A recent decision of the Appellate Division, Second Department, on the SUM “offset” or “reduction of coverage” issue could, if not read and analyzed carefully, lead to confusion regarding the types of payments/recoveries that may be included in the SUM carrier’s offset or reduction under the “Supplementary Uninsured/Underinsured Motorists Endorsement— New York” prescribed by Insurance Department Regulation 35-D (11 NYCRR §60-2.3[e]). We, therefore, take this opportunity to provide our analysis of this case, Liberty Mutual Ins. Co. v. Walker, 84 AD3d 960 (2d Dept. 2011), as well as a brief historical perspective on the SUM offset/reduction in coverage provisions.

Historical Perspective

Prior to the promulgation of Regulation 35-D—the Insurance Department Regulation that introduced the prescribed SUM Endorsement, supplementary uninsured or underinsured motorist endorsements typically provided that the stated policy coverage limits would be reduced by “all sums paid because of the ‘bodily injury’ by or on behalf of persons or organizations who may be legally responsible.” Such policies also typically provided that any amounts otherwise payable for damages under this coverage would be reduced by “all sums paid or payable because of the ‘bodily injury’ under any of the following or similar law: (1) workers’ compensation law; or (2) disability benefits law.” Significant changes were made in the Regulation 35-D endorsement to both of these provisions.

Regulatory Changes

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