On June 4, 2009, the New York Court of Appeals decided Allstate v. Rivera and Clarendon v. Nunez, affirming the appellate division and finding that no trigger for underinsured motorist coverage was present where the insurance policy of the vehicle occupied by the claimants and the offending tortfeasor's coverage was the same. This may not sound novel based upon the plain reading of Insurance Law 3420 which defines SUM coverage as being triggered where the liability limits of another motor vehicle are in a lesser amount than the claimant's limits. However, Nunez and Rivera involved situations where there were multiple occupants of the insured vehicle and each received less that the full liability limit and then sought underinsured benefits.
After reviewing Regulation 35D, which further clarifies and defines an underinsured vehicle as one where the amount of the liability limits have been reduced by payments to other persons injured in the accident, the court conlcuded that the insureds were not "other persons" and thus, rejected their claims for underinsured benefits, affirming the grant of permanent stays of arbitration to the insurers. The court concluded that this construction was the only one consistent with the plain language of Insurance Law 3420 and the "core principle" underlying SUM coverage, that insureds can never use SUM coverage to obtain a greater recovery for themselves than is available to third parties injured by the insureds. If you handle SUM cases in New York, the decision is a must read.