Application of North Carolina does not bode wellMay 12, 2019

Matter of Metropolitan Prop. & Cas. Ins. Co. v Anthony, 2019 NY Slip Op 03662 (1st Dept. 2019)

“Contrary to petitioner’s contention, it was not permitted under North Carolina law to rescind the insurance policy ab initio after the accident involving an uninsured motorist had occurred. North Carolina insurance law prohibits rescission after an accident of any insurance “required” to be offered (see NC Gen Stat § 20-279.21[f][1]). This provision applies to prohibit rescission based on fraud in the application for insurance (see Odum v Nationwide Mut. Ins. Co., 101 NC App 627 [1991], review denied 329 NC 499 [1991]). Uninsured motorist coverage, which is required by statute to be included in all automobile insurance policies, is a “required” type of coverage (see Bray v North Carolina Farm Bur. Mut. Ins. Co., 341 NC 678 [1995]). “

I did the research on this a few years ago and this has been the law forever in North Carolina. Why under a choice of law anyone would think differently beats me? Not a wise appeal.

But I mention this because even though North Carolina is a med-pay state, assume this hypothetical. North Carolina policy and New York accident. Choice of law means NC law applies. Most insurance policies have a contractual deemer clause in them. Alternatively, Ins Law 5107 is the statutory deemer provision. Injured person is guilty of material misrepresentation, but seeks PIP benefits.

Since NY PIP benefits would be “required”, it would seem to follow that under NC law, the carrier would have to provide the benefits. Met Life would have been better off honoring the claim here and perhaps arguing that arbitration is not permitted under the policy. While the First Department would not accept this argument, the Second Department would.

2 Responses

  1. Nate says:

    Problem in this case as the second paragraph shows was the 20-day petition rule. Both NY and NC would allow denial on the material misrepresentation defense, but the defense was precluded by the late petition. Tried to leverage the choice of law issue to validate a rescission, and thus void the policy and arbitration clause to get around the preclusion issue.

    As to your hypothetical, the statutes like NC’s generally only prohibit rescission of coverage mandated under their own laws, not any deemer statute.