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The Rogak Report: 04 Feb 2005 * * Named Driver Exclusion **

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  • Lawrence Rogak
    Message 1 of 1 , Feb 4, 2005

      Property & Casualty Insurance Co. of Hartford v. Clarke, NYLJ 2/04/05
      (Supreme Court, Kings County) (Kramer, j)

      Clarke sustained personal injuries when a vehicle, owned by
      Pennsylvania resident Alexander M. Joyner, registered in
      Pennsylvania, insured by a Pennsylvania insurer, Safe Auto and driven
      by a sibling of the owner, Mark A. Joyner, made a left turn in front
      of respondent's car causing a collision. Safe Auto denied
      respondent's claim because the driver was explicitly excluded from
      coverage by the provisions of the Safe Auto policy - a permissible
      exclusion under Pennsylvania law. Accordingly, Clarke sought
      uninsured motorists benefits from Hartford. Hartford moved to stay
      arbitration and add Safe Auto and the Joyners as additional

      The Court began by stating that there is no question that this non
      resident owner was required to comply with New York law, which makes
      every owner of a vehicle used or operated in this state liable for
      injuries resulting from negligence in the permissive use or operation
      of such vehicle (VTL§388). Indeed, the owner's knowing failure to
      maintain proof of financial security may well subject him to various
      penalties, [VTL§318(4)(a)(b).]

      "A non-resident motorist would, under most circumstances be governed
      by the provisions of Insurance law §5107 which speaks to coverage for
      non-resident motorists and specifically requires an insurer who is
      authorized to transact or is transacting business in this state, or
      is controlling or controlled by or under common control by or with
      such insurer to include in each such policy coverage to satisfy the
      financial security requirements of article six or eight of the
      vehicle and traffic law and to provide for the payment of first party
      benefits . . . "

      Here, however, Safe Auto provided an affidavit from its Vice
      President avering that Safe Auto is not an "authorized insurer" in
      New York. "It is not authorized to do business in New York, is not
      controlled by an insurer authorized to do business in New York and
      has not filed a statement with the Superintendent of Insurance
      agreeing that its automobile insurance policies sold in any other
      state will be deemed to satisfy the financial security requirements
      of article VI or VIII of the New York Vehicle and Traffic Law. Safe
      Auto does not do business in New York nor write insurance policies in
      New York." No evidence was submitted to contradict these statements.

      Although the insurer may not be authorized to transact business in
      this state, it is still possible for the non resident owner-insured
      to give proof of financial responsibility under Vehicle and Traffic
      Law §344 by "filing with the commissioner a written certificate . . .
      of an insurance carrier authorized to transact business in the state
      in which the motor vehicle is registered otherwise conforming to the
      provisions of this article." However, the commissioner shall only
      accept this proof if the carrier complies with four conditions which
      include, inter alia, the execution of a power of attorney authorizing
      the commissioner to accept service on its behalf, adopting a binding
      resolution declaring that its policies shall be deemed to vary with
      the law of this state, and agreeing to accept as final and binding
      any judgment of any court of competent jurisdiction in this state.

      However, according to the affidavit of its Vice President, Safe Auto
      policies do not comply with the conditions outlined above.

      "Thus, in the instant matter, although the owner of the offending
      vehicle did in fact have insurance, the insurance did not comply with
      the above described statutory mandates in this State. The question
      presented is whether under these circumstances, the injured party can
      maintain a viable claim against this out of state insurer," stated
      the Court.

      "In response to this question, this Court holds that an individual
      injured by an automobile covered by an unauthorized, unregistered
      insurer, can only seek recompense from that insurer under two
      circumstances. The first is where there is proof that the insurer has
      conformed to the statutory provisions outlined above, which proof is
      lacking here. The second is where the policy of insurance contains
      language that would make it fair and equitable to deem the insurer to
      be in compliance and conformity with New York law."

      "While this Court is quite keenly aware of New York's public policy
      to protect innocent victims of car accidents and insurance carriers
      authorized to do business in New York are required to make their
      policies conform to New York's minimum financial requirements, this
      rule cannot be applied without a reason to insurers like Safe Auto
      that have not been so authorized and that are not shown to have
      transacted business here in New York and that have not received
      recompense for such accommodation either in the form of business
      dealings or the gathering of additional premiums. By way of contrast,
      [Hartford] does apparently do business here and its premiums
      presumably reflect the incorporation of an uninsured motorist
      provision in the policies it issues in New York. Allowing
      [Hartford's] New York resident, insured, recourse to that provision
      under these circumstances seems fair and equitable.

      A temporary stay of arbitration for a period of three months was
      granted to afford Hartford "the opportunity to gather the sought
      after discovery from respondent."

      Comment: Well, there's a kick in the pants, isn't it? I have been
      asked on numerous occasions whether a "named driver exclusion" in an
      out of state auto policy would be upheld in New York, and I always
      said "no," because although there were no court decisions on the
      subject, it was obviously -- until now -- against public policy.

      This court decision, the first of its kind in New York, carves out a
      narrow exception. It applies only to policies issued by insurers who
      do no business in New York and are not authorized to do so. It
      applies only when such a policy contains an exclusion that applies
      under the circumstances (such as here, where a driver specifically
      excluded by the policy was driving). And it applies only if the
      policy does NOT contain a "deemer" clause such as this one:

      "If an insured person becomes subject to the financial responsibility
      law or the compulsory insurance law or similar laws of another state
      because of the ownership, maintenance or use of your insured car in
      that state, we will interpret this policy to provide any broader
      coverage required by those laws."

      Meet this three-pronged test, says this Court, and you have an auto
      policy that does not provide coverage for a New York accident.

      Larry Rogak
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