Parties cannot stipulate away issues of pure coverage

Matter of Preferred Mut. Ins. Co. (Fisher), 2015 NY Slip Op 02837 (3d Dept. 2015)

he parties entered into a stipulation to temporarily stay arbitration to enable discovery. Shortly thereafter, petitioner moved for a permanent stay of

arbitration on the basis that respondent was not a resident of her parents’ home at the time of the accident and was therefore excluded from SUM coverage under the terms of her parents’ insurance policy. Supreme Court denied petitioner’s application on the ground that the parties’ stipulation waived the issue of respondent’s entitlement to benefits, and temporarily stayed arbitration pending further discovery. Petitioner appeals.

We agree with petitioner that Supreme Court erred in concluding that the parties’ stipulation waived the issue of respondent’s entitlement to SUM coverage. Although the stipulation stated that, “pon the completion of discovery set forth agrees to proceed to arbitration,” a stipulation cannot create coverage of an individual, nor the obligation to arbitrate the issue of coverage, where the individual does not meet the [*2]relevant contractual prerequisites for coverage (cf. Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556, 563-565 ; Zappone v Home Ins. Co., 55 NY2d 131, 134-136 ). Stated differently, the stipulation cannot independently bind petitioner to supply coverage where no such coverage exists under the policy.”

The Appellate Division has spoken.  Issues of pure coverage cannot be stipulated away.  The real life application of this principle is that you stipulate sole issue for trial is “x”.  You then decide or learn that there is a pure coverage defense.  In this instance, you can ignore the stipulation and prove coverage.

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