Do You Have to Notify Your Insurance Company If You Settle a Personal Injury Claim?
Many New York drivers elect to carry supplemental uninsured/underinsured motorist (SUM) coverage as part of their auto insurance policy. SUM coverage kicks in when you are injured in an accident caused by a negligent driver who lacks sufficient insurance (or any insurance) to fully compensate you for your losses, such as your pain and suffering, medical bills and lost income. In these situations, your SUM carrier will cover any excess judgment.
Progressive Stops Arbitration of Policyholder’s Accident Claim
As with any insurance policy, however, you need to carefully read and follow the terms of your SUM coverage in order to obtain benefits. Insurance companies are notorious sticklers when it comes to the rules, particularly when those rules enable the insurer to try to deny coverage. And in many cases, such denials are based on something as simple as failure to properly notify the insurer of a settlement.
Take this recent decision from the Appellate Division, Second Department. In Matter of Progressive Casualty Insurance Co. v. Lai, a woman (the respondent) sustained injuries in a two-car accident. The respondent held an auto insurance policy issued by Progressive that included SUM coverage.
The respondent later sued the driver of the other vehicle for negligence in connection with the accident. The respondent subsequently notified Progressive that she settled that lawsuit for $100,000, which was the limits of the negligent driver’s liability coverage. She then demanded benefits from Progressive under her SUM coverage.
Progressive denied the claim, however, citing the respondent’s failure to comply with the terms of her policy. Specifically, the SUM endorsement excluded coverage for any accident where the respondent (or her representative) settled a lawsuit related to said accident “without our written consent.” Another exclusion required the respondent to provide written notice of any proposed settlement.
The respondent then filed for mandatory arbitration of her SUM claim. Progressive replied by filing a petition in Westchester County Supreme Court seeking an order permanently staying the arbitration, i.e., effectively dismissing the respondent’s claim. A Supreme Court judge denied Progressive’s request, but the Second Department reversed on appeal and granted the permanent stay.
As the Second Department explained in its opinion, the respondent was not entitled to arbitration under the terms of the policy. The policy itself only permitted arbitration on two issues: (1) was she entitled to recover SUM benefits and, if so (2) the amount of damages recoverable. Here, the respondent sought to arbitrate whether she complied with the requirement to obtain Progressive’s consent before settling her personal injury claim, which was outside the scope of the arbitration clause.
More to the point, by settling without Progressive’s consent, the Appellate Division held the respondent committed a breach of contract, thus disqualifying her from seeking any coverage.
Contact a New York City Car Accident Lawyer
You should never assume that just because you have a paid-up auto insurance policy that the insurer will automatically pay you benefits following a crash. You must be prepared to assert your rights, and if necessary fight your insurer in court. Our New York City car accident attorneys can help. Contact the Law Offices of Jaroslawicz & Jaros, PLLC, at 212-227-2780 to schedule a consultation. We serve clients throughout New York City and Long Island.
Source:
scholar.google.com/scholar_case?case=14349670778264394562