Glazer v Lutz

[*1] Glazer v Lutz 2005 NY Slip Op 51396(U) [9 Misc 3d 1104(A)] Decided on June 14, 2005 Supreme Court, New York County Bransten, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 14, 2005
Supreme Court, New York County

Georgina Glazer and MARTIN GLAZER, Plaintiffs,

against

Christopher Lutz, M.D., Defendant. GROUP HEALTH INCORPORATED Plaintiff-Intervenor.



104757/03

Eileen Bransten, J.

Pursuant to CPLR 1012(a)(2) and 1013, non-party Group Health Incorporated ("GHI") moves for an order granting intervention and subrogation in this medical malpractice action. Plaintiffs Georgina Glazer ("Mrs. Glazer") and Martin Glazer ("Mr. Glazer") and defendant Christopher Lutz, M.D. ("Dr. Lutz") oppose the motion.

Background

From August 7, 2001 to April 4, 2003, Mrs. Glazer was enrolled as a member in a medical insurance benefit plan issued by GHI. GHI's Affirmation in Support of Motion ("Aff."), at ¶ 3. During Mrs. Glazer's enrollment, GHI paid $70,754.89 for her medical care and treatment that was necessary as a result of the alleged negligence of Dr. Lutz. Aff., at ¶ 5. From the time of Mrs. Glazer's injury to June of 2004, GHI repeatedly attempted to contact plaintiffs to determine whether they filed a medical malpractice suit against Dr. Lutz. GHI's Affirmation in Reply ("Reply"), Ex. E. Plaintiffs did not reply. Id.

In July of 2004, GHI first learned of plaintiffs' action against Dr. Lutz. Reply, at ¶ 6. Within one week, GHI filed an action against Dr. Lutz directly. Id.

On April 20, 2005, the parties in this action, Mr. and Mrs. Glazer and Dr. Lutz, settled for the sum of one million dollars. Plaintiff's Affirmation in Opposition ("Opp. 01"), at ¶ 3; Dr. Lutz's Affirmation in Opposition ("Opp. 02"), Ex. A, at 4. The settlement was for the entire amount of Dr. Lutz's insurance coverage and was not specifically for medical expenses and/or pain and suffering. Opp. 02, at Ex. A, at 3, 11-12. Later that day, without knowledge of the settlement, GHI moved to intervene.

GHI now moves for an order granting it permission to intervene in the action and pursue its [*2]right of subrogation. Aff., at ¶ 6. Specifically, GHI argues that its interests were not adequately represented by the parties and that Mrs. Glazer's policy contains a clause ("the Rider") that guarantees reimbursement for its expenses in the case of any settlement. Aff., at ¶¶ 9,11. The Rider states, "GHI is subrogated to all of your rights *** to the extent of the reasonable value of the benefits provided to you under this plan. *** You must provide reasonable cooperation with GHI in proceeding against the party responsible for your injury ***. If you *** make a recovery from any liable party (including any insurance carrier), you will promptly reimburse GHI for any benefits provided by GHI in connection with the injury, illness or condition from any settlement, verdict or insurance proceeds received to the extent that such settlement, verdict or other amounts received is specifically identified as being for medical expenses paid out."

Aff., at ¶ 9.

In opposition, plaintiffs argue that GHI cannot recover from the settlement proceeds because the settlement only compensated them for pain and suffering, not economic damages. Aff., at ¶ 3. Furthermore, plaintiffs claim that CPLR 4545 bars GHI from seeking costs covered by a collateral source such as its health insurance plan. Opp. 01, at ¶¶ 3-4. Finally, plaintiffs claim that GHI is guilty of laches because it did not seek to intervene before the parties settled. Opp. 01, at ¶ 7.

Dr. Lutz also opposes the motion, arguing that plaintiffs cannot hold him harmless pursuant to the settlement agreement if GHI has an outstanding claim against him. Opp. 02, at ¶ 7. He also claims that GHI cannot recover from him because the insurance contract was between Mrs. Glazer and GHI, not GHI and him. Opp. 02, at ¶¶ 17,20.

Analysis

Intervention

Pursuant to CPLR 1012(a)(2), a party may intervene as of right "when the representation of the person's interest by the parties is or may be inadequate and the person is or may be bound by the judgment" or "when the action involves the disposition or distribution of *** a claim for damages *** and the person may be affected adversely by the judgment."

Pursuant to CPLR 1013, the court has discretion to determine whether to permit intervention when the intervenor's claim presents a common issue of law or fact. Plantech Housing Inc. v. Conlan, 74 AD2d 920, 921 (2d Dep't 1980), app. dismissed, 51 NY2d 862. "In exercising its discretion, the court shall consider whether the intervention will unduly delay the determination of the action or prejudice the substantial rights of any party." CPLR 1013. The statute should be construed liberally such that when the intervenor has a "real and substantial interest in the outcome of the proceeding," intervention should be permitted. Bay State Heating & Air Conditioning Co. v. Amer. Ins. Co., 78 AD2d 147, 149 (4th Dep't 1980); Plantech Housing Inc. v. Conlan, 74 AD2d, at [*3]920-21.

Under both CPLR 1012 and 1013, the motion to intervene must be "timely made" to be considered by the court. David D. Siegel, New York Practice, § 183, at 300 (3d ed. 1999); see, e.g., Oparaji v. Weston, 293 AD2d 592, 593 (2d Dep't 2002); B.U.D. Sheetmetal Inc. v. Massachusetts Bay Ins. Co., 248 AD2d 856, 857 (3d Dep't 1998); Rectory Realty Assoc. v. Town of Southampton, 151 AD2d 737 (2d Dep't 1989).

Case law clearly establishes that a motion for intervention is not untimely merely because it is made after settlement of an action. Stanford Assoc. v. Bd. of Assessors, 39 AD2d 800 (3d Dep't 1972) (allowing intervention post-settlement because third party intervenor learned of action one day before settlement). Nonetheless, if the intervenor delays in bring the motion, intervention must be denied. See, Oparaji v. Weston, 293 AD2d, at 593 (denying intervention after judgment because third party intervenor waited 20 months after learning of action to bring motion); B.U.D. Sheetmetal Inc. v. Massachusetts Bay Ins. Co., 248 AD2d, at 857 (denying intervention after judgment because third party intervenor waited two years after learning of action to bring motion); Rectory Realty Assoc. v. Town of Southampton, 151 AD2d, at 737(denying intervention after settlement because third party intervenor waited one year after learning of action to bring motion).

In this instance, GHI's motion to intervene is timely and will be considered by the Court. The record demonstrates that GHI first learned of plaintiffs' action in July of 2004 and immediately commenced an action against Dr. Lutz. Reply, at ¶ 6. Less than one year later, on April 20, 2005, GHI brought this Order to Show Cause to intervene. Reply, at ¶ 7. Additionally, from the time of Mrs. Glazer's injury until the time of the settlement, GHI repeatedly tried to contact plaintiffs to determine whether they were pursuing a personal injury action against Dr. Lutz in which it should be involved. Reply, Ex. E. GHI never received any response to its inquiries. Id. Based on the foregoing, it is clear that GHI did not sit on its rights, and therefore, its motion must be considered.

On the merits, GHI has demonstrated its statutory right to intervene in the action under CPLR 1012. The action involves recovery of economic and emotional damages for the personal injury of Mrs. Glazer. As a result of this injury, GHI paid $70,754.89 for Mrs. Glazer's medical care. If GHI were not permitted to intervene in the action, it would not be able to claim reimbursement from Dr. Lutz because its direct claim is barred by the statute of limitations. See, Allstate Ins. Co. v. Stein, 1 NY3d 416, 420 (2004). Furthermore, the settlement contemplates complete compensation for Mrs. Glazer's injuries and may preclude any further recovery by GHI. Thus, GHI undoubtedly may be "affected adversely by the judgment" and must be included as a party to this action. CPLR 1012(a)(2).

GHI also has an equitable right of intervention in this case under CPLR 1013. GHI's claims and plaintiffs' action share a common issue of fact, namely, Mrs. Glazer's injuries due to Dr. Lutz's alleged malpractice. CPLR 1013; Plantech Housing Inc. v. Conlan, 74 AD2d, at 921. GHI's participation in the case would not result in substantial prejudice to the parties or delay because the matter has already settled. Berry v. St. Peter's Hosp., 250 AD2d 63, 66 (3d Dep't 1998), lv. dismissed 92 NY2d 1045 (1999). Thus, in the interests of judicial efficiency, GHI's claims should be joined with plaintiffs' and GHI will be permitted to intervene in the action.

Subrogation

GHI has a contractual right of subrogation in this action based on Mrs. Glazer's insurance [*4]policy rider. Additionally, GHI has an equitable right of subrogation because it made payments on behalf of Mrs. Glazer for her medical care and treatment. See, Teichman v. Comm. Hosp. of Western Suffolk, 87 NY2d 514, 521 (1996). The equitable right of subrogation, developed to prevent unjust enrichment, allows an insurer to stand in the shoes of the insured and recover directly from the third party legally responsible for the loss once it makes payment on behalf of the insured. Teichman v. Comm. Hosp. of Western Suffolk, 87 NY2d, at 521; Winkelmann v. Excelsior Ins. Co., 85 NY2d 577, 581 (1995).

Plaintiffs inaccurately assert that GHI's subrogation claim is barred by the statute of limitations. In fact, courts have repeatedly held that, for purposes of intervention, an insurer's claims relate back to their insured's claims. Kaczmarski v. Suddaby, 9 AD3d 847, 848 (4th Dep't 2004), app. dismissed 3 NY3d 738; Omiatek v. Marine Midland Bank, 9 AD3d 831 (4th Dep't 2004), app. dismissed 3 NY3d 738.

Plaintiffs also incorrectly argue that GHI is estopped from recovering its expenses because, under CPLR 4545, plaintiffs cannot recover expenses covered by their health insurance at trial. CPLR 4545, however, only applies to judgments; it does not apply to settlements. Teichman v. Comm. Hosp. of Western Suffolk, 87 NY2d 514, 523 (1996). Thus, the provision is inapplicable to this case.

Finally, plaintiffs mistakenly claim that GHI is not subrogated to Mrs. Glazer's claims because the settlement was not specifically for economic loss. Indeed, the settlement was unclear and neither party specified during settlement that the recovery was for either economic loss or pain and suffering. In such cases, courts order a hearing to determine which portion of the settlement, if any, should be allocated to economic damages. Aetna Cas. and Sur. Co. v. S. Siskind & Sons, Inc., 209 AD2d 215, 215-16 (1st Dep't 1994); see also, Dymond v. Dunn, 148 AD2d 56, 59 (3d Dep't 1989); Pang v. Maimonides Med. Cntr., 105 AD2d 775, 778 (2d Dep't 1984). The insured is not protected from sharing the proceeds of settlement merely because the settlement does not state the phrase "economic loss." See, Aetna Cas. and Sur. Co. v. S. Siskind & Sons, Inc., 209 AD2d, at 215-16 ("Third-party tortfeasors are entitled to reimbursement from the insureds to the extent that the settlement proceeds represented economic loss as opposed to pain and suffering"); see also, Scinta v. Kazmierczak, 59 AD2d 313, 317 (4th Dep't 1977).

Nonetheless, GHI cannot recover from the settlement proceeds. The settlement clearly stated that Dr. Lutz settled for the full amount of his malpractice insurance coverage. Although plaintiffs claimed damages in the amount of two million dollars, in the end, they settled for less and only obtained the full amount of Dr. Lutz's insurance coverage, one million dollars. It is well-settled that, "if the sources of recovery ultimately available are inadequate to fully compensate the insured for its losses, then the insurer who has been paid by the insured to assume the risk of loss has no right to share in the proceeds of the insured's recovery from the tortfeasor." Winkelmann v. Excelsior Ins. Co., 85 NY2d, at 581; see also, Berry v. St. Peter's Hosp., 250 AD2d 63, 66-67 (3d Dep't 1998) ("Only if the insured's recovery exceeds its loss can the insurer share in the excess proceeds"), lv. dismissed 92 NY2d 1045 (1999). Because the recovery of plaintiffs and more significantly Mrs. Glazer in particular did not exceed the losses, GHI will not be permitted to diminish plaintiffs' recovery by sharing in the proceeds.

Accordingly, it is

ORDERED that GHI's motion for intervention is granted; and it is further [*5]

ORDERED that GHI's claim for reimbursement from the settlement proceeds is denied.

This constitutes the Decision and Order of the Court.

Dated: New York, New York

June ___ , 2005

E N T E R

Hon. Eileen Bransten