No Good Deed Goes Unpunished: Insurance Coverage Cannot be Created by Estoppel

An Insurer Mistakenly Providing Benefits Does not Bind Insurer After it Discovers Error

Posted on May 27, 2022 by Barry Zalma

Dymond Ottey sued Maya Assurance Company for a judgment declaring that the defendant is obligated to provide insurance coverage. Ottey appealed from an order of the Supreme Court, Queens County (Pam B. Jackman-Brown, J.), dated June 27, 2019. The order, insofar as appealed from, granted that branch of the defendant’s motion which was for summary judgment dismissing the complaint.

In Dymond Ottey v. Maya Assurance Company, 2022 NY Slip Op 03397, No. 2019-09825, Index No. 701656/16, Supreme Court of New York, Second Department (May 25, 2022) the appellate court affirmed the trial court’s decision.

FACTS

The plaintiff allegedly was injured on February 14, 2010, when a livery cab from which she was exiting suddenly sped away, causing her to fall to the ground. The livery cab was owned by nonparty ABC Global Limo Corp. (hereinafter ABC Global). The plaintiff commenced an action against ABC Global to recover damages for her personal injuries, and obtained a default judgment therein against ABC Global in the principal sum of $75,000.

The plaintiff also applied to the defendant insurer for no-fault benefits, alleging that it had insured the livery cab. Initially, the defendant paid certain benefits, but it subsequently determined that the livery cab was not covered by it and informed the plaintiff that the payments had been made in error.

The plaintiff then sued for a judgment declaring that the defendant is obligated to provide insurance coverage.

The defendant moved for summary judgment dismissing the complaint. In support of its motion, the defendant submitted evidence which demonstrated that it had insured the livery cab until August 14, 2009, when the insured, ABC Global, submitted a request to remove coverage from the livery cab and transfer coverage to a replacement vehicle. Upon presentation of certain forms by ABC Global, the defendant removed coverage from the livery cab and transferred coverage to the replacement vehicle.

In support of its motion, the defendant argued that, since the livery cab was not covered at the time of the subject accident, it had no obligation to provide coverage.

The plaintiff argued that the defendant should be estopped from disclaiming coverage because it had failed to timely deny coverage, it had begun the representation and assumed the defense of the policy by paying certain benefits, it had lulled the plaintiff into sleeping on her rights, and the plaintiff had been prejudiced thereby as she was now precluded from seeking alternative remedies, such as a claim with the Motor Vehicle Accident Indemnification Corporation (hereinafter the MVAIC).

The Supreme Court (trial court) granted that branch of the defendant’s motion which was for summary judgment dismissing the complaint. The court found that the defendant was not required to issue a disclaimer because the livery cab was not covered on the date of the accident. The court further found that the plaintiff was not prejudiced by the partial payment, since she had 180 days from the date that she received notice of the defendant’s denial to pursue a claim with the MVAIC.

DISCUSSION

The plaintiff argued that the defendant should be equitably estopped from denying coverage because it was complicit in ABC Global’s insurance fraud. She further contends that she was prejudiced by the defendant’s failure to issue a disclaimer and partial payment because the statutory maximum she could receive if she filed a claim with the MVAIC is $25,000, and, therefore, she could not recover the full $75,000 default judgment amount. These arguments are raised for the first time on appeal, and are not properly before the court.

Accordingly, the order is affirmed insofar as appealed from.

ZALMA OPINION

There is no way to force an insurer to provide benefits to an injured person when it had no insurance in effect at the time of the accident. The fact that the insurer provided some benefits until it determined the policy had been deleted before the accident, it promptly advised the plaintiff who then – rather than take advantage of the MVAIC sued and by so doing lost the opportunity to collect a part of the default judgment she obtained from the operator of the vehicle that caused her injury.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at https://www.zalma.com and [email protected].

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