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Supreme Court, Appellate Division, Third Department, New York.

IN RE: the Arbitration between ALLSTATE INSURANCE COMPANY, Appellant, Joseph MANNUCI et al., Respondents.

Decided: February 25, 1999

Before:  MERCURE, J.P., CREW III, PETERS, SPAIN and CARPINELLO, JJ. Pemberton & Briggs (Paul Briggs of counsel), Schenectady, for appellant. John S. Hall Jr., Warrensburg, for respondents.

Appeal from an order of the Supreme Court (Teresi, J.), entered June 3, 1998 in Albany County, which denied petitioner's application pursuant to CPLR 7503 to stay arbitration between the parties.

Respondent Joseph Mannuci (hereinafter respondent) was injured in a February 14, 1997 automobile accident with John Olden III. Olden's vehicle was insured by a policy of insurance issued by American Home Assurance Company containing a bodily injury limit of $25,000.   Respondent and his wife, respondent Cathy Mannuci, were insured with petitioner pursuant to a policy of insurance which included $100,000 in supplementary uninsured motorists coverage.   On April 29, 1997, a formal notice of claim for such benefits was submitted to petitioner.

By letter dated November 4, 1997, respondents' attorney advised petitioner's claims representative that American Home offered to pay respondents its policy limits of $25,000 and that, absent an objection by petitioner by November 17, 1997, he was going to send that company a general release.   Petitioner received this letter on November 7, 1997.

When petitioner failed to respond to the letter or in any way object to the settlement, respondents' attorney further advised petitioner by letter dated November 17, 1997 that respondents would be pursuing supplementary uninsured (which by definition includes underinsured) motorists benefits.   On November 24, 1997, respondents' attorney learned for the first time that petitioner objected to Olden's release because the supplementary uninsured motorist provisions of its policy provide that the release could only be executed after 30 days' written notice to petitioner.1  Accordingly, respondents' attorney directed American Home to hold the executed release in escrow pending the passage of 30 days from petitioner's receipt of notice of the settlement.

Despite knowledge that the release was being held in escrow pending expiration of this period, petitioner did not begin an investigation regarding Olden's financial status.   Nor did it issue a written notice of disclaimer or denial of coverage.   By letter dated December 10, 1997, respondents' attorney authorized American Home to accept the release and issue a settlement check.   Respondents' demand for arbitration of their claim for underinsured coverage was followed by this proceeding pursuant to CPLR article 75 seeking a permanent stay.   Supreme Court dismissed the petition prompting this appeal.   We affirm.

Petitioner asserts that Supreme Court erred in denying its application for a permanent stay of arbitration because respondents failed to comply with the conditions of the insurance policy thereby precluding their claim for underinsured motorists coverage.   We are not persuaded.   Respondents timely advised petitioner of their claim for supplementary uninsured motorist benefits and American Home's settlement offer.   Although respondents' counsel, unaware of the 30-day provision in the policy, initially provided petitioner with only 10 days within which to object to the settlement, he took prompt curative action upon learning that petitioner was actually entitled to a total of 30 days and the settlement funds were not released until December 10, 1997.   Under these circumstances, we conclude that respondents are not precluded from asserting a claim for benefits (see generally, Matter of Tri-State Consumer Ins. Co. v. Hundley, 208 A.D.2d 754, 754-755, 618 N.Y.S.2d 41, lv. denied 85 N.Y.2d 808, 628 N.Y.S.2d 51, 651 N.E.2d 919;  Matter of Prudential Prop. & Cas. Ins. Co. [King], 198 A.D.2d 421, 604 N.Y.S.2d 136).

ORDERED that the order is affirmed, with costs.


1.   The policy provides:  “[I]f [the] insured settles with [a negligent party] for the available limit of the motor vehicle bodily injury liability coverage of such party, release may be executed with such party after thirty calendar days actual written notice to [petitioner]”.   The purpose of this provision is to give petitioner an opportunity to investigate the financial status of the third-party tortfeasor and the propriety of pursuing a subrogation action.



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