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August 20, 2015  

 
 Q&A of the Week

Vehicle Coverage under CGL Form

An Illinois subscriber recently asked the following question:

I have an insured that is purchasing a vehicle to be raffled off over the summer. They will own the vehicle for about three months but are not planning to register the vehicle during this time. At the end of the three months, they will pick a winner and transfer the title to the winner. The vehicle will be trailered to and from various events in the area over the summer for tickets to be raffled off at these events.

Would the insured's commercial general liability policy provide liability coverage for this vehicle or will the insured need to purchase a commercial automobile policy to obtain liability coverage for the vehicle?

ANSWER: The CGL form excludes coverage for BI and PD arising out of the use of any auto operated by or rented or owned or loaned to any insured. Since the insured is purchasing the vehicle and owning it for three months, that exclusion is going to apply. It would be better and less troublesome for the insured if a claim were to arise, if he bought an auto policy, if such a short-term policy can be found.

 
 Litigation Watch
No-Fault Benefits under Arbitration Rules

This is an appeal to vacate an arbitration award from an order of the Supreme Court, Queens County. This case is In the Matter of Fiduciary Insurance Company v. American Bankers Insurance Company of Florida, 2015 WL 4546629.

A taxi insured by Fiduciary Insurance Company was involved in a collision with a horse. The rider of the horse was seriously injured and Fiduciary paid him nearly $60,000 in no-fault benefits. Fiduciary then sought reimbursement of the benefits by filing a demand for mandatory arbitration against American Bankers, the insurer that provided commercial general liability to the stables where the horse was boarded. The arbitrator denied the petition, finding that American Bankers was not a motor vehicle insurer subject to mandatory arbitration provisions of the New York insurance law. Fiduciary then commenced this proceeding to vacate the arbitration award.

The trial court denied the petition to vacate the award and this appeal followed.

The Supreme Court, Appellate Division, Second Department, New York noted that the issue before the arbitrator was the threshold issue of whether American Bankers was an insurer subject to the mandatory arbitration procedures of the law. The court said that to be upheld, the arbitrator's award in a compulsory arbitration proceeding must have evidentiary support and cannot be arbitrary and capricious. Moreover, with respect to determinations of law, the applicable standard in mandatory no-fault arbitrations is whether any reasonable hypothesis can be found to support the questioned interpretation. The court concluded that the trial court properly determined that the award was supported by a reasonable hypothesis and was not arbitrary and capricious.

In further explaining its ruling, the court said that the main issue here is the applicability of certain provisions of the no-fault law. Under that law, an insurer that has paid first-party no-fault benefits to an accident victim is afforded the remedy of mandatory inter-company arbitration to recoup those benefits from the insurer of the party at fault for the accident. However, the court pointed out, the law restricts recovery to accidents involving vehicles for hire or vehicles weighing more than 6,500 pounds, and, not all insurers that insure those actually involved in an accident are subject to the mandatory arbitration provisions.

In this instance, the American Banker's policy did not provide no-fault insurance coverage for the type of accident underlying this dispute. Moreover, American Bankers did not insure a person, vehicle, or animal involved in the accident, but only the stables at which the animal was boarded. Accordingly, American Bankers cannot be deemed to be an insurer as that term is described in the no-fault law. Since American Bankers did not meet the definition of insurer or self-insurer under the no-fault law, the determination of the arbitrator that the claims against it were not subject to compulsory arbitration was supported by a reasonable hypothesis. So, the Supreme Court properly denied the petition to vacate the arbitrator's award. The order was affirmed.

Editor's Note: The Supreme Court, Appellate Division, New York rules that American Bankers was not an insurer as defined under the terms of the state no-fault law. An insurer that was subject to the mandatory arbitration provisions had to insure a vehicle that was involved in an accident and in this instance, American Bankers simply did not provide no-fault insurance coverage for the type of accident that was at the heart of the underlying dispute.
 
   
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