Why Wait? Arbitrate! The Value of Consenting to Arbitrate Your Sum Cases at NAM

Supplemental Underinsured Motorist (“SUM”) endorsement cases can be complex and resolving them may be a lengthy process. The delay has become more severe due to extenuating circumstances from the pandemic. Instead of waiting for years while the system recovers from unmanageable backlogs, arbitration will help your clients have their day in court quickly.

About the SUM/UM process

Parties should be aware that they are free to utilize a private ADR provider such as NAM. If both parties agree, they are free to chart their own course and choose NAM as their arbitration forum. If you are considering arbitration for a SUM/UM case, a brief refresher on the basics is in order, as there are some hoops which you must jump through to be able to arbitrate the claim. Prior to 1993, individual insurance carriers would prepare their own UM (Uninsured Motorist) and UIM (Underinsured Motorist) endorsements, which did have significant differences, and could lead to lack of coverage for the policy holder. On October 1, 1993, the New York State Insurance Department promulgated a policy form, entitled the Supplemental Underinsured Motorist endorsement. The SUM endorsement removed any gaps in coverage and put into place a unified endorsement which provides coverage for both uninsured and underinsured motorists. The SUM endorsement on your client's policy is Supplementary Underinsured Motorist coverage. The purpose of SUM coverage is to give the policy holder first party coverage over and above the tortfeasor's coverage, but only up to the determined value of the claimant's injury. The amount collected from the tortfeasor is deducted as an offset from any SUM award. So, for example, if the tortfeasor has a $25,000 policy which you collect in the underlying claim, the policy holder can then bring a SUM claim, and you can proceed to arbitrate this claim. If your client is awarded $50,000 from the SUM arbitration, then $25,000 is deducted from the award and the SUM carrier would pay your client $25,000.

SUM/UM arbitration requirements

There are several requirements which must be satisfied in order to bring a SUM claim. The claimant must provide timely notice to its own SUM carrier which includes forwarding the pleadings in the underlying lawsuit against the tortfeasor to the SUM carrier. The claimant must obtain a policy limit offer in the underlying lawsuit. The bodily injury policy limits for the tortfeasor must be less than the bodily injury limits for the plaintiff. SUM coverage will not be triggered when the policy limits for the policy holder are the same as the bodily injury limits for the tortfeasor. The claimant must qualify as an insured, for example the named insured and spouse. An insured can also be someone related to the named insured who lives in the same household. Other examples of insureds include someone who occupies a motor vehicle that is driven by the named insured or spouse.

Further, the loss/injury must arise from an accident. Obviously, there is no coverage for a staged loss or fraudulent claim. If a claimant settles the underlying claim against the tortfeasor without the written consent of the SUM carrier, the SUM coverage would be negated. The claimant must establish that he suffered a Serious Injury as defined by the Insurance Law. If the claimant fails to establish a Serious Injury there is no SUM coverage. This issue becomes central to many SUM arbitrations.

The statute of limitations for this mandatory New York rule is 6 years. The SUM carrier is permitted to conduct discovery in the form of an EUO, perform an IME, and/or serve authorizations.

The benefits of arbitration

In my seven years as a neutral at NAM, I have noticed an uptick in SUM/UM arbitrations. Due to this increase, NAM has recently created a special SUM Arbitration Panel, of which I am a member. This panel is designed to expedite the disposition of your SUM/UM claim, allowing you and your client to resolve matters faster. As an Arbitrator at NAM, my responsibility at the hearing is to evaluate the injury, determine if the Serious Injury threshold has been met, and put a fair value on the case, without consideration of any set off against my award. Arbitration can serve as a time and cost-effective method of resolving your case. The parties participate in the neutral selection process, choosing from a dedicated and experienced panel of neutrals who are well-versed in SUM/UM matters. After the neutral is chosen to arbitrate your case, hearings are typically scheduled within four to five weeks. NAM also provides full administrative assistance throughout the entire process. Thereafter, decisions are rendered within thirty days after completion of the hearing. Arbitration at NAM is a smart choice for your SUM/UM cases.  

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Reprinted with permission from the January 17, 2025 edition of the NEW YORK LAW JOURNAL © 2024 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com

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Hon. Larry S. Schachner (Ret.) is a former Justice of the Supreme Court, Bronx County where he served on the bench for nearly 20 years and oversaw a myriad of civil litigation including negligence, medical malpractice, contracts, commercial landlord-tenant disputes, consumer credit transactions, and small claims matters. He has also acted as a Special Master to supervise and rule on discovery issues in complex litigation cases. Judge Schachner has developed an impeccable reputation for his judicial temperament, integrity, and superior settlement skills. He was voted a Top Ten Neutral in the 2024 and 2023 New York Law Journal Best Of Surveys and he has been rated “Highly Qualified” by the New York State Independent Judicial Election Qualification Commission. He is a member of NAM's (National Arbitration and Mediation) Hearing Officer Panel and is available to arbitrate and mediate cases throughout the New York Metro area.

For any questions or comments, please contact Dawn M. Lack / Vice President, Client Services, via email at dlack@namadr.com or at 646-737-1414 ext. 126.