Graphic Arts Mut. Ins. Co. (Leno on Behalf of Leno), Matter of

• Decision Date: 28 April 1995
• Citation: 214 A.D.2d 976,626 N.Y.S.2d 916
• Parties: Matter of Arbitration Between GRAPHIC ARTS MUTUAL INSURANCE COMPANY and Utica Mutual Insurance Company, Appellants, and Lorraine LENO, on Behalf of Edward Leno and April Leno, et al., Respondent.
• Court: New York Supreme Court — Appellate Division

Page 916

626 N.Y.S.2d 916

214 A.D.2d 976

Matter of Arbitration Between GRAPHIC ARTS MUTUAL INSURANCE

COMPANY and Utica Mutual Insurance Company, Appellants,

and

Lorraine LENO, on Behalf of Edward Leno and April Leno, et

al., Respondent.

Supreme Court, Appellate Division,

Fourth Department.

April 28, 1995.

Law Office of Roy A. Mura by Roy Mura, Buffalo, for appellants.

David A. Scheer, Newark, for respondent Lorraine Leno on Behalf of Edward & April Leno.

Before PINE, J.P., and LAWTON, WESLEY, CALLAHAN and DAVIS, JJ.

MEMORANDUM:

Lorraine Leno (respondent) filed a claim on behalf of Edward and April Leno for uninsured motorists coverage under commercial automobile policy number BAC 1443415 issued by petitioner Graphic Arts Mutual Insurance Company (Graphic Arts) to Business Services Company of Utica. Graphic Arts denied the claim and respondent filed a demand for arbitration. Petitioners thereafter filed a petition for a stay of arbitration of the claim of respondent or, alternatively, for "reasonable discovery" to determine whether Edward and April Leno are entitled to uninsured motorists coverage under the Graphic Arts policy. Respondent cross-petitioned seeking, among other relief, an order denying the petition and directing that respondent's claim proceed to arbitration. Supreme Court denied the petition for a stay of arbitration. The court determined that Edward and April Leno are "insureds" as defined by the Graphic Arts policy and that the issues "(1) whether there is insurance coverage under the policy, taking into consideration all relevant terms of the policy including exclusions, and (2) the amount of damages are subject to arbitration at the demand of the insured". The court denied petitioners' request for "reasonable discovery" and the relief sought in the cross petition.

The Graphic Arts policy contains a limited arbitration clause that states, if "[Graphic Arts] and an insured disagree whether the insured is legally entitled to recover damages from the owner or driver of an uninsured motor vehicle or do not agree as to the amount of damages, either party may make a written demand for arbitration". Therefore, the parties agreed to arbitrate only two issues: 1) the insured's right to recover from the uninsured tortfeasor, and 2) the amount of the insured's damages (see, Matter of Kansas City Fire & Mar. Ins. Co. [Barnes], 115 A.D.2d 311, 495 N.Y.S.2d 876).

The court properly determined that Edward and April Leno are "insureds" as that term is defined in the uninsured motorists insurance endorsement of the Graphic Arts policy. That endorsement, however, excludes from coverage "[a]nyone using a vehicle without a reasonable belief that the person is entitled to do so". Whether Edward and April Leno are precluded from recovering under that endorsement because of the applicability of the non-permissive use exclusion implicates a coverage issue for the court, not the arbitrator, to decide and, therefore, the court erred in...