Firm Successfully Defends in Staged Loss Case

Montfort, Healy, McGuire & Salley, LLP, recently secured a victory on behalf of the insurer it represented in the Supreme Court of the State of New York Appellate Division, Second Judicial Department.

The case concerned a 2009 accident in which a vehicle occupied by a driver and two passengers was allegedly was struck in the rear by another vehicle, whose driver was insured. The driver and the passengers of the struck vehicle filed claims with the driver’s carrier, which disclaimed coverage on the ground that the contact between the vehicles resulted from an intentional act.

The driver of the struck vehicle then filed an uninsured motorist claim with her own insurance carrier, which commenced a proceeding to stay arbitration. At the Framed Issue Hearing, evidence was presented on issues raised in the underlying Petition to Stay. The issue for the Supreme Court to adjudicate was whether the disclaimer of coverage was proper. The Supreme Court concluded that it was not because the carrier had not met its prima facie burden to establish that the accident was a “staged loss.” The Supreme Court, therefore, granted the petition for a permanent stay of arbitration and directed the client to provide liability coverage to its insured.

On appeal, the Second Department found that strong circumstantial evidence had been presented at the hearing sufficient to establish the accident at issue was staged. The Second Department further found that the Supreme Court wrongly directed its focus on whether or not photographs showed damage to the striking vehicle rather than on the totality of the circumstantial evidence. Because the unrebutted circumstantial evidence established, prima facie, that the collision had been staged, the Second Department found the incident was not covered under the striking vehicle’s policy and confirmed its prior holdings that “A deliberate collision by an insured is not a covered event under an insurance policy.” Accordingly, the Second Department found that the Supreme Court erred in granting the petition for a permanent stay of arbitration.

Click here to read the court’s full decision.