U.S. Fidelity and Guar. Co. v. Mitchell

• Decision Date: 21 December 1990
• Parties: Matter of UNITED STATES FIDELITY AND GUARANTY COMPANY, Respondent, v. Carol A. MITCHELL, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 894

564 N.Y.S.2d 894

168 A.D.2d 941

Matter of UNITED STATES FIDELITY AND GUARANTY COMPANY, Respondent, v. Carol A. MITCHELL, Appellant.

Supreme Court, Appellate Division,

Fourth Department.

Dec. 21, 1990.

D.J. and J.A. Cirando by John Cirando, Syracuse, for appellant.

MacKenzie, Smith, Lewis, Mitchell & Hughes by Eric Johnson, Syracuse, for respondent.

Before DOERR, J.P., and BOOMER, PINE, BALIO and LAWTON, JJ.

MEMORANDUM:

Respondent was injured when a vehicle operated by Diann Williams left the roadway and rolled over several times. Respondent settled her action for damages against Williams for $10,000, the personal injury limits of Williams' policy. Respondent submitted a claim for underinsurance benefits provided by the underinsurance endorsement of her automobile insurance policy issued by petitioner, United States Fidelity and Guaranty Company (USF & G). After USF & G denied coverage and respondent insured filed a demand for arbitration, USF & G commenced this proceeding for a stay of arbitration upon the ground that, in executing a general release in favor of the tortfeasor, respondent failed to protect and preserve USF & G's subrogation rights to proceed against the tortfeasor.

The parties agreed to submit to arbitration all disputes regarding whether the insured "is legally entitled to recover damages" under the endorsement. Such language submits to arbitration the issues of fault and damages, but it does not include the issue of compliance with a condition precedent to coverage (see, Matter of Rosenbaum [American Sur. Co. of N.Y. ], 11 N.Y.2d 310, 314, 229 N.Y.S.2d 375, 183 N.E.2d 667). Thus, Supreme Court correctly determined that the issue whether respondent's settlement prejudiced USF & G's subrogation rights was a matter for the court, not the arbitrators, to decide (see, Matter of Rosenbaum [American Sur. Co. of N.Y.], supra; Matter of Aetna Cas. & Sur. Co. [Bruton], 45 N.Y.2d 871, 410 N.Y.S.2d 580, 382 N.E.2d 1355, rev'g 58 A.D.2d 551, 396 N.Y.S.2d 207; Matter of CNA Ins. Co. v. McNamara, 149 A.D.2d 590, 540 N.Y.S.2d 455; cf., Matter of General Acc. Ins. Co. [Ramee], 157 A.D.2d 877, 549 N.Y.S.2d 880). The court erred, however, in concluding that respondent's execution of a general release prejudiced her insurer's subrogation rights. The release expressly reserved "any and all rights under the underinsured coverage portion" of the policy issued by USF & G. Assuming, arguendo, that this language did not amount to an express reservation of USF...