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New York concludes that an LLC is more related to a partnership than a company



I Matter of United Financial Casualty Company v. Alan Tekel 2019-10964, 2020 NY Slip Op 03919, Supreme Court of the State of New YORK Appellate Division, Second Judicial Department (July 15, 2020) The court decision granted Alan Tekel's proposal to allow arbitration to proceed to seek supplementary underinsured motorist benefits (hereinafter TOTAL)

FACTS

Alan Tekel was injured when he was struck by a vehicle as a pedestrian. After concluding with the shield driver the full limit for the driver's insurance policy, Tekel filed an application for SUM benefits under a commercial car insurance policy issued by the Progressive Casualty Insurance Company (hereinafter referred to as Progressive) to Air Repair, LLC (hereinafter referred to as LLC), of which Tekel was the sole member.

Progressive denied coverage on the grounds that Tekel did not meet the definition of an insured under the SUM approval, as he was not the said insured on the insurance and at the time of the accident, did not occupy a motor vehicle insured for the SUM under the insurance.

Following Terkel's request for arbitration, the insurer sought a permanent arbitration from the insured. The Supreme Court (Court) granted the branch of the petition which was to remain in arbitration permanently only to change its position after reconsideration and denied the branch of the petition which was to remain in arbitration permanently.

ANALYSIS

Where a car Insurance policy contains a SUM provision and is issued to an individual, that the individual and others in his or her family can receive SUM coverage under the insurance when such a person is injured in a vehicle, including a vehicles owned and insured by a third party. However, when such a policy is issued to a company, the SUM provision does not follow any particular individual, but instead covers any person [injured] when occupying a car owned by the company or when it is operated on behalf of the company. On the other hand, in cases where the policy is issued to a partnership, the decision is easier because partnerships are a combination of individuals who may be harmed and have spouses, households and relatives.

Here, the policy was issued to a limited liability company, which is more akin to a partnership than a company.

Given the whole policy, the decision to grant Tekel's proposal that the definition of the term 'insured' must be resolved in Tekel's favor, the SUM approval defines the term 'insured' to mean 'you, as the said insured and, while residents of the same household, your spouse and relatives of either you or your spouse.

Although the declaration page identifies the LLC as the said insured, it states that supplementary cover for supplementary liability insurance will be included in your liability insurance at no extra charge.

Consequently, permanent arbitration was not justified.

The New York court dismissed Tekel in favor of the insurer not writing a policy that was clear, unambiguous or even logical. When insuring an LLC, a form of company, it also provided coverage for the insured's spouse. Since a company cannot have a spouse, the court allowed it to conclude that the insurer considered the LLC to be an individual (and its sole member) as an insured and not the fictitious entity operating as an LLC. If they wanted to limit the coverage that Progressive needed to rewrite the policy to treat the insured as a company rather than as an individual. Cut and paste clearly did not work for Progressive.


© 2020 ̵

1; Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to employment as an insurance consultant specializing in insurance coverage, insurance claims handling, bad faith insurance and insurance fraud almost equally for insurance companies. . He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and attorney-at-law attorney and more than 52 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

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