The Office of General Counsel issued the following opinion on November 5, 2003, representing the position of the New York State Insurance Dept
Re: Business SUM Coverage Under the Property/Casualty Insurance Security Fund
Question Presented:
Is a claim made under a Supplementary Uninsured/Underinsured Motorists Endorsement ("SUM") of a New York commercial automobile liability insurance policy issued by an authorized insurer covered under the Property/Casualty Insurance Security Fund ("the Fund") established under N.Y. Ins. Law Article 76 (McKinney 2000) upon the insolvency of such insurer?
Conclusion:
Yes. A loss incurred under an SUM endorsement contained in the commercial automobile liability insurance policy would be covered under the Fund for a claim allowed by a court in a proceeding by the Superintendent acting as liquidator, rehabilitator or conservator under Insurance Law Article 74 ("Rehabilitation, Liquidation, Conservation and Dissolution of Insurers"). See N.Y. Ins. Law § 7608 (McKinney 2000). In the event that the commercial vehicle is engaged in the business of carrying or transporting vehicles for hire, such as taxis or liveries, the loss would be covered under the Public Motor Vehicle Liability Security Fund established under N.Y. Ins. Law § 7604 (McKinney 2000).
Facts:
There are no facts other than the assumed fact in this case that the insurer would have paid the SUM claim except for the possible intervention of insolvency.
Analysis:
An automobile insurance policy issued in New York contains both liability and property damage coverages, as required under N.Y. Comp. Codes R. & Regs. tit. 11, § 60-1.1(2003) (Department Regulation 35-A). The prescribed SUM endorsement, which must be provided by motor vehicle liability insurers at the option of the insured, is established pursuant to N.Y. Comp. Codes R. & Regs. tit.11, § 60-2.0 et seq. (1999) (Department Regulation 35-D)(Supplementary Uninsured/Underinsured Motorists Insurance). These coverages continue to be covered under the Fund.
N.Y. Ins. Law § 7602(c) (McKinney 2000) defines an insurer for purposes of Article 76 as follows:
Insurer means any insurer (other than an insolvent insurer, or a municipal reciprocal insurer which issues policies not covered by the property/casualty insurance security fund, or a risk retention group as defined in article fifty-nine of this chapter, or a provider of service contracts pursuant to article seventy-nine of this chapter) authorized to transact the kinds of business specified in paragraphs four through fourteen, sixteen, seventeen, nineteen through twenty-one of subsection (a) of section one thousand one hundred thirteen of this chapter.
N.Y. Ins. Law § 7602 (g) (McKinney 2000) defines "Allowed claim" to mean "a claim which has been allowed by the court in a proceeding under article seventy-four "
N.Y. Ins. Law § 7603 (McKinney 2000) states in relevant part:
(a) (1) The property/casualty insurance security fund shall be used in the payment of allowed claims remaining unpaid, in whole or in part, by reason of the inability due to insolvency of an authorized insurer to meet its insurance obligations under policies:
(A) on account of claims from motor vehicle accidents as defined in subsection (f) of section seven thousand six hundred two of this article,
N. Y. Ins. Law § 7602(f) (McKinney 2000) defines a motor vehicle accident as "either an accident occurring within or without this state arising out of the ownership, operation or maintenance of a motor vehicle which is principally garaged in this state or an accident occurring within this state "
Pursuant to N.Y. Ins. Law § 7603, the Fund covers allowed claims against an insolvent authorized insurer that wrote automobile insurance. Hence, an allowed claim under a SUM Endorsement to an automobile insurance policy is protected by the Fund.
It should be noted that when a commercial vehicle is engaged in the business of carrying or transporting passengers for hire as defined and covered pursuant to N.Y. Veh. & Traf. Law § 370 (McKinney 2003), allowed claims against an insolvent insurer would be covered under N.Y. Ins. Law § 7604 (McKinney 2000), which establishes a Public Motor Vehicle Liability Security Fund for that purpose.
For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.