Key Takeaway
Court upholds insurer's right to challenge arbitration award exceeding policy limits, even without timely denial, when coverage has been exhausted under no-fault law.
Insurance carriers operating under New York’s no-fault system face complex procedural requirements, including strict deadlines for claim denials. However, courts have recognized important exceptions when fundamental policy limits are at stake. The case of Allstate Ins. Co. v DeMoura illustrates how insurers can challenge arbitration awards that exceed their policy obligations, even when they haven’t followed standard denial procedures.
This decision builds on established precedent regarding policy exhaustion defenses and demonstrates the courts’ willingness to protect insurers from being compelled to pay beyond their contractual obligations. The ruling clarifies that certain fundamental defenses remain available to carriers regardless of procedural missteps in the claims handling process.
Jason Tenenbaum’s Analysis:
Allstate Ins. Co. v DeMoura, 2011 NY Slip Op 50430(U)(App. Term 1st Dept. 2011)
“When an insurer “has paid the full monetary limits set forth in the policy, its duties under the contract of insurance cease” (Countrywide Ins. Co. v Sawh, 272 AD2d 245 ). A defense that the coverage limits of the policy have been exhausted may be asserted by an insurer despite its failure to issue a denial of the claim within the 30-day period (New York & Presby. Hosp. v Allstate Ins. Co., 12 AD3d 579 ), and an arbitrator’s award directing payment in excess of the $50,000 limit of a no-fault insurance policy exceeds the arbitrator’s power and constitutes grounds for vacatur of the award (see Matter of Brijmohan v State Farm Ins. Co., 92 NY2d 821, 822 ; Countrywide Ins. Co. v Sawh, 272 AD2d at 245; 11 NYCRR 65-1.1).”
This was an interesting case, and similar to a recent Second Department case, where the Court have held that a carrier can collaterally attack an arbitration award or judgment to the limited extent of determining whether complying with the award or judgment would cause the policy to exhaust.
Key Takeaway
The DeMoura decision reinforces that insurance carriers retain the fundamental right to assert policy exhaustion as a defense, even when procedural requirements like timely claim denials have not been met. This limited collateral attack authority protects insurers from being forced to exceed their contractual obligations through arbitration awards.
Related Articles
- Policy exhaustion and priority of payment requirements
- Policy exhaustion must comport with priority payment regimen
- Priority of payment considerations in coverage disputes
- Understanding collateral estoppel in no-fault insurance cases
- New York No-Fault Insurance Law
Legal Update (February 2026): Since this 2011 decision, New York’s no-fault regulations under 11 NYCRR 65-1 have undergone multiple amendments affecting claim denial procedures, arbitration processes, and policy exhaustion defenses. Practitioners should verify current provisions regarding collateral attack standards and procedural requirements, as both regulatory changes and subsequent case law may have modified the application of these principles.
