The Office of General Counsel issued the following opinion on December 16, 2003, representing the position of the New York State Insurance Department.
Re: SUM Coverage Offset
When the amount of Supplementary Uninsured/Underinsured Motorist ("SUM") coverage available to an insured under a motor vehicle liability policy is less than the amount recovered by the insured from third party tortfeasors, is there coverage available to the insured?
No. Pursuant to the mandatory SUM endorsement contained in Department Regulation 35-D, the amount available under SUM coverage is offset by the amount received from third party tortfeasors, so that there is no SUM coverage available for the insureds to recover.
Two minor passengers were injured in an automobile accident while occupying a motor vehicle which maintained third party liability coverage of $50,000/100,000 and SUM coverage of $50,000/100,000. After third party actions were commenced, the court awarded $110,000 to the two minors, to be split equally. The inquirer asked what the availability of SUM coverage to the minors would be in this instance.
N.Y. Comp. Codes R. & Regs. tit. 11 § 60-2.3(f)(1999) contains the prescribed SUM endorsement for motor vehicle liability policies issued in New York. Under Condition G, it mandates that in calculating the insurers maximum SUM payments, the maximum payment under the SUM endorsement shall be the difference between:
(a) the SUM limits, and
(b) the motor vehicle bodily injury liability insurance received by the insured, from or on behalf of all persons that may be legally liable for the bodily injury sustained by the insured.
In the situation that the inquirer posed, under $50,000/100,000 in SUM coverage, $100,000 is available when there are two or more insureds injured, subject to a maximum of $50,000 each. The inquirer stated that the two minor insureds have already received $55,000 each in third party recoveries, which offset the $50,000 each in proceeds available under SUM coverage. Therefore, since the amount of recoveries from the tortfeasors exceeds the amount which was purchased and available as SUM limits, there would be no additional benefits available under SUM.
For further information you may contact Supervising Attorney Lawrence M. Fuchsberg at the New York City Office.