Supplemental uninsured/underinsured motorist (SUM) coverage is designed to compensate a person who is seriously injured in a car accident and unable to recover the full amount of the damages from the negligent party. SUM benefits may be available when the negligent driver is unknown—such as in the case of a hit-and-run accident—or either lacks insurance or has less liability coverage than the victim’s policy provides. Like all insurance coverage, SUM benefits are subject to a host of conditions and restrictions that may frustrate an accident victim’s efforts to receive timely compensation.
Appeals Court Holds Two-Year Delay Did Not “Prejudice” Insurer
For example, the Appellate Division, Fourth Department recently addressed a case where an insurer denied SUM benefits on the grounds the victim waited too long to notify it of her claim. The case involves a 2012 car accident. The victim was a passenger in a car that was rear-ended by another vehicle. Approximately one year later, the victim required cervical fusion surgery, allegedly as the result of injuries sustained in the accident.
The negligent driver actually had insurance, but its coverage was limited to $50,000. Accordingly, the victim informed her mother’s insurance company in 2014—more than two years after the accident took place—that she was seeking payment of SUM benefits. The insurance company denied the claim, saying the victim failed to provide notice in a “timely manner” as required by the policy.
The victim sued the insurance company, seeking a court declaration that she was entitled to SUM coverage. A state supreme court judge rejected the claim, but on appeal, the Fourth Department reversed and ordered the insurance company to pay up.
Initially, the Fourth Department said the victim did not notify the insurer in a “timely manner.” The policy stated an insured party must provide notice “with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured.” Here, the victim learned about the limit of the negligent driver’s insurance coverage in September 2012, yet she waited until August 2014 to notify the insurer. The appeals court said this was an “unreasonable” delay.
That said, the victim was still entitled to SUM coverage. Under New York law, an insurer may not deny SUM benefits due to late notice unless such delay “materially impairs the ability of the insurer to investigate or defend the claim.” So long as the victim notifies the insurer within two years of the time required under the policy—as the victim did here—the burden is then on the insurer to prove it was prejudiced by the delay. In this case, the Fourth Department said the insurer failed to meet this burden, so as a matter of law it was required to pay SUM benefits.