Case Summary: In the Matter of Prudential Property and Casualty Insurance Company v. Marjorie Hobson et al.

Factual and Procedural Background

Respondents Marjorie Hobson and Vivian Belasco were involved in an automobile accident precipitated by an unidentified driver who made an illegal turn and then fled the scene. In attempting to avoid collision with that unidentified vehicle, respondents spun out and collided with another vehicle which was then struck by a further car. Respondents filed notices of intention to make claim and demands for arbitration under the uninsured motorist endorsement to Hobson's insurance policy. The endorsement defined a "hit-and-run automobile" as one that "causes bodily injury to an insured arising out of physical contact of such automobile with the insured or with an automobile which the insured is occupying at the time of the accident." The respondents stipulated there was no physical contact with the unidentified vehicle.

The insurer (petitioner) issued no disclaimer of liability but instituted a special proceeding to stay arbitration on the ground that there was no coverage because there was no physical contact. Special Term dismissed the petition and directed arbitration, concluding the physical-contact requirement was an exclusion. The Appellate Division reversed, granting the petition on the ground that coverage does not exist without physical contact and that the insurer's failure to disclaim could not create coverage. The Court of Appeals considered the matter on review.

Legal Issues Presented

Whether the requirement of "physical contact" in the uninsured motorist endorsement's definition of "hit-and-run automobile" is a matter of coverage or an exclusion from coverage.
Whether arbitration must be stayed where the stipulated facts show no physical contact, notwithstanding the insurer's failure to issue a disclaimer of liability.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Matter of Smith [Greater Am. Ins. Co.], 29 N.Y.2d 116, 122 (Fuld, Ch. J., concurring)	Support for the proposition that no coverage exists in the absence of the required physical contact.	Used to support the conclusion that the physical-contact requirement determines coverage (i.e., no coverage without contact).
MVAIC v Eisenberg, 18 N.Y.2d 1, 4	Support for the proposition that no coverage exists absent physical contact with a hit-and-run automobile.	Cited as authority reinforcing that the physical-contact requirement is a precondition to coverage.
Zappone v Home Ins. Co., 55 N.Y.2d 131	Authority that an insurer's failure to disclaim cannot itself create coverage; supports staying arbitration where no coverage exists despite lack of disclaimer.	Applied to hold that arbitration may be stayed even though the insurer did not disclaim liability.

Court's Reasoning and Analysis

The court reasoned that the physical-contact requirement is a condition of coverage rather than an exclusion. It relied on three sources: the language and placement of the definition in the insurance contract (the definition appears in the "Insuring Agreements" section, not "Exclusions"); the Insurance Law (the definition is drawn from former §167, now substantially reenacted as §3420[f][3]); and supporting case law. Because a "hit-and-run automobile" exists by definition only when the specified physical contact occurs, the required contact is a prerequisite to entitlement under the coverage. Given the stipulated absence of physical contact, the court concluded there was no coverage and therefore arbitration should be stayed even though the insurer issued no disclaimer.

Holding and Implications

The order of the Appellate Division is affirmed, with costs.

Direct effect: The Appellate Division's grant of the petition to stay arbitration was affirmed because no coverage existed in the absence of the required physical contact, and the insurer's failure to disclaim did not create coverage. The opinion does not discuss broader new legal precedents beyond its application to the parties' dispute.

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In the Matter of PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, Respondent, v. MARJORIE HOBSON et al., Appellants.

Per Curiam.

The requirement of "physical contact" in the definition of "hit-and-run automobile" contained in the uniform uninsured motorist indorsement is a matter of coverage, not exclusion from coverage.

Respondents, Marjorie Hobson and Vivian Belasco, were in an automobile accident involving an unidentified driver, who made an illegal turn in front of their car. In attempting to avoid a collision, respondents spun out of control and collided with another vehicle which was in turn struck by yet another car. The unidentified vehicle sped away. Respondents filed notices of intention to make claim and demands for arbitration under the uninsured motorist indorsement to the insurance policy of respondent Hobson, the driver. The indorsement, in providing coverage for injury resulting from an accident with a "hit-and-run automobile," defined such a vehicle as "an automobile which causes bodily injury to an insured arising out of physical contact of such automobile with the insured or with an automobile which the insured is occupying at the time of the accident". Respondents stipulated that there was no physical contact with the unidentified vehicle.

Petitioner insurer issued no disclaimer of liability or denial of coverage (see, Insurance Law § 3420 [d] [formerly § 167 (8)]), but instead instituted a special proceeding to stay arbitration on the ground that there was no coverage because there was no physical contact between the two vehicles in the accident. Special Term dismissed the petition and directed the parties to proceed to arbitration, concluding that the requirement of physical contact was an exclusion rather than a matter of coverage. The Appellate Division reversed and granted the petition, on the ground that coverage does not exist in the absence of physical contact, and the insurer's failure to disclaim cannot itself create coverage.

The conclusion that physical contact goes to coverage, rather than exclusion, is supported by the contract, the Insurance Law and case law. A "hit-and-run automobile" by definition exists only when there is the specified physical contact. This definition appears in the "Insuring Agreements" section of the indorsement rather than "Exclusions," and is taken from former section 167 of the Insurance Law (since substantially reenacted as § 3420 [f] [3]), which requires physical contact with a hit-and-run automobile before various protections of that section apply to any cause of action by an insured. No coverage exists in the absence of the required contact (see, Matter of Smith [Greater Am. Ins. Co.], 29 N.Y.2d 116, 122 [Fuld, Ch. J., concurring]; MVAIC v Eisenberg, 18 N.Y.2d 1, 4). There being no coverage here, the Appellate Division correctly concluded that arbitration should be stayed even in the absence of a disclaimer (see, Zappone v Home Ins. Co., 55 N.Y.2d 131).

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge WACHTLER and Judges MEYER, SIMONS, KAYE, ALEXANDER, TITONE and HANCOCK, JR., concur in Per Curiam opinion.

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 N.Y.CRR 500.4), order affirmed, with costs.

PRUDENTIAL PROP v. HOBSON