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October 30, 2008

Intentional Loss Not a Covered Loss Under "UM" Coverage but is Covered Under "No-Fault" Endorsement

On February 12, 2002, Neil Spicehandler was struck and fatally injured by a motor vehicle driven by Ronald Popadich. Mr. Popadich was later arrested in connection with Mr. Spicehandler's death.

Thereafter, John Robert Langan, as administrator of Spicehandler's estate, sought to recover uninsured motorist benefits and death benefits pursuant to an automobile liability policy issued to Langan by State Farm Mutual Auto Ins. Company (State Farm). Langan claimed that the policy covered Spicehandler as an insured. State Farm disclaimed coverage because Spicehandler's injuries were caused by Popadich's intentional criminal conduct and thus were not the result of an "accident" as required by the State Farm policy. Popadich later pled guilty to the charge of murder in the second degree, admitting that he intentionally caused Spicehandler's death by striking him with an automobile.

In State Farm Mutual Auto Ins. Co. v Langan, A.D.3d (2nd Dept. Sept. 16, 2008) the Appellate Division, Second Department, modified the decision and order of Supreme Court and held that State Farm did not provide "UM" coverage because of the intentional nature of the act, but would be liable for "no-fault" benefits. In discussing its holding on Uninsured Motorist benefits, the Court reasoned as follows:

[I]n New York, the mandatory coverage afforded under an uninsured motorist endorsement is meant to be coextensive with, and therefore no greater than, the standard coverage that would ordinarily be available to the uninsured motorist had he or she been insured (cf. McCarthy v Motor Veh. Acc. Indem. Corp., 16 A.D.2d at42. Plainly, no standard automobile liability policy would have provided coverage to Popadich for the injuries he intentionally inflicted on Spicehandler (see Westchester Med. Ctr. v Travelers Prop. Cas. Ins. Co., 309 A.D.2d, 927, 928. It follows then, that, because no coverage would have been provided under a standard automobile liability policy issued to Popadich, State Farm is not obligated to provide benefits under the uninsured motorist endorsement of its policy with Langan.

The Appellate Division then held that "no-fault" insurance benefits would be covered under the same facts, and drew a sharp distinction based upon the subjective "intent" of the person seeking the coverage, in this case, the decedent, Neil Spicehandler. The Court, in coming to its conclusion, held:

[I]n contexts other than a claim made by an uninsured motorist endorsement, coverage is
unaffected by whether the tortfeasor acted intentionally in causing the injury, provided only that, from the viewpoint of the insured, the event was 'unexpected, unusual and unforeseen' and not brought about by the insured's own 'misconduct, provocation or assault.' (Nallan v Union Labor Life Ins. Co., 42 N.Y.2d 884.

In this case, from Spicehandler's point of view, the incident that caused his injuries and death was certainly "unexpected, unusual and unforeseen," and was not the result of any "misconduct, provocation or assault" on his part. Consequently, the question of whether or not Popadich acted with criminal intent, although critical to the issue of coverage under the uninsured motorist endorsement, was entirely irrelevant to State Farm's obligation here to provide coverage under the subject policy's mandatory personal injury protection endorsement, and its death, dismemberment and loss of sight provisions, neither of which contain a specific exclusion for injury or death caused by an intentional act.

Of additional interest is that this decision contained two dissents suggesting the case may be decided by the New York Court of Appeals. Justice Mastro, in a dissent joined by Justice Carni, would not have allowed "no-fault benefits" based upon the Court's prior decision in this case, in which "we unequivocally and unambiguously held that no coverage was available under the policy for Spicehandler's death if it resulted from intentional conduct."

Justice Mastro did, however, invite the Court of Appeals to revisit the existing law which required the finding of no "UM" coverage. After noting the trend in other states to allow such coverage under similar facts, Justice Mastro stated:

Given the foregoing discussion, the persuasive logic and strong public policy considerations underlying those decisions in other jurisdictions which have allowed the recovery of uninsured motorist benefits in cases such as this, and the overwhelming modern national trend favoring a recovery, I would respectfully suggest that the time may have come for a reexamination of the governing principles in this area by our state's highest court.

This case demonstrates the Courts reluctance to deny no-fault benefits to an insured injured as a result of intentional conduct but permit recovery of uninsured motorist benefits for the same injuries. It remains to be seen how the New York Court of Appeals will deal with these various legal issues.


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