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Insurers In SUM Arbitration Must Timely Seek Discovery Or Risk Losing The Right To Do So

November 4, 2021

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<p style="text-align: justify;">In<em> <a href="https://www.wcmlaw.com/wp-content/uploads/2021/11/In-the-Matter-of-Arbitration-Allstate-Insurance-Company-and-James-M.-Twomey.pdf">In the Matter of Arbitration Allstate Insurance Company and James M. Twomey</a></em>, an insurer moved to stay arbitration of a supplementary uninsured/underinsured motorist (SUM) claim to compel discovery in aid of arbitration pursuant to CPLR 3102 (c). The Supreme Court denied the initial Petition and the insurer appealed.</p>
<p style="text-align: justify;">The Fourth Department affirmed, finding that the Supreme Court correctly found that the insurer “had ample time . . . within which to seek discovery of the respondent insured as provided for in the insurance policy, and unjustifiably failed to utilize that opportunity” to obtain the requested discovery. The Fourth Department also found that the insurer failed to establish the “extraordinary circumstances” necessary to warrant court-ordered disclosure in aid of arbitration under CPLR 3102 (c), or that the discovery if it was allowed would be inadequate for it to establish its case.</p>
<p style="text-align: justify;">The court also rejected the insurer’s argument that the insured respondent’s demand for arbitration was premature in that he had not complied with the terms of the SUM endorsement in the policy. The insurer failed to properly raise the issue on appeal, but the court nonetheless found that the insurer failed to show that its insured had failed to comply with the terms of the endorsement.</p>
<p style="text-align: justify;">This decision highlights the importance of promptly seeking discovery in SUM arbitration and shows that an insurer can lose the right to do so if it does not seek discovery in a timely manner.</p>
<p style="text-align: justify;">Please e-mail <a href="mailto:jdiffley@wcmlaw.com">John Diffley</a> with any questions.</p>

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