Right to Deny Spousal Coverage Upheld (NY)

Although “spousal immunity” no longer exists in New York as a bar to civil lawsuits by one spouse against another, under Section 3420(g) of the New York Insurance Law, an insurer does not need to provide coverage for a personal injury claim asserted by a spouse unless the policy provides for that specific type of coverage.  The legislature passed the statute with the intent to prevent spouses from colluding to seek to recover for fraudulent liability claims.  Recently, in Osuna v. GEICO, the Eastern District of New York was presented with a interesting challenge to Section 3420(g) on the basis that the law was unconstitutional as a “bill of attainder.”

The insured commenced an action against GEICO, his auto insurer, seeking coverage for a personal injury claim made by his wife.  The insured then moved for summary judgment claiming that Section 3420(g) is a constitutionally prohibited bill of attainder.  In prior litigation, the Supreme Court has held that a “bill of attainder is a legislative act which inflicts punishment without a judicial trial.” United States v. Lovett.  In brief, plaintiff claimed that the statute “specifically targets lawfully married persons solely by virtue of their marriages,” which was, in effect a marriage penalty.

The court did not agree with the insured’s characterization of Section 3420(g), and ruled that the law is constitutional because there is no “punishment” as defined by both the Supreme Court and the Second Circuit.  The noted that the increased premium required for supplemental spousal insurance pursuant to Section 3420(g) does not compare to historically forms of “punishment,” such as death and imprisonment.

Citing the Second Circuit’s decision in ACORN v. U.S., the court ruled that there was also no “grave imbalance or disproportion between the burden and purported nonpunitive purpose.”  The “burden” was not a heavy one, as the insured simply had to pay an additional premium to include a spouse in the insurance policy.  Requiring the payment of a fee to extend coverage to a spouse “can be reasonably said to further the nonpunitive ends of the statute,” which is to prevent collusion and fraud.  Finally, the court found that the insured failed to demonstrate that the legislature clearly intended to inflict punishment.

Thanks to Steve Kay for his contribution to this post.  If you would like more information please write to mbono@wcmlaw.com