Criterion Ins. Co. of Washington, D. C. v. Commercial Union Assur. Co.
Decision Date | 24 November 1976 |
Citation | 89 Misc.2d 36,390 N.Y.S.2d 953 |
Parties | Petition of CRITERION INSURANCE COMPANY OF WASHINGTON, D.C., Petitioner, to stay the arbitration demanded by COMMERCIAL UNION ASSURANCE COMPANY, Respondent, of the claim of Frances Frangione. |
Court | New York Supreme Court |
Montfort, Healy, McGuire & Salley, Mineola, for petitioner.
Curtis, Hart & Zaklukiewicz, Merrick, for respondent.
Louis L. Lefkowitz, Atty. Gen., State of New York, New York City.
This proceeding to stay compulsory arbitration proceedings under Insurance Law Sec. 674 involves the interpretation of the statute and, if interpreted contrary to petitioner's contentions, an attack on its constitutionality.
The facts are undisputed. On May 12, 1974, Frances Frangione was operating an automobile owned by Felix Frangione covered by a policy of insurance issued by the respondent Commercial Union Assurance Company (Commercial Union) which complied with the requirements of the Comprehensive Automobile Insurance Reparations Act, Insurance Law Article 18 (secs. 670--677 inclusive) commonly known as the New York No-Fault Act, when there was a collision in Suffolk County between that vehicle and the automobile owned and operated by Jennie Kronske, insured by the petitioner Criterion Insurance Company of Washington, D.C. (Criterion). Criterion's policy provided liability coverage of $10,000/$20,000 for personal injuries and $5,000 for property damage and it, too, contained provision for no-fault benefits as required by law, Insurance Law, sec. 672. Thus each of the operators was a 'covered person' under the No-Fault Act, sec. 671, subd. 10.
Mrs. Frangione was seriously injured in that collision and Commercial Union has made payments to her of the first party benefits required by its policy and the statute, Insurance Law, sec. 671, subds. 1 and 2 and sec. 672. By May 19, 1975, such payments aggregated $35,579.16 and were continuing. No challenge is presented either to the fact, or to the necessity and propriety, of the payments. On that day Commercial Union demanded arbitration under sec. 674 of the Insurance Law 1 predicated on its position that Jennie Kronske was the at-fault party in causing the collision on May 12, 1974. The response was Criterion's application to stay the arbitration proceedings.
Eleven adjournments of that application were taken mainly to await the decision of the Court of Appeals in Montgomery v. Daniels, 38 N.Y.2d 41, 378 N.Y.S.2d 1, 340 N.E.2d 444, which involved an attack on the constitutionality of Insurance Law, Article 18, by persons injured in vehicular accidents. The legislation was upheld by a unanimous court; and the pending application was finally presented to the Special Term on March 1, 1976. An intermediate order required the vouching in of the Attorney General, Executive Law, sec. 71, and he has now by notice dated November 10, 1976, appeared herein and filed an answering affidavit and brief.
Among other claims, the petitioner urges that any interpretation of the statute which requires it to pay to Commercial Union or to its insureds any sums in excess of $10,000.00 impairs the obligations of its contract (the liability policy) with Mrs. Kronske who only purchased limited coverage as noted, and that in any event, the statute violates its right to a jury trial of the liability issues and denies it equal protection of the laws and due process in allegedly precluding it from obtaining contribution from possible joint tortfeasors (in this case, the manufacturer of the Kronske vehicle).
In Montgomery v. Daniels, 38 N.Y.2d 41, 46, 378 N.Y.S.2d 1, 4, 340 N.E.2d 444, 446, the court pointed out that the No-Fault Act was one which effected 'a two-pronged, partial modification of the pre-existing system of reparation for personal injuries suffered in automobile accidents' and that '(o)ne prong deals with compensation; the other with limitation of tort actions.' In pursuit of the objective of compensation the act requires that every owner of a motor vehicle provide himself, operators, occupants and pedestrians with compensation for basic economic loss as defined in the statute, thus achieving a limited objective in that area, 38 N.Y.2d at pp. 46, 47, 378 N.Y.S.2d at p. 4, 340 N.E.2d at p. 446.
In our consideration of sec. 674 of the Insurance Law we are concerned with the second prong of the No-Fault Act which 'imposes two limitations on tort recovery for personal injuries, applicable, however, only to actions between 'covered persons' (as defined in § 671, subd. 10): (1) there can be no duplicate tort compensation for 'basic economic loss' ( § 673, subd. 1); and (2) damages for noneconomic loss (i.e., pain and suffering) are not recoverable in tort unless the plaintiff can establish that he has suffered a 'serious injury' ( § 673, subd. 1).', ibid.
The legislative intent is to be gathered from the language employed in the statute construed as written and given its unequivocal meaning, Flushing Nat'l Bank v. Municipal Assistance Corp., 40 N.Y.2d 731, 390 N.Y.S.2d 22, 358 N.E.2d 848; Assn. of Contr. Plumbers v. Contr. Plumbers Assn., 302 N.Y. 495, 500, 99 N.E.2d 542, 546; People v. Olah, 300 N.Y. 96, 102, 89 N.E.2d 329, 333, and the plain and clear provisions of Insurance Law, sec. 674 set forth in footnote 1, require no interpretation, cf. Matter of Wendell v. Lavin, 246 N.Y. 115, 120, 158 N.E. 42, 45.
The statutory mandate, in simple terms, is that Commercial Union having paid first party benefits to its insured, a covered person, has the right to recover the amount of those benefits from Criterion as the insurer of another covered person 'if and to the extent that such other covered person would have been liable, but for the provisions of this article (the No Fault Act), to pay damages in an action at law.' (Insurance Law, § 674, subd. 1.) The procedure is by arbitration, the limit of recovery by the demanding insurer, is the amount of the benefits paid for economic loss as defined in the Act, and the obligations of the responding insurer under any policy of bodily injury liability insurance are not affected or diminished.
This patent construction has been followed by the Department of Insurance of the State of New York. Thus in its Circular Letter No. 5 (1976) issued February 27, 1976, it stated:
(all underlining in original).
See, also, 11 NYCRR, Part 65.
The petitioner's argument that this imposes on it a liability which it did not contract to assume is untenable. The object of the No Fault Act was to eliminate the vest majority of auto accident negligence suits from the judicial arena and to assure prompt compensation to accident victims of substantially all of their economic loss without regard to fault, see Governor's Memorandum on approving bill, N.Y.Legis. Ann., 1973, p. 298; 2 McKinney's Session Laws of New York, 1973, p. 2335; Montgomery v. Daniels,38 N.Y.2d 41, 49 378 N.Y.S.2d 1, 7, 340 N.E.2d 444, 448 et seq. In part this was achieved by providing for inter-company arbitration of loss reallocations. 2 In writing insurance in this State, Criterion necessarily assumed the obligations imposed by the statute on those so engaged in that type of business, see Insurance Law, secs. 143, 167, 672; Bersani v. Gen. Acc. Fire Corp., 36 N.Y.2d 457, 460, 369 N.Y.S.2d 108, 111, 330 N.E.2d 68, 70; State Farm Mut. Ins. v. Westlake, 35 N.Y.2d 587, 592--593, 364 N.Y.S.2d 482, 486, 324 N.E.2d 137, 139; Antinora v. Nationwide Life Ins. Co., 76 Misc.2d 599, 350 N.Y.S.2d 863; and the requirement for such assumption may constitutionally be made, see Hoopeston Co. v. Cullen, 318 U.S. 313, 63 S.Ct. 602, 87 L.Ed. 777; Merchants Liability Co. v. Smart, 267 U.S. 126, 45 S.Ct. 320, 69 L.Ed. 538.
Given this interpretation of sec. 674 of the No-Fault Act, the constitutional grounds urged by the petitioner become relevant. In this connection, not only is the respondent's and the Attorney-General's argument of validity bolstered by the broad sweep of Montgomery v. Daniels, 38 N.Y.2d 41, at p. 45, 378 N.Y.S.2d 1, at p. 4, 340 N.E.2d 444, at p. 446 the court said: 'We hold that the New York no-fault automobile accident compensation law is not unconstitutional', 3 but also by the established rule that there is an exceedingly strong presumption of constitutionality in essence requiring demonstration of unconstitutionality beyond a reasonable doubt, Wasmuth v. Allen, 14 N.Y.2d 391, 397, 252 N.Y.S.2d 65, 69, 200 N.E.2d 756, 758; Wiggins v. Town of Somers, 4 N.Y.2d 215, 218, 173 N.Y.S.2d 579, 581, 149 N.E.2d 869, 871; Lincoln Bldg. Associates v. Barr, 1 N.Y.2d 413, 415, 153 N.Y.S.2d 633, 634, 135 N.E.2d 801, 802.
What is settled by Montgomery is that Mrs. Frangione's tort right of recovery for her economic loss for which she has been and may be continuing to be reimbursed has been abolished to the extent of the first $50,000, in amount thereof, 38 N.Y.2d at pp. 53--59. In its place has...
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