A “Tort Reform” We All Want – “Innocent Party” Auto Coverage

Do you take this case? Clients Ms. & Miss Innocent, are riding along the road minding their own business in their 1998 Dodge insured byPicayune Insurance Company under a contract of insurance carrying the standard New York “uninsured motorist endorsement”. They have broken no laws, taken no unreasonable actions with respect to the use or operation of their vehicle, and harmed no one. They are in compliance with all state insurance requirements, vehicle inspection requirements and rules of the road. At the intersection of Strange Street and Loophole Avenue, while stopped waiting for a red light to change, their Dodge is slammed into from behind by a 1989 Honda belonging to Oswald Owner. It is covered by a policy of insurance issued by Some Freakin’ Insurance Company, which policy contains New York’s standard No-Fault PIP endorsements, and was driven at the time by either Mr. Owner (if you believe his version of things) or by a Mr. Otherguy (if you believe the Police Report). [Insofar as the Innocents are concerned, please assume that the injuries that ensue are serious as defined by Insurance Law Section 5102 (d).]

Without hedging bets, it seems from this account to be a worthwhile exercise in auto-liability justice to represent the Innocents in an action to recover for the injuries, damages, pain and suffering visited upon them through no fault of their own. Indeed, it seems at first blush to be just the type of case we all would wish to see in our office.

Doubtless that is how plaintiffs’ counsel felt when this Nassau County case was originally signed-up, processed and moved through the system toward a recovery for a deserving pair of law-abiding citizens. But, alas, the plot thickened.

As it turned out, this was the second instance of Mr. Owner’s car rear-ending an unsuspecting motorist in a two-week period. Within a month after the Innocents’ collision Owner’s policy of auto insurance was officially cancelled for non-payment of any premiums beyond the initial binder which initiated coverage (which payment pre-dated the accident in question). Owner failed to cooperate with his carrier by refusing to make a Statement and not appearing at an E.U.O., though two passengers in his car on the day in question did show up. Their combined testimony convinced Some Freakin’ Ins. Co. that this was no accident at all, but rather an intentional act designed to fraudulently obtain No-Fault benefits for occupants of the Owner car. Some Freakin’cordially issued disclaimers of coverage to Owner, his occupants and both Innocents for any claims arising out of this felonious occurrence.

A disappointment, of course, but only a temporary setback to be sure. Intrepid plaintiff’s counsel then makes timely claim for Arbitration under the uninsured motorist endorsement of the host car’s policy. Picayune’s counsel move to Stay the Arbitration, alleging that UM coverage is only to compensate for injuries “caused by an accident”, which this staged collision was not. Both carriers and claimants were joined in the Petition, which results in a day-long bench Trial in Nassau County Supreme Court.

Lest anyone think this a fabricated scenario, this is a real case actually namedPROGRESSIVE v. McNEIL [4 Misc. 3d 1022(A), 2004 WL 2059538 (N.Y.Sup.), 2004 N.Y. Slip Op. 50998 (U); Unpublished Disposition, Supreme Nassau, 9/13/04] . And, lest anyone believe that “all’s well that ends well”, be assured that this accident case ended as badly for plaintiffs as it began. In a well-written decision that was obviously a displeasure to author, Justice Zelda Jonas felt constrained to rule: 1) that the carrier of the offending vehicle was correct in denying coverage to plaintiffs for “an intentional staged event”, definitionally not an accident; 2) that the language of the UM endorsement covering the plaintiffs’ own vehicle has been interpreted by the Courts to likewise “exclude recovery for intentional conduct”; and, by extension 3) MVAIC would likewise be unavailable to plaintiffs for similar reasons.(McCARTHY v. MVAIC, 16 AD2d 35, 224 NYS2d 909). In short: 1 accident + 2 injureds + 2 carriers + 3 co-conspirators in an offending vehicle = 0 recoveries to the Innocents!

Justice Jonas has been quoted as saying “I couldn’t believe the law on it……You have an innocent party that was rear-ended.(Legislators) have to create a statute that deems this to be an accident or to exempt a party from not being covered when fraud is determined”.

As a public policy matter, we at NYSTLA agree. As a result, our standing Committee on Legislation, Chaired by Corey Kaye, in conjunction with our Automobile Litigation and No-Fault Committee, is drafting a Bill to provide such “Innocent Party Auto Coverage” to be submitted to the Legislature sometime this session. In future issues we will keep you apprised of how it progresses toward law. In the meantime however, members with auto practices may wish to contact their State Legislators to make them aware of the grand injustice that the present state of the law permits.

Marc M. Dittenhoefer, a Member of the Bill of Particulars Board of Editors, is currently the NYSTLA Parliamentarian and Chair of the Automobile Litigation and No-Fault Committee

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