The Office of General Counsel issued the following opinion on April 27, 2004, representing the position of the New York State Insurance Department.
Re: Supplementary Uninsured/Underinsured Motorist (SUM) Coverage
Question Presented:
Must a self-insured medallion cab maintain SUM coverage and, if so, in what amount (limit)?
Conclusion:
No. N.Y. Ins. Law § 3420 establishes standard provisions that must be included in or offered to the insured in conjunction with policies of liability insurance issued or delivered in this state. Policies insuring against liability arising out of the ownership, maintenance and use of a motor vehicle must include uninsured motorist coverage up to the dollar limits specified by the statute. N.Y. Ins. Law § 3420(f)(1) (McKinney Supp. 2004). Insurers must offer additional coverage (Supplementary uninsured/underinsured motorists or SUM coverage) beyond the required limits in amounts up to two hundred and fifty thousand dollars because of bodily injury to or death of one person in any one accident, subject to such limit for one person, and up to five hundred thousand dollars because of bodily injury to or death of two or more persons in any one accident, or a combined single limit policy of five hundred thousand dollars because of bodily injury to or death of one or more persons in any one accident. N.Y. Ins. Law § 3420(f)(2) (McKinney Supp. 2004). The insured is free to choose to accept or decline the supplementary coverage.
The above requirements are applicable to liability coverage for both personal use and commercial motor vehicles and to self-insured parties as well as insureds that secure coverage from a licensed insurer.
Facts:
The inquirers client is the owner-operator of a medallion taxicab. He is self-insured for mandatory liability coverage required under the Vehicle and Traffic Law and Insurance Law.
Analysis:
Insurance Law § 3420 (McKinney Supp. 2004) establishes, for liability insurance policies, provisions that must be included and supplementary coverage(s) that must be offered by the insurer but may declined by the insured. Section 3420(f)(1) requires that all policies insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any natural person arising out of the ownership, maintenance and use of a motor vehicle by the insured must contain a provision:
"...whereby the insurer agrees that it will pay to the insured, as defined in such provision, subject to the terms and conditions set forth therein to be prescribed by the board of directors of the Motor Vehicle Accident Indemnification Corporation and approved by the superintendent, all sums, not exceeding a maximum amount or limit of twenty-five thousand dollars exclusive of interest and costs, on account of injury to and all sums, not exceeding a maximum amount or limit of fifty thousand dollars exclusive of interest and costs, on account of death of one person, in any one accident, and the maximum amount or limit, subject to such limit for any one person so injured of fifty thousand dollars or so killed of one hundred thousand dollars, exclusive of interest and costs, on account of injury to, or death of, more than one person in any one accident, which the insured or his legal representative shall be entitled to recover as damages from an owner or operator of an uninsured motor vehicle, unidentified motor vehicle which leaves the scene of an accident, a motor vehicle registered in this state as to which at the time of the accident there was not in effect a policy of liability insurance, a stolen vehicle, a motor vehicle operated without permission of the owner, an insured motor vehicle where the insurer disclaims liability or denies coverage or an unregistered vehicle because of bodily injury, sickness or disease, including death resulting therefrom, sustained by the insured, caused by accident occurring in this state and arising out of the ownership, maintenance or use of such motor vehicle."
Insurance Law § 3420(f)(1) (McKinney Supp. 2004). Also see N.Y. Comp. Codes R. & Reg. tit. 11, Part 60-1.4 (2004) (Regulation 35-A).
The aforesaid provision establishes the mandatory uninsured motorist coverage that must be maintained by owner/operators of motor vehicles in New York State. This requirement applies whether the owner/operator secures coverage under an insurance policy or obtains a Certificate of Self-Insurance from the Department of Motor Vehicles (DMV). Allstate Insurance Company v. Shaw, 52 N.Y.2d 818 (1980).
Section 3420(f)(2)(A) requires that, in addition to the mandatory coverage specified above, the policy shall, at the option of the insured, provide:
"...supplementary uninsured/underinsured motorists insurance for bodily injury, in an amount up to the bodily injury liability insurance limits of coverage provided under such policy, subject to a maximum of two hundred fifty thousand dollars because of bodily injury to or death of one person in any one accident and, subject to such limit for one person, up to five hundred thousand dollars because of bodily injury to or death of two or more persons in any one accident, or a combined single limit policy of five hundred thousand dollars because of bodily injury to or death of one or more persons in any one accident."
Insurance Law § 3420(f)(2)(A) (McKinney Supp. 2004).
The SUM coverage must be offered to the insured but the insured need not choose to accept it. In the case of a self-insured entity the DMV's Application for Certificate of Self-Insurance (FS-100) requires the applicant to declare that it has, and will continue to have, the financial ability to respond to all payments of automobile claims and/or judgments arising out of ownership, maintenance, use or operation of applicant's motor vehicles. The self-insurance program must be structured to provide coverage equivalent to the mandatory liability limits required by the Vehicle and Traffic Law and Insurance Law (copy of FS-100 form attached hereto).
There is no requirement in the Insurance law or Vehicle and Traffic Law that cab companies, or any other self-insured entity, maintain supplemental uninsured motorist coverage in excess of the mandatory limits. Please note that this letter does not consider whether any other legal requirements (such as those established by the Taxi and Limousine Commission in New York City) may require licensees to provide coverage in excess of the statutory minimums.
For further information you may contact Associate Attorney Sam Wachtel at the New York City Office.