The Office of General Counsel issued the following informal opinion on February 8, 2002, representing the position of the New York State Insurance Department.
Re: Business SUM Coverage
Does the underlying business motor vehicle liability insurance policy limit the coverage afforded by the SUM endorsement thereto?
Where the church is the named insured under the business motor vehicle liability insurance policy is the churchs employee covered as an insured under the SUM endorsement of the churchs policy where the employee at the time of the accident is driving her own personal motor vehicle in the course of her employment and while acting within the scope of her duties as a church employee?
Are the passengers who were riding in the church employees personal motor vehicle at the time of the accident covered as insureds under the churchs SUM endorsement?
No. As specified in the "conditions" section of the New York Supplementary Uninsured/Underinsured Motorists Endorsement, none of the insuring agreements of the underlying business motor vehicle liability insurance policy apply to the SUM coverage except for "Duties After an Accident or Loss", "Fraud", and "Termination", if applicable.
Yes, the SUM endorsement issued to the church covers a church employee when the employee is driving her own personal motor vehicle in the course of her employment and while acting within the scope of her duties as a church employee.
Yes, the passengers in the church employees personal motor vehicle are covered as insureds under the churchs SUM endorsement.
This inquiry surrounds a Youth Director of the Youth Program of ABC Church ("the Church"). The inquirer states that:
As part of the Youth Directors job she ordinarily provides transportation to the children attending Church sponsored Youth programs. Often that transportation is provided through the use of her own van (as opposed to the one vehicle that the Church owns), and on the evening of the accident giving rise to this insurance issue that was the case. The Youth director was on her way to a Church basketball tournament sponsored by the Youth Program, and the car [sic, the van] was filled with 5 young girls who were members of the 7th grade team. On route to the tournament the van was struck by a truck which blew threw [sic, through] a stop sign causing a catastrophic collision. The offending driver was not only careless, he was unlicensed and underinsured.
The accident occurred on March 30, 2001.
The Alpha Insurance Company ("Alpha") had issued a business automobile liability insurance policy with a SUM endorsement to the Church. The Church owns one motor vehicle. The inquirer made an underinsured motorists coverage claim to Alpha on behalf of the inquirers client, a passenger in the Church employees van. The inquirer sent us a copy of the letter dated November 9, 2001 from a Claim Technical Specialist with the Alpha Insurance Group, denying the claim based upon the conclusion that the SUM endorsement in question covers only those automobiles owned by the Church that are required to maintain such coverage and that the inquirers client is not an "insured" under the SUM endorsement. Alpha attached to this letter selected pages of the Churchs policy and its SUM endorsement to support its denial, which pages the inquirer also sent to us.
The business automobile liability insurance policy issued by Alpha to the Church provides coverage only for those automobiles that are owned by the insured. However, the SUM endorsement covering the Church provides coverage to "you the named insured" and to "any other person while occupying: any other motor vehicle while being operated by you." The inquirer asserts that the SUM coverage extends to the children occupants of the motor vehicle belonging to the Church employee, when such vehicle was being driven by the Church employee while acting within the scope of her employment because the Church employee is a "you" within the meaning of the SUM endorsement. The inquirer points out that a church can only act thorough another, in this case its employee.
This writer contacted the inquirer asking for a full copy of the policy but the inquirer said that he did not have it. By letter of January 9, 2002 the inquirer forwarded to this writer a copy of the declarations pages of the Churchs successor policy issued by another insurer. The inquirer states that he has been advised that the coverage amounts are the same and the terms are similar to the policy issued by Alpha. These policy declarations pages indicate that the policy coverages apply to the one automobile owned by the Church and provides no coverage for hired or borrowed automobiles. The declarations pages of the new policy do not identify any employee of the Church. The inquirer made further arguments, in his letter, in support of the position that the passengers in the employees vehicle are covered under the Churchs SUM endorsement.
For purposes of this response, we will assume that the facts are as presented. Thus, we assume that the Alpha policy issued to the Church provided the same coverages as indicated in the declarations pages of the successor policy that was sent to us. We also assume that at the time of the accident, the Church employee was driving her own personal motor vehicle in the course of her employment and that she was acting within the scope of her duties as a church employee.
N.Y. Ins. Law § 3420(f)(2) (McKinney 2000) requires motor vehicle liability insurance companies to provide, at the option of the insured, supplementary uninsured/underinsured motorists ("SUM") insurance coverage to all policyholders in New York State. SUM provides coverage for bodily injury, in an amount up to the bodily injury liability insurance limits contained in the insurance policy. SUM coverage extends to accidents in any state or Canadian province and applies if the limits of liability under all the available bonds and insurance policies of the motor vehicle liable for damages add up to an amount lower than the bodily injury liability insurance limits provided by the SUM policy. The Superintendent has established a standard form for SUM coverage, which is contained in Insurance Department Regulation 35-D, N.Y. Comp. R. & Regs. tit. 11, Subpart 60-2 (1999). Those portions of the Alpha policy that was sent to us conform to the Regulation.
The underlying business automobile liability insurance policy issued to the Church provided the liability coverage required by VTL § 311 (McKinney 1996) and Insurance Department Regulation 35-A, N.Y. Comp. R. & Regs. tit. 11, Subpart 60-1 (1996). Thus, in accordance with the statutory requirements the "insured" is as defined in § 60- 1.1(c) of Regulation 35-A, as follows:
(c) A provision insuring as "insured":
the named insured and, if an individual, his or her spouse if a resident of the same household with respect to the motor vehicle or vehicles;
any other person using the motor vehicle with the permission of the named insured or such spouse provided his or her actual operation or (if he or she is not operating) his or her other actual use thereof is within the scope of such permission; and
any other person or organization but only with respect to her, her or its liability because of acts or omissions of an insured within paragraph (1) or (2) of this subdivision. As respects any person or organization other than the named insured or such spouse the policy need not apply:
[Omitted are the statutory exceptions, none of which are relevant to the inquiry]
The underlying business automobile liability insurance policy covers the Church as named insured with respect to the liability incurred arising from the Churchs vehicle, any other person using the Churchs motor vehicle with permission and, any other person with respect to that persons liability because of acts or omissions of the Church in either of the aforementioned situations. Under § 60-1.1(d) of the Regulation, the policy must provide coverage where the named insured is an individual or husband or wife, for an automobile not otherwise covered under the policy, used with the permission or the owner. This coverage for non-owned vehicles is not required where the insured is not an individual or a husband or wife, such as the Church. Hence, the liability provisions of the policy did not have to cover the non-owned vehicle and, in fact, the policy did not provide such coverage.
The coverage afforded under a SUM endorsement is different from that provided under the underlying motor vehicle liability policy. The first condition of the required SUM endorsement makes this clear. It provides as follows:
Policy Provisions: None of the Insuring Agreements, Exclusions or Conditions of the policy shall apply to this SUM coverage except: "Duties After an Accident or Loss", "Fraud"; and "Termination" if applicable.
Thus, the insuring agreement provisions of the underlying liability insurance policy do not apply to the SUM endorsement.
The SUM endorsement, in the Insuring Agreement, defines "insured", as specified in Insurance Department Regulation 35-D, N.Y. Comp. R. & Regs. tit 11, Subpart 60-2 (1999), as follows:
(a) Insured. The unqualified term "insured" means:
(1) you, as the named insured and, while residents of the same household, your spouse and the relatives of either you or your spouse;
(2) any other person while occupying
(i) a motor vehicle insured for SUM under this policy; or
(ii) any other motor vehicle while being operated by you or your spouse; and
(3) any person, with respect to damages such person is entitled to recover, because of bodily injury to which this coverage applies sustained by an insured under paragraph (1) of (2) above.
The named insured is the Church, as stated on the declarations pages. Under (a)(1), the SUM endorsement provides coverage to "you, as the named insured." Under (a)(2)(ii), "insured" also includes any other person while occupying any other vehicle other than the one insured for SUM under the policy while being operated by "you." Since businesses such as the Church can only act through individuals (i.e., the employees), the "you" in this context includes both the employee and other persons occupying a vehicle not owned by the Church that is being driven by the employee in the course of her employment and while acting within the scope of her duties as a Church employee.
Assuming at the time the accident took place the Churchs employee was acting in the course of her employment and within the scope of her duties as a Church employee, such employee and each occupant of her personal motor vehicle would be covered as insureds under the Churchs SUM endorsement at the time of the accident.
The foregoing is the opinion of the Office of General Counsel as based upon the facts as presented to us.
For further information you may contact Associate Attorney Barbara A. Kluger at the New York City Office.