Matter of Government Employees Insurance Company v Sarmiento
Attorneys and Parties
Brief Summary
Insurance coverage for uninsured motorist (UM) benefits in the rental vehicle context and whether the rental company’s policy is primary versus the passenger’s personal policy; interaction with the Graves Amendment.
The Supreme Court, Queens County, denied Government Employees Insurance Company (GEICO)'s request to permanently stay arbitration of Alan S. Sarmiento’s claim for uninsured motorist benefits.
The denial of a permanent stay of arbitration against GEICO.
GEICO showed the accident involved a rental truck owned by Herc Rentals, Inc., which was required under New York Vehicle and Traffic Law § 370(1), (3) [requires owners/rental companies to obtain insurance or file a surety bond or self-insure] to provide UM coverage; thus, primary UM benefits are available under the National Union policy covering the rental vehicle, not Sarmiento’s personal GEICO policy. The Graves Amendment, 49 USC § 30106 [preempts vicarious liability of vehicle lessors based solely on ownership; savings clause permits states to enforce financial responsibility/insurance standards], does not bar a claim for UM benefits based on the negligence of an unidentified hit-and-run motorist.
Background
Alan S. Sarmiento, a passenger in a rental truck owned by Herc Rentals, Inc. and insured by National Union Fire Insurance Company of Pittsburgh (National Union), was injured in a hit-and-run collision. National Union declined coverage. Sarmiento demanded arbitration of uninsured motorist (UM) benefits against his personal auto insurer, Government Employees Insurance Company (GEICO). GEICO commenced a proceeding under CPLR article 75 [special proceeding to stay or compel arbitration] to permanently stay the UM arbitration, arguing that the rental company’s policy is primary because New York Vehicle and Traffic Law § 370(1), (3) [requires owners/rental companies to obtain insurance or file a surety bond or self-insure] obligates rental companies to provide UM coverage. National Union opposed, invoking the Graves Amendment, 49 USC § 30106 [preempts vicarious liability of vehicle lessors based solely on ownership; savings clause permits states to enforce financial responsibility/insurance standards].
Lower Court Decision
The Supreme Court, Queens County (Leverett, J.), denied the branch of GEICO’s petition that sought a permanent stay of the UM arbitration, effectively allowing Sarmiento’s arbitration against GEICO to proceed.
Appellate Division Reversal
Reversing the order insofar as appealed from, the Appellate Division granted the branch of GEICO’s petition to permanently stay arbitration, with costs payable by National Union. The Court held GEICO met its prima facie burden to justify a stay by showing the availability of primary UM coverage under the rental vehicle’s policy as required by VTL § 370, and that National Union failed to rebut this showing. The Graves Amendment’s savings clause preserves New York’s insurance/financial responsibility requirements and does not bar a UM claim against the rental vehicle’s insurer.
Legal Significance
Clarifies that for passengers injured in rental vehicles, the rental company’s policy provides primary uninsured motorist coverage pursuant to New York Vehicle and Traffic Law § 370, and that the Graves Amendment does not shield rental company insurers from UM obligations because UM claims do not impose vicarious liability on the lessor. Also reaffirms the burden-shifting framework in CPLR article 75 stay-of-arbitration proceedings.
In New York, occupants of rental vehicles must look first to the rental company’s policy for uninsured motorist benefits; a personal auto policy is excess. The Graves Amendment does not defeat UM claims against the rental vehicle’s insurer.