A federal district court in New York has ruled that an auto insurer's disclaimer was unenforceable where it failed to provide timely notice of its disclaimer to all parties asserting claims against its insured.
The Case
When Sewell L. "Hunter" Frey, Jr., rented a Chrysler vehicle from National Car Rental at LaGuardia Airport in Queens, New York, he purchased an optional supplemental insurance policy from Ace American Insurance Company (the "Ace Policy") that National offered.
Mr. Frey was a "Named Insured," defined in the Ace Policy as the person renting the vehicle or any additional authorized driver, as defined in the rental agreement Mr. Frey signed.
The Ace Policy expressly disclaimed liability arising out of the use of the vehicle by any unauthorized driver. The Ace Policy included a supplemental uninsured/underinsured motorists endorsement (the "SUM Endorsement") that stated that Ace would pay for sums that the named insured was legally entitled to recover from the owner or driver of an uninsured motor vehicle.
A few days later, Eduardo Nunez was driving the vehicle when he allegedly lost control and crashed into a concrete pillar. Mr. Nunez, Daniela Abreu and her unborn child, and Jose Henriquez died; Abel Garcia (Mr. Frey's employee) and Raymond Bautista were injured.
After the injured persons and the estates of the deceased filed multiple lawsuits against Mr. Frey, Ace asked a federal court in New York to declare that it had no obligation to defend or indemnify Mr. Frey or any other person for the underlying actions.
Ace moved for summary judgment.
The District Court's Decision
The district court denied the motion.
In its decision, the district court first found that Mr. Nunez was covered under the rental agreement as an authorized additional driver ("AAD").
The district court then ruled that, under New York Insurance Law § 3420(d)(2), Ace was required to provide the injured persons and the estates of the deceased with written notice of its denial of liability. Because it had not done so, the district court ruled, it was precluded from successfully disclaiming coverage.
The district court was not persuaded by Ace's argument that it had no liability and therefore no duty to provide that notice because Mr. Nunez was an unauthorized driver. The district court ruled that New York state law presumed that Mr. Nunez had National's consent to drive the car, a presumption that Ace failed to rebut. Moreover, the district court continued, regardless of whether Mr. Frey had paid the additional driver fee when he rented the vehicle, state law mandated that the rental agreement cover Mr. Nunez as an AAD.
To exclude coverage, the district court ruled, Ace needed to send notice to the possible claimants within a reasonable time. Ace had not done so, the district court concluded, and its disclaimer of liability was unsuccessful.
The case is Ace American Ins. Co. v. Frey, No. 17 Civ. 6810 (ER) (S.D.N.Y. Sept. 27, 2019). Attorneys involved include: For Ace American Insurance Company, Plaintiff: Kurt Michael Mullen, Nixon Peabody LLP, Boston, MA; Seth Lawrence Berman, Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrara, Wo, Lake Success, NY. For The Estate of Daniela Abreu, Defendant: Philip Michael Hines, LEAD ATTORNEY, Held & Hines, LLP, Brooklyn, NY. For Abel Garcia, Defendant: Christopher Scott Joslin, LEAD ATTORNEY, David Horowitz, P.C, New York, NY; Steven Jeffrey Horowitz, David Horowitz, P.C, New York, NY. For The Estate of Daniela Abreu, Counter Claimant: Philip Michael Hines, LEAD ATTORNEY, Held & Hines, LLP, Brooklyn, NY. For Ace American Insurance Company, Counter Defendant: Kurt Michael Mullen, Nixon Peabody LLP, Boston, MA; Seth Lawrence Berman, Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrara, Wo, Lake Success, NY.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].