substantive issue cannot be determined in the context of an Article 75 proceeding. This proceeding only presents the issue of whether an enforceable agreement to arbitrate exists. [ILLIGIBLE] therefore convert this proceeding into a declaratory judgment action (CPLR 103 [c]; Cologne Life Reinsurance Co. v Zurich Reinsurance [North America], Inc., 286 AD2d 118, 123 [1st Dept 2001]).
Respondents are directed to file a summons and complaint seeking a declaration of their rights under the policy.
The Encompass policy provides that both parties may agree to arbitrate, but it does not make arbitration mandatory. No agreement to arbitrate is alleged.
Respondents argue that Encompass has a duty to arbitrate pursuant to New York law. Respondents' reliance upon National Grange Mut. Ins. Co. v Hing Wa Louie ( 39 AD3d 293 [1st Dept 2007]) is misplaced. National Grange involved a duty implied by New York law to arbitrate a claim involving uninsured motorist coverage. Insurance Law § 5106 (b) requires carriers charged with providing first-party benefits to arbitrate first-party claims, including those involving a policy endorsement for uninsured motorist coverage. The holding of National Grange applies only to first-party benefits, and only involves an uninsured motorist endorsement triggered under no-fault. Encompass has already paid plaintiffs the full amount of first-party benefits.
"[T]he mandatory coverage afforded under an uninsured motorist endorsement is meant to be coextensive with, and therefore no greater than, the standard coverage that would ordinarily be available to the uninsured motorist had he or she been insured" ( State Farm Mut. Auto. Ins. Co. v Langan, 55 AD3d 281, 284 [2d Dept 2008]).
There are numerous reported cases involving arbitration of a claim for first-party benefits under an uninsured motorist endorsement. Respondents have cited no case in which New York law required arbitration of a claim under an underinsured motorist endorsement in a policy issued out of state.
Because Encompass has paid the full amount of first-party no-fault benefits, any duty to arbitrate must be found in the terms of the policy.
"There is no requirement under the New York no-fault . . . statutes and regulations that mandates arbitration where, as here, a policy issued out of State meets the minimum financial security requirements of Insurance Law § 5107" ( Matter of United Services Auto. Ass'n v Melendez, 27 AD3d 296, 297 [1st Dept 2006]).
Accordingly, it is
ORDERED that the petition is granted to the extent of permanently staying arbitration, and is otherwise denied; and it is further
ORDERED that this Article 75 proceeding is converted into a declaratory judgment action pursuant to CPLR 103 (c), and respondents are directed to file a summons and complaint seeking a declaration of their rights under the policy.