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The Rogak Report: 29 July 2005 (Part 2) ** Disclaimers - Non-Cooperation **

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  • Lawrence Rogak
    AUTO INSURER FAILS TO MEET HEAVY BURDEN OF PROVING INSURED S NON- COOPERATION Matter of State Farm Mutual Automobile Insurance Co. v. Figueroa, NYLJ 7/29/05
    Message 1 of 1 , Jul 29, 2005
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      AUTO INSURER FAILS TO MEET HEAVY BURDEN OF PROVING INSURED'S NON-
      COOPERATION

      Matter of State Farm Mutual Automobile Insurance Co. v. Figueroa,
      NYLJ 7/29/05 (Supreme Court, Bronx County) (RENWICK, j)

      State Farm sought a permanent stay of UM arbitration. On December 17,
      2002, Figueroa was involved in a two-car accident with a vehicle
      owned and operated by Kamaludin. At the time of the accident, the
      Figueroa vehicle was insured by State Farm. The Kamaludin vehicle was
      insured by General Assurance Corporation. On June 2, 2004, General
      Assurance disclaimed coverage on the basis that Kamaludin failed to
      cooperate in the investigation of this claim. Consequently, Figueroa
      served a demand for UM arbitration against State Farm. Then State
      Farm commenced this proceeding to stay arbitration. A framed issue
      hearing followed.

      At the hearing, General Assurance presented two witnesses who
      testified about their individual efforts to locate the insured
      Kamaludin. First, General Assurance's investigator twice visited the
      building address listed in the insurer's file for Kamaludin. The
      investigator spoke to the building's superintendent, the next door
      tenant and the mail delivery person. None of them had any personal
      knowledge that Kamaludin was a tenant at the premises in question. On
      both visits, the investigator left a note on the door of the
      apartment for the insured to contact her with regard to the accident.
      The investigator also called the home phone number for the insured in
      the insurer's file. She was not able to reach anyone at that number.

      Secondly, a claims processor at General Assurance called the insured
      at the phone number in the insurer's file. She was unable to reach
      the insured; she left a voice message, to which no one responded. The
      claims processor also called the insured's broker, who informed her
      that Kamaludin never gave notice of the claim. The broker also said
      that she had lost contact with the insured. The claims person also
      procured the service of a PI to call the home and work phone numbers
      listed in the insurer's file. The PI reported that the home phone
      number listed in the insurer's file was "incorrect." The PI's call of
      the insured's work number listed in the insurer's file revealed that
      the insured had not worked at the place for about six months.

      At the end of her investigation, the claims processor sent Kamaludin
      an "acknowledgment letter," and a "reservation of rights" letter,
      both on April 14, 2004, by regular and certified mail. One return
      receipt was sent back with the apparent signature of Kamaludin.
      Subsequently, the claims processor sent out a letter on April 29,
      2004, by regular and certified mail, demanding that the insured
      appear for an EUO scheduled for May 10, 2004. Neither the return
      receipt requested nor the EUO letter were returned to the insurance
      carrier. Nor did Kamaludin appear for the EUO on May 10, 2004. The
      claims processor then sent another letter, by regular mail and return
      receipt requested, demanding that the insured appear for the EUO
      rescheduled for May 19, 2004. Neither the return receipt requested
      nor the EUO letter were returned to the insurance carrier. Nor did
      Kamaludin appear for the EUO on May 19, 2004. Finally, the claims
      processor issued a disclaimer letter on June 2, 2004.

      The Court ruled, first, that "when an insured deliberately fails to
      cooperate with its insurer in the investigation of a covered incident
      as required by the policy, the insurer may disclaim coverage.
      However, inasmuch as the defense frustrates the policy that innocent
      victims of motor vehicle accidents be recompensed for the injuries
      inflicted upon them, the courts have consistently held that the
      burden of proving the lack of co-operation is a heavy one indeed. The
      insurer must demonstrate that, (1) it acted diligently in seeking to
      bring about the insured's co-operation, (2) the efforts employed by
      the carrier were reasonably calculated to obtain the insured's
      cooperation, and (3) the attitude of the insured, after his co-
      operation was sought, was one of willful and avowed obstruction."

      "Under this standard, the insured need not have openly 'avowed' the
      intent to obstruct the insurer; however, the showing must support the
      inference that the insured's failure to cooperate was deliberate.
      That is, mere inaction by the insured is not enough. Instead, there
      must be substantial effort exerted with a reasonable degree of
      skill. Ultimately, willful non-cooperation must be shown. The
      carrier must prove an attitude of 'willful and avowed obstruction' of
      the efforts by the insured to defend the action."

      "The standard of proof necessary is illustrated by the recent
      decision in New York Central Mutual Fire Ins, Co. v. Salomon, 11
      A.D.3d 315 (1st Dept. 2004). In Salomon... the insurer, upon receipt
      of notice of the accident by an attorney for a passenger in the
      insured vehicle, contacted the insured's broker. Since the broker did
      not know the insured's telephone number, the insurer sent 'contact
      letters' to her at the address listed on the police report and at the
      address listed in the insurer's file. These letters were sent by both
      regular and certified mail. The letter sent by regular mail did not
      come back, but the letter sent by certified mail was returned
      as 'unclaimed.' The insurer then assigned the file to a special
      investigator. His check of the DMV records revealed that the insured
      vehicle had been 'salvaged' and that the address listed on the police
      report was the one listed on the insured's driver's license.
      Certified letters sent to the insured again at both of her addresses
      were returned as 'unable to serve.' One letter came back with a
      forwarding address, which the investigator visited and determined
      that the insured did not live there at that time. Three deposition
      notices sent to the insured were sent by certified mail, and one was
      returned with what purported to be the insured's signature. The
      insured did not appear for her deposition."

      "Under these circumstances, the court held that the insurer did not
      meet its burden of establishing non-cooperation by the insured, since
      the evidence was insufficient to support an inference that the
      insured's failure to cooperate was deliberate and willful. Indeed,
      the court said that the inference of noncooperation was far
      from 'practically compelling.' As explained by the court, the
      insurer's efforts, to locate the insured were 'almost entirely
      limited to sending letters.' The assigned investigator never visited
      either of the insured's possible addresses, and there was no
      indication that when he visited the third potential address he ever
      sought to clarify when the insured moved or where she moved to. As
      the court summed up, '[u]ltimately, before being permitted to
      disclaim due to non-cooperation, the insurer had an obligation to do
      somewhat more than merely to send letters. It should have
      ascertained, by on-site visits, whether and when the insured lived in
      the various locations it had on file, and whether forwarding
      addresses were available, in order to determine whether the insured
      was deliberately avoiding responding to the insurer.'"

      "In this case, the disclaiming insurer does not demonstrate much more
      effort than those found inadequate in Salomon. As fully explained
      above, the representatives from General Assurance were unable to
      confirm that the insured continued to live at the address listed in
      the insurer's file, based upon the uneventful visits made to the
      address in question and the unsuccessful phone calls made to the home
      and work numerous listed in the insurer's file. On the contrary,
      while one return receipt request was returned with the apparent
      signature of the insured, the preponderance of the evidence gathered
      during the carrier's own investigation suggested the strong
      possibility that the insured had relocated from the address listed in
      the insurer's file."

      "Under the circumstances, the insurer in this case, like the
      insurance carrier in Salomon, had an obligation to do somewhat more
      than to send letters to the address listed in the insurer's file....
      An insured's failure to answer correspondence from the insurer or the
      failure to return registered letters sent to the insured are palpably
      insufficient to meet its burden of lack of cooperation. This is
      particularly true in this case where the carrier's own investigation
      suggested that the insured had relocated from the address listed in
      the insurer's file. Before disclaiming due to lack of cooperation,
      the insurance carrier should have ascertained whether forwarding
      addresses were available to determine whether the insured was
      deliberatively avoiding responding to the insurer. Most egregious was
      the investigators' utter failure to ascertain the insured's actual
      residence by visiting commercial establishments in the neighborhood,
      visiting his place of employment and talking to former co-workers,
      and requesting information from the Department of Motor Vehicles and
      Board of Elections."

      "As the foregoing evidence makes plain, General Assurance failed to
      act diligently in seeking Kamaludin's cooperation and failed to
      employ reasonable efforts to locate him. Moreover, since the evidence
      does not support a conclusion that Kamaludin was aware of the fact
      that General Assurance was seeking his cooperation, it cannot be said
      that he willfully refused to cooperate."

      As a result, General Assurance's disclaimer was voided, coverage was
      found for Kamaludin through GA, and State Farm's request for a
      permanently stay of UM arbitration was granted.

      Larry Rogak
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