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Insured Was Entitled to Settle with Tortfeasor 30 Days After Insured’s Notification of His Insurer of the Settlement Offer—Although Insurer Sent a Letter Responding to the Notification, It Was Sent to the Wrong Address and the Insured Never Received It

In determining the insurer’s (GEICO’s) motion to stay arbitration should have been denied, the Second Department explained the procedure where the insured has been offered a settlement by the tortfeasor for the full amount of the tortfeasor’s policy and permission to settle is sought from the insured’s carrier (GEICO here). The insured timely notified and requested permission to settle from GEICO, but GEICO sent its response to the wrong address and the insured never received it.  After the passage of 30 days, the insured accepted the settlement and served a demand for arbitration on GEICO re: the supplemental uninsured/underinsured motorist (SUM) benefits under the GEICO policy:

As a general rule, an insured who settles with a tortfeasor in violation of a policy condition requiring his or her insurer’s consent to settle, thereby prejudicing the insurer’s subrogation rights, is precluded from asserting a claim for SUM benefits under the policy … . However, the language set forth in 11 NYCRR 60-2.3(f), which must be included in all motor vehicle liability insurance policies in which SUM coverage has been purchased, creates an exception to this rule in situations where the insured advises the insurer of an offer to settle for the full amount of the tortfeasor’s policy, which obligates the insurer either to consent to the settlement or to advance the settlement amount to the insured and assume the prosecution of the tort action within 30 days … . In the event that the insurer does not timely respond in accordance with this condition, the insured may settle with the tortfeasor without the insurer’s consent, and without forfeiting his or her rights to SUM benefits (see 11 NYCRR 60-2.3[f]…).

Here, the burden was on GEICO to come forward with sufficient facts to establish justification for a stay of arbitration … . GEICO’s submission of its letter requesting additional documentation regarding the settlement, which was addressed to the wrong law firm at an address different from that of the law firm which had initially notified GEICO of the settlement offer, failed to sustain this burden. Matter of Government Empls. Ins. Co. v Arciello, 2015 NY Slip Op 05477, 2nd Dept 6-24-15

 

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