Morris v. Progressive Cas. Ins. Co., Inc., 86 Civ. 9605 (CLB).

Decision Date22 June 1987
Docket NumberNo. 86 Civ. 9605 (CLB).,86 Civ. 9605 (CLB).
Citation662 F. Supp. 1489
CourtU.S. District Court — Southern District of New York

Raymond J. Keegan, White Plains, N.Y., for plaintiff.

David W. Brand, Garden City, N.Y., for defendant.


BRIEANT, Chief Judge:

For the second time within a year, we are called upon to construe §§ 3420(f)(1) and (f)(2) of the New York Insurance Law. For the reasons set forth below, we hold that the cross-motions for summary judgment now before us present claims appropriate for declaratory judgment, and grant plaintiff's motion for summary judgment.

The plaintiff, William Morris, contracted with defendant for a policy of insurance on his motorcycle. The original policy, apparently issued on July 15, 1985, provided coverage for bodily liability, guest passenger liability, and for what the declarations page calls "uninsured motorists" (hereinafter "UM") coverage, each in the amount of $10,000 per person and $20,000 per accident (hereinafter "$10,000/$20,000"). Defendant's Memorandum of Law, Exh. A. On April 7, 1986, the policy was amended, at the request of Morris, increasing these coverages to $100,000 per person and $300,000 per accident (hereinafter "$100,000/$300,000"). The revised declarations page continued to refer to UM coverage. Id. Exh. B.

On June 18, 1986, Morris was involved in an accident with a vehicle operated by one Michael Jacobson. Jacobson carried only the minimum $10,000 coverage for bodily injury required by N.Y.Veh. & Traf.L. § 311(4)(a) (McKinney 1986). Morris initiated suit against Jacobson in Supreme Court, Putnam County: the Prudential Insurance Company, Jacobson's carrier, offered the full face amount of $10,000 in settlement. Defendant's policy contained a provision disclaiming UM coverage if the covered person "settles the bodily injury claim without our consent." Because he did not wish to forfeit his UM coverage by settling with Jacobson, Morris interposed a claim against defendant under the UM provision of the policy. Defendant rejected the claim on the ground that Jacobson was not an "uninsured" motorist in the sense of the policy endorsement, but merely underinsured.

Defendant's position is that it offers only UM coverage within the meaning of N.Y. Ins.L. § 3420(f)(1) (McKinney 1985), which requires that every motor vehicle liability insurance policy contain a so-called uninsured motorists endorsement ("the UME"), providing $10,000/$20,000 in coverage for bodily injury occasioned by an accident with an uninsured motorist. When Morris voluntarily chose to supplement his UM coverage, defendant contends, he simply purchased more § (f)(1) coverage: he chose to protect himself, to a greater extent than § (f)(1) requires, against uninsured and other motorists enumerated in N.Y.Ins.L. § 5202 and in § (f)(1) (and in defendant's policy, which reflects but does not duplicate these provisions). Because Jacobson carried the minimum $10,000 in liability coverage, defendant maintains, he was not uninsured in the sense of § (f)(1); in consequence, Morris was not covered as to this accident.

Morris argues that the additional coverage he purchased, even though it is denominated UM coverage, is not the statutorily required UME of § (f)(1), but the "supplementary uninsured motorists insurance" (hereinafter "SUMI"), sometimes called "underinsurance," which all vehicle owners and operators in New York have the option to purchase under § 3420(f)(2). Such insurance allows an insured vehicle owner or operator to make up the difference between the amount of coverage he wants to carry and the lesser amount carried by somebody, here Jacobson, who is responsible for an accident in which the insured is injured.

Section 3420(f)(2), as we held in Downey v. Allstate Insurance Co., 638 F.Supp. 322, 324 (S.D.N.Y.1986), requires insurers to provide SUMI "at the insured's election." Defendant claims that Morris did not ask for SUMI and therefore did not get it. It denies that it even offers SUMI (or under-insurance) on motorcycle policies in New York, arguing that Morris is simply confusing the quite different concepts of UM coverage and SUMI.

Morris argues that his increased coverage must have been SUMI, by operation of law: what defendant calls UM coverage is in actuality SUMI, and defendant cannot avoid its obligation to provide coverage simply by omitting the term "SUMI" or "underinsurance" from its endorsement.

In consequence of defendant's refusal to acknowledge coverage, Morris seeks a declaration from this Court that his policy indeed provides SUMI, that he be allowed to settle with Jacobson, and that he then be allowed to pursue his claim against defendant for the $100,000 coverage he enjoys under SUMI.

Propriety of Declaratory Judgment

Defendant has not objected to the propriety of a declaratory judgment proceeding in this case. Disputes over coverage afforded by an insurance policy present an actual case or controversy, so that declaratory judgment is appropriate. See, e.g., Aetna Life Insurance Co. v. Haworth, 300 U.S. 227, 57 S.Ct. 461, 81 L.Ed. 617 (1937). Whether to entertain a declaratory judgment proceeding is always within the district court's discretion, and the Supreme Court has reminded us that "a federal district court should, in the exercise of discretion, decline to exercise diversity jurisdiction over a declaratory judgment action raising issues of state law when those same issues are being presented contemporaneously to state courts." Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 126, 88 S.Ct. 733, 746, 19 L.Ed.2d 936 (1968). However, that is not the case here. There is no state negligence action in which the issue concerning which a declaration is sought would be presented. In the action that underlies this case, Prudential has already offered the full amount of Jacobson's coverage in settlement of the claim against him. What Morris seeks from this Court is a declaration as to whether he can accept that settlement without prejudice to his rights under his own policy. There is no pending state proceeding in which the coverage issue can be resolved. Morris could have sought a declaratory judgment in the New York Supreme Court, see N.Y.C.P.L.R. § 3001, but chose to come to this Court instead. In view of the fact that the existence of an alternative remedy (including a declaratory judgment in an alternative forum) does not preclude the entry of a declaratory judgment, see Fed.R.Civ.P. 57, we decline to overrule that choice. Accordingly, we consider the merits.

Scope and Purpose of § 3420(f)(1)

Section 3420(f)(1) provides:

No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any natural person arising out of the ownership, maintenance and use of a motor vehicle by the insured shall be issued or delivered by any authorized insurer upon any motor vehicle then principally garaged or principally used in this state unless it contains a provision whereby the insurer agrees that it will pay to the insured, as defined in such provision, subject to the terms and conditions set forth therein to be prescribed by the board of directors of the Motor Vehicle Accident Indemnification Corporation and approved by the superintendent, all sums, not exceeding a maximum amount or limit of ten thousand dollars exclusive of interest and costs, on account of injury to and all sums, not exceeding a maximum amount or limit of fifty thousand dollars exclusive of interest and costs, on account of death of one person, in any one accident, and the maximum amount or limit, subject to such limit for any one person so injured of twenty thousand dollars or so killed of one hundred thousand dollars, exclusive of interest and costs, on account of injury to, or death of, more than one person in any one accident, which the insured or his legal representative shall be entitled to recover as damages from an owner or operator of an uninsured motor vehicle, unidentified motor vehicle which leaves the scene of an accident, a motor vehicle registered in this state as to which at the time of the accident there was not in effect a policy of liability insurance, a stolen vehicle, a motor vehicle operated without permission of the owner, an insured motor vehicle where the insurer disclaims liability or denies coverage or an unregistered vehicle because of bodily injury, sickness, or disease, including death resulting therefrom, sustained by the insured, caused by accident occurring in this state, and arising out of the ownership, maintenance or use of such motor vehicle.

This section must be read together with the Motor Vehicle Accident Indemnification Corporation Act, N.Y.Ins.L. §§ 5201-5225 (McKinney 1985). In particular, the MVAIC Act's statement of purpose, § 5201(b), controls § 3420(f)(1) as well as that Act. Application of MVAIC, 32 Misc.2d 1055, 229 N.Y.S.2d 788, 790, rev'd on other grounds sub nom. MVAIC v. Levy, 17 A.D.2d 965, 234 N.Y.S.2d 152 (2d Dep't 1962). Section 5201(b) records a legislative finding that the financial responsibility provisions of the Vehicle and Traffic Law failed to compensate victims of motor vehicle accidents involving the seven kinds of vehicles enumerated in § 3420(f)(1) — uninsured vehicles in general, hit-and-run vehicles, registered vehicles without liability insurance, stolen vehicles or vehicles operated without the owner's permission, vehicles for which the insurer disclaims liability, and unregistered vehicles. The legislature intended the MVAIC to fill these gaps. Indeed, as originally enacted, § 3420(f)(1) required the MVAIC to compensate the injured party within the statutory limits: only in 1965 was the statute amended to provide that the insurer pay. See StateWide Insurance Co. v. Curry, 43 N.Y.2d 298, 302, 372 N.E.2d 31, 401 N.Y.S.2d 196, 198 (1977).

Thus, for purposes of § (f)(1), ...

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