Opinion
16386/2004.
Decided June 28, 2005.
In this proceeding pursuant to CPLR Article 75, petitioner State Farm Mutual Automobile Insurance Company (hereinafter referred to as "State Farm") seeks a permanent stay of arbitration of a claim for uninsured motorist (UM) benefits. Preliminarily, Justice McKeon issued a temporary stay and ordered a framed issue hearing, which took place on October 29, 2004. At the end of the hearing, however, Justice McKeon recused himself, and the proceeding was reassigned to this Court. Meanwhile, the parties have stipulated to this Court rendering a determination based upon the testimonial and documentary evidence presented at the October 29, 2004 hearing. This Court now grants a permanent stay of the arbitration for the reasons explained below.
Procedural and Factual Background
On December 17, 2002, respondent Yvelisse Figueroa was involved in a two-car automobile accident with a vehicle owned and operated by Mohamed A. Kamaludin. At the time of the accident, the Figueroa vehicle was insured by petitioner State Farm. The Kamaludin vehicle was insured by respondent General Assurance Corporation (hereinafter referred to as "General Assurance"). On June 2, 2004, General Assurance disclaimed coverage on the basis that Kamaludin failed to cooperate in the investigation of this claim. Consequently, respondent Yvelisse Figueroa served a demand for arbitration against State Farm for a claim of uninsured motorist (UM) benefits. Thereafter, State Farm commenced the instant proceeding to stay arbitration. Justice McKeon granted a temporary stay pending a hearing on the issue of General Assurance's disclaimer based on lack of cooperation. As stipulated, this Court renders a decision based upon the testimonial and documentary evidence presented at the framed issue hearing.
Framed Issue Hearing
At the framed issue hearing, respondent General Assurance presented two witnesses who testified about their individual efforts to locate the insured Kamaludin. First, Irene Delgado, who was employed by General Assurance as an investigator, on April 22, 2004 and May 5, 2004, visited the building address listed in the insurer's file for Kamaludin. Delgado 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, Delgado left a note on the door of the apartment for the insured to contact her with regard to the December 17, 2001 accident. Delgado 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, Chris Barbella, a claims processor at General Assurance, was assigned the Kamaludin file on April 12, 2004. Barbella immediately 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. Barbella also called the insured's broker, who informed Barbella that Kamaludin never gave notice of the claim. The broker also informed Barbella that she had lost contact with the insured. Barbella also procured the service of a third-party (unrelated to the insurance carrier) to call the home and work phone numbers listed in the insurer's file. The third-party reported that the home phone number listed in the insurer's file was "incorrect." The third-party'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, Barbella 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, Barbella sent out a letter on April 29, 2004, by regular and certified mail, demanding that the insured appear for an Examination Under Oath ("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. Barbella 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, Barbella issued a disclaimer letter on June 2, 2004.
Discussion
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. New York Central Mutual Fire Ins, Co. v. Salomon, 11 AD3d 315, 316 (1st Dept. 2004). 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." Thrasher v. United States Liab. Ins. Co., 19 NY2d 159, 168 (1967); see also, Empire Mut. Ins. Co. v. Stroud, 36 NY2d 719 (1975). 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.'" Thrasher v. United States Liab. Ins. Co., supra, 19 NY2d at 168; see also, Empire Mut. Ins. Co. v. Stroud, supra, 36 NY2d at 722; Mount Vernon Fire Ins. Co. v. 170 E. 106th St. Realty Corp, 212 AD2d 419 (1st Dept. 1995); Pawtucket Mut. Ins. Co. v. Soler, 184 AD2d 498, 499 (2nd Dept. 1992); Hanover Ins. Co. v. DeMato, 143 AD2d 807, 808 (2nd Dept. 1988).
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. Mount Vernon Fire Ins v. 170 E. 106th St. Realty Corp, supra, 212 AD2d at 420. That is, mere inaction by the insured is not enough. Empire Mut. Ins. Co. v. Stroud, supra, 36 NY2d at 721-722 (1975). Instead, there must be substantial effort exerted with a reasonable degree of skill. Id. 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. Empire Mut. Ins. Co. v. Stroud, supra, 36 NY2d at 722; see also Mount Vernon Fire Ins. Co. v. 170 E. 106th St. Realty Corp, 212 AD2d 419 (1st Dept. 1995).
The standard of proof necessary is illustrated by the recent decision in New York Central Mutual Fire Ins, Co. v. Salomon, 11 AD3d 315 (1st Dept. 2004). In Salomon, supra, 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. New York Central Mutual Fire Ins, Co. v. Salomon, supra.
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. New York Central Mutual Fire Ins, Co. v. Salomon, supra.
In this case, the disclaiming insurer does not demonstrate much more effort than those found inadequate in Salomon, supra. 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, supra, had an obligation to do somewhat more than to send letters to the address listed in the insurer's file. Cf. New York Central Mutual Fire Ins, Co. v. Salomon, supra. Indeed, as Thrasher, supra, and its progeny make abundantly clear, 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. See Thrasher, supra, 19 NY2d at 169-170; Empire Mut. Ins. Co v. Stroud, supra, 36 NY2d at 721-722. 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. Cf. New York Central Mutual Fire Ins, Co. v. Salomon, supra. "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." Thrasher, supra, 19 NY2d at 169-170.
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. Cf. Thrasher, supra, 19 NY2d at 169-170; New York Central Mutual Fire Ins, Co. v. Salomon, 11 AD3d 315 (1st Dept. 2004); Pawtucket Mut. Ins. Co. v. Soler, 184 AD2d 498 (2nd Dept. 1992); Statewide Ins. Co v. Ray, 125 AD2d 573 (2nd Dept. 1986)
Conclusion
For the foregoing reasons, this petition is granted to the extent of declaring and adjudging that respondent General Assurance failed to demonstrate that it met the requirements to disclaim coverage on the ground of lack of cooperation. Accordingly, petitioner is granted a permanent stay of the uninsured motorist arbitration instituted by its insured respondent Yvelisse Figueroa
This constitutes the Decision, Order and judgment of the Court.