In re the Arbitration Between Kemper National Insurance & Russell , 905 N.Y.S.2d 313 ( 2010 )

Peters, J.

Appeal from an order of the Supreme Court (Aulisi, J.), entered June 22, 2009 in Schenectady County, which partially granted petitioners’ application pursuant to CPLR 7503 to stay arbitration between the parties.

Respondent was injured in a 2000 accident in which the automobile she was driving was rear-ended by another car. She retained a law firm to bring a personal injury suit and, when the firm failed to timely do so, her ensuing legal malpractice action against the firm settled for $50,000, the full limit of the other driver’s automotive liability insurance.¹ Respondent then advised petitioners, her automotive insurer and its third-party administrator, that she intended to file a supplementary uninsured/underinsured motorist (hereinafter SUM) insurance coverage claim. After she demanded arbitration of that claim, petitioners commenced this proceeding seeking a stay of arbitration. Supreme Court granted the petition to the extent of temporarily staying arbitration pending a hearing on various issues, and petitioners appeal.

An insurer is obligated to pay under SUM coverage if the bodily injury liability insurance limits of its insured’s policy exceed those of the other policy, subject to the condition that “the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgments or settlements” (Insurance Law § 3420 [f] [2] [A]; see Matter of Federal Ins. Co. v Watnick, 80 NY2d 539, 546 [1992]). The statute, in short, “requires primary insurers to pay every last dollar, and requires [respondent] to accept no less, prior to the initiation of an underinsurance claim” (Matter of Federal Ins. Co. v Watnick, 80 NY2d at 546). The primary insurer here, however, has paid nothing, as respondent was forced to recover damages in a separate legal malpractice claim. As the other driver’s policy limit was not exhausted by payment, respondent’s own SUM coverage does not come into play, and Supreme Court should have granted petitioners’ application for a permanent stay.

In light of the foregoing, we need not consider petitioners’ remaining arguments.

Cardona, EJ., Mercure and Kavanagh, JJ., concur.

1 . Respondent notified petitioners of the proposed settlement of her legal malpractice claim and requested their consent to the settlement, but allegedly received no response.