As New York Civil Law wrote in a prior post, the New York Court of Appeals heard oral arguments earlier this month in Raffellini v. State Farm Mut. Auto. Ins. Co. The issue on the appeal is: Does an injured plaintiff have to establish he or she sustained a "serious injury" under Insurance Law sec. 5102 to recover supplementary underinsurance motorist coverage (SUM) from his or her insurance carrier?
I attended the oral argument and was impressed by both the appellant's and respondent's counsel. For those of you who missed the oral argument, the following is a summary of my notes:
Appellant’s counsel began his argument on behalf of State Farm by stating that the statutory framework of Insurance Law § 3420(f)(1) and (2)(A) demonstrate the “serious injury” requirement in both the uninsured motorist coverage and supplementary underinsured motorist contexts. Chief Judge Kaye asked counsel to explain his position given section 3420(f)(1) explicitly required a “serious injury” showing where section 3420(f)(2)(A) did not. Counsel explained that section 3420(f)(2)(A) was not written in a vacuum. Counsel also pointed out that section 3420(f)(2)(A) incorporated the language of section 3420(f)(1) because section 3420(f)(2)(A) language began with the phrase, “[a]ny such policy.” Judge Ciparick seemed to reject that interpretation, observing that such general language is always contained in statutes. Judge Ciparick also seemed to question the fairness aspect of requiring the plaintiff/insured to demonstrate a “serious injury,” commenting that SUM benefits are purchased for an additional premium, the coverage is optional, and the benefits act as excess coverage.
Judge Read asked appellant’s counsel whether there was any logic for the Court to require a “serious injury” showing for section 3420(f)(1) and not for section 3420(f)(2)(A). Counsel stated that there was no logic supporting such divergent treatment. Judge Read followed up her question, asking about State Farm’s position regarding the plaintiff/insured’s settlement with the underinsured tortfeasor (State Farm did not respond to its insured’s request for authorization to accept the settlement and, thus, it was deemed that State Farm authorized the settlement). Judge Read then asked whether State Farm would protest settlements with underinsured tortfeasors in future cases if the Court decided against State Farm. Counsel answered that he most likely would advise State Farm to respond to its insureds’ request for authorization. Judge Smith then asked rhetorically, “What would you do? Tell the [insured] not to settle?”
Judge Smith then asked about the res judicata impact of a “serious injury” finding in the underinsured motorist part of the case. Appellant’s counsel stated that it was State Farm’s position that the SUM insurer would not be bound under the doctrine of res judicata by the finding of “serious injury” and that the plaintiff/insured would have to demonstrate “serious injury” in seeking SUM benefits. Judge Ciparick then replied, “Would you be forcing a trial on the serious injury [issue]?”
Prior to respondent’s counsel setting out his argument on behalf of Mr. Raffellini, Chief Judge Kaye asked him to explain the logic for section 3420(f)(1) including the “serious injury” requirement but section 3420(f)(2)(A) not doing containing such language. Counsel argued that the two sections were completely separate. The crux of counsel’s argument was that a “serious injury” finding was implicit where the underinsured tortfeasor’s carrier paid the plaintiff/insured the policy limits. He reasoned that the plaintiff/insured had to convince the underinsured tortfeasor’s carrier that the plaintiff sustained a “serious injury” to justify the carrier paying the policy limits. As such, a settlement demonstrated a “serious injury” finding and the plaintiff did not have to demonstrate for a second time to the SUM insurer that he or she sustained a “serious injury” to receive SUM benefits. Chief Judge Kaye noted that if the “serious injury” finding was implicit when a settlement with the underinsured tortfeasor’s carrier was reached, what was the harm with just making a “serious injury” showing explicit in a SUM endorsement. Counsel answered that doing so would require two showings of serious injury, and he argued that such a requirement was an unnecessary obstacle to the plaintiff/insured receiving SUM benefits.
Judge Graffeo struggled with respondent’s counsel’s argument, asking “At some point, don’t you have to demonstrate a serious injury?” Judge Pigott followed up by explaining that the significance of a settlement can have different interpretations depending on the type of injury. He gave the example of a broken pinky versus a herniated disc. In the case of a broken pinky, Judge Pigott explained that there was no doubt that the plaintiff sustained a “serious injury” as explained in Insurance Law § 5102(d). Judge Read also appeared skeptical of counsel’s “implicit showing” argument, asking “Aren’t there many reasons for settlement?”
Chief Judge Kaye asked respondent’s counsel whether the Fourth Department’s decision in Meegan was distinguishable. Counsel stated that the Fourth Department was mistaken in its holding, and that the statute had to explicitly state that a “serious injury” showing was necessary to require such a showing.
Perhaps the most telling question came from Judge Graffeo, who asked “In order to find in your [Mr. Raffellini’s] favor, the Court must make a determination about settlement?” The implication of Judge Graffeo’s question is that the Court would have to hold that a settlement with the underinsured tortfeasor’s carrier equated to an finding of “serious injury.” Respondent’s counsel stated that in the case before the Court, a “serious injury” was implicit because of the settlement with underinsured tortfeasor’s carrier.
New York Civil Law will report on the Decision, which is expected be handed down in November.
