David M. Barshay
David M. Barshay ()

No-fault automobile insurance coverage is limited to injuries arising out of a covered “accident.” The no-fault regulations provide, inter alia, “Mandatory Personal Injury Protection—The [insurance] company will pay first-party benefits to reimburse for basic economic loss sustained by an eligible injured person on account of personal injuries caused by an accident arising out of the use or operation of a motor vehicle…”1 Thus, no-fault automobile policies, and indeed most liability policies, do not cover intentional acts. For purposes of no-fault insurance, whether an automobile collision is an accident or an intentional act is to be interpreted from the viewpoint of the insured claimant.

In State Farm v. Langan,2 the insured, Neil Spicehandler, was injured, and ultimately died, as a result of the intentional and criminal act of the driver of a vehicle, Ronald Popadich, in driving into a group of people. Spicehandler’s estate sought no-fault and uninsured/underinsured benefits under his insurance policy. The insurer disclaimed coverage as the injuries were caused by the intentional act of Popadich.

The Court of Appeals, affirming the Appellate Division, Second Department, held that although Popadich may have intentionally driven his car into Spicehandler, from Spicehandler’s perspective, it was an accident and therefore covered under the no-fault and uninsured motorist endorsements of the decedent’s policy. The court in Utica Mut. Ins. Co. v. Burrous3 ruled similarly and held, “when an occurrence is ‘unexpected, unusual and unforeseen,’ from the insured’s perspective, it qualifies as an ‘accident.’”

Although not a no-fault case, the 2014 case of Leo v. New York Central Mutual Fire Insurance Company4 presented an interesting insurance coverage question, to wit, whether an act of self-defense by the insured resulting in fatal injuries to another person is a covered act under a liability policy, requiring the insurer to indemnify the insured for a wrongful death claim by the injured person’s estate.

The facts of Leo are as follows. The insured, Mark Leo, was involved in an altercation with the decedent, Anthony Sciortino. According to Leo, before his encounter, he sensed that Sciortino may get violent, and therefore brought a baseball bat with him to defend himself. Sciortino had a metal bar and swung it at Leo, first missing Leo, then grazing the top of Leo’s head. Leo then swung his bat in self-defense and struck Sciortino in the head or back of the neck. After Sciortino swung his metal bar again, Leo again struck Sciortino in the head or back of the neck, resulting in Sciortino’s ultimate death.

Leo was charged with criminal manslaughter, second degree, and, after asserting the affirmative defense of self-defense, was acquitted after trial. Sciortino’s estate sued Leo for wrongful death. Leo’s liability carrier, New York Central Mutual, disclaimed coverage, asserting that the acts of self-defense by Leo are excluded from coverage. Leo commenced a declaratory action against his insurer, seeking a declaration that the insurer was required to indemnify Leo in the wrongful death action. The parties settled the wrongful death action and agreed that if the court found Leo’s act of self-defense to be covered under the insurance policy, New York Central would pay its policy limits.

The Leo court, New York Supreme Court, Oneida County, held, consistent with the Langan and Burrous courts above, that the question of a covered accident is viewed “from the point of view of the insured” and applies to those incidents that are “unexpected, unusual and unforeseen.” Further, the court recognized that a covered accident may also include “an intentional or expected event which unintentionally or unexpectedly” results in death. Finding this to be a case of first impression in New York and analyzing the policy language regarding coverage (for accidents) and exclusions, as well as the insured’s deposition testimony, the court held that, “loss occasioned by acts of self-defense is excluded under the terms of the [expected or intended injuries] exclusion in the policy.” Specifically, in this case, the court found that the injuries resulting in death to Sciortino “flowed directly and immediately from the Plaintiff’s [Leo's] conduct.”

Thus, even if legally justified, acts of self-defense may be excluded from liability insurance coverage as intentional acts. Of course, in the no-fault insurance context, the rare use of an automobile in an act of self-defense may warrant a different result, insofar as the injured claimant would likely not be the person engaging in the act of self-defense.

Out-of-State Policies

Several appellate decisions regarding out-of-state policies have recently been issued. The issue addressed in Natural Therapy Acupuncture v. Geico Ins. Co.5 was an election to arbitrate the parties’ dispute. The underlying policy in that case was written in New Jersey and governed by New Jersey law. One important distinction between New York and New Jersey no-fault law is that in New York, the applicant medical provider (or injured person) alone determines whether to litigate its dispute in court or submit the dispute to binding arbitration,6 while in New Jersey, either party to the dispute may elect arbitration.7 In fact, an insurance policy form mandating all no-fault disputes to be submitted to arbitration instead of court has been upheld by the New Jersey courts as proper under New Jersey law.8

The plaintiff in Natural Therapy Acupuncture moved for summary judgment, and the defendant cross-moved for dismissal on the ground that as the insurer was electing arbitration, the dispute had to be resolved by arbitration. The lower court granted the cross-motion and dismissed the case. On appeal, the court reversed and held that although a no-fault dispute may be submitted to arbitration upon the initiative of either party, “the existence of an option to arbitrate is not a ground for dismissal of a court action.” Instead, the Appellate Term held, “such an option—if exercised by way of a motion to compel arbitration—is a ground to stay the court action.” As the defendant insurer in that case did not move to compel arbitration, its motion to dismiss should have been denied. Thus, the proper action for an insurer electing arbitration under New Jersey law is to move to compel arbitration.

In Compas Med. v. Infinity Group9 the issue was the effect of an insurer’s rescission of a Florida policy ab initio. New York law does not permit the retroactive voiding or rescission of a policy ab initio.10 According to the Appellate Term in Compas Med., Florida law does permit retroactive cancellation if there has been a material misrepresentation in an application for insurance.11 The policy in that case was written in Florida based on the alleged residence of the insured in Florida and the alleged garaging of the insured vehicle in Florida.

The defendant insurer’s investigation revealed that the insured did not reside at the Florida address listed on the policy, and the vehicle was not garaged at the Florida address. The insurer then gave notice of the rescission, and returned all premiums that had been paid. The lower court determined that triable issues remain as to the basis for the cancellation, to wit, whether the insured was a Florida resident and whether the insured vehicle was garaged in Florida.

The Appellate Term reversed and held that the mailing of the notice of rescission and the return of premiums were sufficient to void the policy ab initio, and that the plaintiff failed to raise a triable issue as to the validity of the rescission under Florida law. This decision was consistent with a prior decision in Universal Health Chiropractic v. Infinity Prop. & Cas. Co.,12 which also concerned the retroactive cancellation of a Florida policy based on misrepresentations in the garaging of the vehicle and the residence of the insured.

New Way Med. Supply Corp. v. Infinity Group13 involved a pre-accident cancellation of a Pennsylvania policy for non-payment of premium. The defendant insurer moved to dismiss the action based on cancellation of the underlying insurance policy, presumably submitting a copy of its cancellation notice and appropriate proof of mailing with its motion. The lower court granted the motion and dismissed the case. The Appellate Term reversed and held that insofar as Pennsylvania law requires that a cancellation notice be mailed to the insured at the address shown in the policy, the defendant was required to attach a copy of the insurance policy or declaration page to its motion. Failure to do so must result in denial of the insurer’s motion for summary judgment.

Stracar Med. Servs. v. Nationwide Mut. Ins. Co.14 involved a Virginia policy that was purportedly voided ab initio. In that case, similar to Compas Med. v. Infinity Group, the insurer notified the insured-assignor that it was retroactively canceling the underlying policy due to material misrepresentations made by the insured as to where the vehicle would be garaged. The insurer then commenced a declaratory action in Virginia to void the policy. The insured-assignor agreed to entry of an order which effectively voided the insurance policy ab initio. The insurer moved to dismiss the medical provider-assignee’s lawsuit based on the retroactive cancellation of the policy. The insurer included in its motion the order of rescission from the Virginia court.

The lower court dismissed, and the Appellate Term reversed, holding that as the plaintiff medical provider was not a party to the Virginia declaratory action, it was not bound to that decision, as it did not have a full and fair opportunity to be heard and it was not in privity with the assignor at the time the assignor signed off on the order. The holding in this case is consistent with the Appellate Term, First Department’s decision in Quality Psychological Servs. v. Infinity Prop. & Cas. Co.,15 in which the First Department held that the plaintiff medical provider was not bound by a Pennsylvania court’s order voiding the underlying insurance policy ab initio insofar as it was not a party to that Pennsylvania action and it was not in privity with the assignor.

Endnotes:

1. 11 NYCRR 65-1.1.

2. 16 N.Y.3d 349 (2011).

3. 121 A.D.3d 910 (2d Dept. 2014).

4. 2014 N.Y. Misc. LEXIS 6101, 2014 NY Slip Op. 24437 (Sup. Ct. Oneida County 2014).

5. 2015 N.Y.Slip Op. 25425 (App. Term 2d, 11th & 13th Jud. Dists. 2015).

6. Ins. Law §5106(b) (“Every insurer shall provide a claimant with the option of submitting any dispute involving the insurer’s liability to pay first party benefits, or additional first party benefits, the amount thereof or any other matter which may arise pursuant to subsection (a) of this section to arbitration pursuant to simplified procedures to be promulgated or approved by the superintendent.”)

7. N.J.S.A. 39:6A-5.1 (“Any dispute regarding the recovery of medical expense benefits or other benefits provided under personal injury protection coverage…arising out of the operation, ownership, maintenance or use of an automobile may be submitted to dispute resolution on the initiative of any party to the dispute, as hereinafter provided.”)

8. Coalition for Quality Health Care v. New Jersey Department of Banking and Insurance (348 N.J. Super. 272, 791 A.2d 1085 [App. Div. 2002], cert. denied 174 N.J. 194 [2002]).

9. 2016 N.Y.Slip Op. 50042(U) (App. Term 2d, 11th & 13th Jud. Dists. 2016).

10. See, VTL §313 and Matter of Liberty Mut. Ins. Co. (127 AD2d 767 [2d Dept. 1987]) (“It has long been recognized that this provision [VTL §313] supplants an insurance carrier’s common-law right to cancel a contract of insurance retroactively on the grounds of fraud or misrepresentation, and mandates that the cancellation of a contract pursuant to its provisions may only be effected prospectively.”)

11. The court cited Florida Statute Title 37, section 627.409 to support this holding. However, that section reads, inter alia, “a misrepresentation, omission, concealment of fact, or incorrect statement may prevent recovery under the contract or policy only if any of the following apply: (a) The misrepresentation, omission, concealment, or statement is fraudulent or is material to the acceptance of the risk or to the hazard assumed by the insurer. (b) If the true facts had been known to the insurer pursuant to a policy requirement or other requirement, the insurer in good faith would not have issued the policy or contract, would not have issued it at the same premium rate, would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss.”

12. 42 Misc.3d 146(A) (App. Term 2d, 11th & 13th Jud. Dists. 2014).

13. 50 Misc.3d 128(A) (App. Term 2d, 11th & 13th Jud. Dists. 2015).

14. 49 Misc.3d 152(A) (App. Term 2d, 11th & 13th Jud. Dists. 2015).

15. 47 Misc.3d 142(A) (App Term 1st Dept. 2015).