Lebron v St. Vincent Med. Ctr.

[*1] Lebron v St. Vincent Med. Ctr. 2008 NY Slip Op 52542(U) [21 Misc 3d 1147(A)] Decided on December 17, 2008 Supreme Court, Bronx County Roman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 17, 2008
Supreme Court, Bronx County

Jenny Lebron, Plaintiff(s),

against

St. Vincent Medical Center, DR. ALAN HIRSCHFELD, DR. GENE BARSA, TENBROEK MEDICAL CENTER, DR. MEYER HALBERSTAM, DR. SUSAN MINKOWITZ, DR. VINCENT YEN, DR. HAROLD SCHOLNICK, AND MONTEFIORE MEDICAL CENTER, Defendant(s).



27073/03

Nelson S. Roman, J.

Defendants SAINT VINCENTS CATHOLIC MEDICAL CENTERS OF NEW YORK S/H/A ST. VINCENT MEDICAL CENTER (Saint) and SUSAN MINKOWITZ, M.D. S/H/A DR. SUSAN MINKOWITZ (Minkowitz), and VINCENT YEN, M.D. S/H/A DR. VINCENT YEN (Yen), move seeking an Order pursuant to CPLR §3025 granting them leave to amend their answer to assert a discharge in bankruptcy as an affirmative defense. Saint, Minkowitz and Yen aver that insofar as Saint obtained an Order discharging the instant action in the United States Bankruptcy Court, the amendment sought has merit and plaintiff is not prejudiced thereby. If the motion to amend is granted Saint, Minkowitz and Yen seek an Order dismissing the within action as against them pursuant to CPLR §§3211(a)(7) and (a)(5). Saint, Minkowitz and Yen aver that insofar as the instant claim has been discharged by the aforementioned bankruptcy proceeding, the action is barred by CPLR §3211(a)(5) and plaintiff fails to state a cause of action pursuant to CPLR §3211(a)(7). Plaintiff opposes the instant motion averring that leave to amend the answer be denied insofar as Saint, Minkowitz and Yen have waited years to seek the instant relief absent any excuse. Plaintiff further avers that if the amendment sought is granted, she will prejudiced thereby insofar as Saint, Minkowitz and Yen seek dismissal of the action as to all parties to the bankruptcy proceeding and seek to bar recovery against Saint, Minkowitz and Yen's insurers. Plaintiff opposes Saint, Minkowitz and Yen's motion seeking dismissal of the instant action insofar as to the extent plaintiff seeks to recover from Saint, Minkowitz and Yen's insurers, the instant action is not bared by the bankruptcy discharge.

For the reasons that follow hereinafter, Saint, Minkowitz, and Yen's motion is hereby granted in part. [*2]

The instant action is for alleged personal injuries premised upon alleged medical malpractice. The complaint, which was filed on November 20, 2003, alleges the following. Saint owned and operated a health care facility located at 153 West 11th Street, New York, NY. (Plaintiff's Complaint at ¶2). Saint controlled and supervised the medical staff employed at the aforementioned facility, including defendants DR. ALAN HIRSCHFELD (Hirschfeld) and DR. GENE BARSA (Barsa), who along with Saint, held themselves out as physicians competent to perform and render all medical care and treatment required by the plaintiff (¶¶3-22). Tenbroeck owned and operated a health care facility at 1180 Morris Park Avenue, Bronx, NY. (¶23). Tenbroeck controlled and supervised the medical staff employed at the aforementioned facility, including defendant DR. MEYER HALBERSTAM (Halberstam), who along with Tenbroeck, held himself out as a physician competent to perform and render all medical care and treatment required by the plaintiff. (¶¶24-37). Minkowitz owned and operated a health care facility located at 260 East Broadway, New York, NY. (¶38). Miskowitz controlled and supervised the medical staff employed at the aforementioned facility, and held herself out as a physician competent to perform and render all medical care and treatment required by the plaintiff. (¶¶39-42). Yen owned and operated a health care facility located at 32 west 18th Street, New York, NY. (¶43). Yen controlled and supervised the medical staff employed at the aforementioned facility, and held herself out as a physician competent to perform and render all medical care and treatment required by the plaintiff. (¶¶44-48)). Plaintiff alleges that defendants treated plaintiff from 1997 through the date of the complaint, September 24, 2003 and that said services were negligently rendered. (¶58-59). It is alleged that defendants departed from accepted standards in treatment rendered to the plaintiff and that a result, plaintiff was injured and damaged thereby. (¶¶59-60). Plaintiff alleges that defendants failed to provide plaintiff with information a reasonably prudent medical practitioner should have provided and failed to make plaintiff aware of the risks, benefits and alternatives to the treatment rendered. (¶63). It is further alleged that a reasonably prudent person, having been fully informed, would have withheld consent to the treatment received. (¶64).

In support of the instant motion, Saint, Minkowitz, and Yen submit plaintiff's summons and complaint. They also submit a copy of their answers. Neither Saint, Minkowitz, nor Yen assert any cross-claims. Saint does not interpose any affirmative defenses and Minkowitz and Yen assert six affirmative defenses. The sixth affirmative defense is that the complaint fails to state a cause of action. None of the affirmative defenses asserted aver that the action herein is barred by virtue of a bankruptcy discharge. Saint, Minkowitz, and Yen submit a demand for a bill of particulars.

Saint, Minkowitz, and Yen submit a copy of a Voluntary Bankruptcy Petition filed by Saint in the United States Bankruptcy Court, Southern District of New York, dated July 5, 2005. They also submit a copy of and Order, issued by the Untied States Bankruptcy Court, dated January 25, 2006, wherein the Court sets a deadline pursuant to Rule 3003(c)(3) of the Federal Rules of Bankruptcy Procedures, within which debtors are to file proofs of claims. They also submit an affidavit of mailing evincing that notice of the deadline within which to file claims was provided by mail to plaintiff and her attorney on February 14, 2006. Saint, Minkowitz, and Yen submit affidavits evincing that they published the deadline within which to file claims in several [*3]newspapers.

Saint, Minkowitz, and Yen submit several Orders issued by the United States Bankruptcy Court and other documents annexed thereto. Pertinent to the Court's decision, is an Order dated July 27, 2007, wherein the Bankruptcy Court confirms Saint's Chapter 11 plans of reorganization and liquidation dated June 5, 2007. Paragraph 5 of said Order states that all the classification of claims for purposes of distribution are governed by the first amended Plan. Paragraph 20 of said Order states that with regard to professional liability insurance/medical malpractice insurance, the proceeds thereof, shall be available to holders of timely filed claims. Paragraph 39 enjoins the commencement and continuation of claims against Saint, subject to section 11.6(c) of the first amended plan, which does not bar and thus allows actions for medical malpractice against Saint, seeking damages from Saint's insurers, for policies covering it or covering covered persons, provided they were duly claimed during in the bankruptcy proceeding or were not disallowed. Section 1.42 of the first amended plan defines a covered person as any physician or employee of Saint insofar as said employee has a right of indemnification from Saint with respect to claims of medical malpractice. With regard to medical malpractice claims against Saint or a covered person, section 4.8 of the first amended plan, as well as other sections of the same states that holders of medical malpractice claims, who did not file timely proofs of claim during the bankruptcy proceeding shall not be entitled to recover from any of Saint's insurers.

Saint, Minkowitz, and Yen submit two affidavits. The first is from Marcia Levinson (Levinson), risk manager with Saint. Levinson states that both Minkowitz and Yen were physicians employed by Saint in 2001. The second affidavit is from Barry Aquilino (Aquilino), servicing agent, with Liberty Mutual Insurance Company (Liberty). Aquilino states that both Minkowits and Yen were additional insured employees under the policy issued by Liberty to Saint. Neither Minkowitz nor Yen had other insurance coverage beyond that which Saint provided to them.

Saint, Minkowitz, and Yen submit a copy of this Court's prior Order dated June 6, 2008, wherein this Court, inter alia, denied their previous application seeking dismissal of the within action on identical grounds due to their failure to assert bankruptcy discharge as an affirmative defense.

Saint, Minkowitz, and Yen submit a copy of proposed amended answer wherein they assert bankruptcy discharge as an affirmative defense.

In opposition to Saint, Minkowtz and Yen's motion, plaintiff submits no evidence.

Amendment of Pleadings

CPLR §1003 prescribes the procedure for adding additional parties to an existing action and it states

Nonjoinder of a party who should be joined under section 1001 is a ground for dismissal of an action without prejudice unless the court allows the action to proceed without that party under the [*4]provisions of that section. Misjoinder of parties is not a ground for dismissal of an action. Parties may be added at any stage of the action by leave of court or by stipulation of all parties who have appeared, or once without leave of court within twenty days after service of the original summons or at anytime before the period for responding to that summons expires or within twenty days after service of a pleading responding to it. Parties may be dropped by the court, on motion of any party or on its own initiative, at any stage of the action and upon such terms as may be just. The court may order any claim against a party severed and proceeded with separately.

Thus, new parties may be added at anytime with leave of court and without leave of court within 20 days of the service of the original summons or prior to the expiration of the pleading responding to the summons. An amended pleading seeking to add additional parties served without leave of court when leave is required is a nullity, constitutes a jurisdictional defect, and warrants dismissal. Yonker v. Amol Motorcycles, Inc., 161 AD2d 638 (2nd Dept. 1990); Camacho v. New York City Transit Authority, 115 AD2d 691 (2nd Dept. 1985). The exception to this rule is when the person added absent leave of court waives jurisdiction by engaging in conduct constituting waiver. Id.

CPLR §1009 governs the circumstances under which a plaintiff can amend his complaint to assert a direct cause of action against a third-party. CPLR §1009 reads

Within twenty days after service of the answer to the third-party complaint upon plaintiff's attorney, the plaintiff may amend his complaint without leave of court to assert against the third-party defendant any claim plaintiff has against the third-party defendant.

Thus, a plaintiff may amend his complaint to assert direct claims a third-party defendant within 20 days after service of the third-party defendant's answer upon the plaintiff.

CPLR §3025 prescribes the law with regard to the amendment of pleadings. CPLR §3025(a) and (b) state

(a) Amendments without leave. A party may amend his pleading once without leave of court within twenty days after its service, or at any time before the period for responding to it expires, or within twenty days after service of a pleading responding to it. (b) Amendments and supplemental pleadings by leave. A party may amend his pleading, or supplement it by setting forth additional or subsequent transactions or occurrences, at any time by leave of court or by stipulation of all parties. Leave shall be freely given upon such terms as may be just including the granting of costs and continuances.

Thus, a party may amend its pleading without leave to assert claims against an existing party provided the amended pleading is served within 20 days after the service of the pleading sought to be amended, prior to the expiration of the time period prescribed for responding to the pleading sought to be amended or within 20 days after the service of the responsive pleading. Failure to seek leave of court to amend a pleading adding claims against an existing party, when [*5]such leave is required, is a nullity requiring dismissal of the amended pleading. Nikolic v. Federation Employment and Guidance Service, Inc., 18 AD3d 522 (2nd Dept. 2005); Peterkin v. City of New York, 293 AD2d 244 (2nd Dept. 2002).

Generally, leave to amend a pleading shall be freely granted absent prejudice or surprise resulting directly from the delay. McMcaskey, Davies and Associates, Inc., 59 NY2d 755 (1983); Fahey v. County of Ontario, 44 NY2d 934 (1978). Delay in seeking leave to amend a pleading is not in it of itself a barrier to judicial leave to amend, instead, "[i]t must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine." Edenwald Contracting Co. v. City of New York, 60 NY2d 957, 958 (1983). A failure to adequately explain the delay in seeking to amend the pleadings, if coupled with prejudice, may serve as a basis for the denial of movant's motion to amend. Morgan v. Prospect park Associates Holdings, L.P., 251 AD2d 306 (2nd Dept 1998). A motion seeking leave to amend a pleading must be denied if the amendment will result in actual prejudice or surprise. Bonanni v. Staright Arrow Publishers, 133 AD2d 585 (1st Dept. 1987). An amendment which requires supplemental discovery thereby resulting in prejudicial delay should be denied. Alpert v. Shea Gould Climenko & Casey, 160 AD2d 67 (1st Dept. 1990). In Bonanni, the Court denied plaintiff's petition to amend the complaint, when plaintiff sought to add a new theory of liability, four years after the action was initially commenced, which had not been mentioned in the original complaint. Bonanni v. Staright Arrow Publishers, 133 AD2d 585 (1st Dept. 1987). The Court concluded that the theory originally pled and the theory for which leave to amend was sought required different factual proofs. Id. In Alpert, the Court concluded that the original complaint did not sufficiently give notice of the facts regarding the amendment and cause of action. Alpert v. Shea Gould Climenko & Casey, 160 AD2d 67 (1st Dept. 1990). As such, the Court concluded that, the absence of notice did not enable the defendant to prepare a defense. Id. The Court deemed that plaintiff's three year delay in seeking to amend its pleadings was inexcusable. Id.

Even if there is no prejudice resulting from the proposed amendment, before leave is granted, it must be demonstrated that the proposed amendment has merit. Thomas Crimmins Contracting Co., Inc. v. City of New York, 74 NY2d 166 (1989)(Defendant's petition to amend its answer to assert, an affirmative defense, was denied when the Court found that the defense even if asserted would not be meritorious); Herrick v. Second Cuthouse, Ltd., t/a Forbidden Forest, 64 NY2d 692 (1984)(Court concluded that defendant was rightfully allowed to amend its answer when the amendment would not prejudice plaintiff and where the amendment was found to have merit); Mansell v. City of New York, 304 AD2d 381 (1st Dept. 2003); Rachmani Corporation v. 19th Street Associates, 214 AD2d 358 (1st Dept. 1995); Leszczynski v. Kelly & McGlynn, 281 AD2d 519 (2nd Dept. 2001); McKiernan v. Mckiernan, 207 AD2d 825 (2nd Dept. 1994). When seeking to amend the complaint the moving party must make some evidentiary showing that a proposed amendment has merit. Curran v. Auto Lab Serv. Ctr., 280 AD2d 636 (2nd Dept. 2001). The motion to amend will be granted " unless the insufficiency or lack of merit is clear and free from doubt." Noanjo Clothing v. L & M Kids Fashion, 207 AD2d 436, 437 (2nd Dept. 1994). Thus, it has been held that the Court should examine the proposed amendment and determine whether said amendment is legally sufficient or otherwise has merit. Weider v. Skala, 168 AD2d 355 (1st Dept. 1990) (Court held that plaintiff's proposed amendment to include [*6]a tortious interference claim was legally insufficient and was not meritorious. Consequently, the motion seeking leave to amend the complaint to assert that cause of action was denied). In discussing the relevant inquiry as it pertains to motions seeking leave to amend pleadings the Court stated

...this Court has held that leave to amend a complaint is not granted upon mere request without a proper showing. Rather, in determining whether to grant leave to amend, a court must examine the underlying merit of the causes of action asserted therein, since to do otherwise, would be wasteful of judicial resources.

Id. at 76-77. On this issue, the Court of Appeals has stated that

Where a proposed defense plainly lacks merit, however, amendment of a pleading would serve no purpose but needlessly to complicate discovery and trial, and the motion to amend is therefore, properly denied.

Thomas Crimmins Contracting Co., Inc. v. City of New York, 74 NY2d 166, 170 (1989).

Thus, in determining whether to grant the proposed amendment, the Court can look at whether or not the proposed amendment is sufficient on its face to establish a viable cause of action or whether the evidence submitted supports a conclusion that the claim has merit. Mansell v. City of New York, 304 AD2d 381 (1st Dept. 2003); Rachmani Corporation v. 19th Street Associates, 214 AD2d 358 (1st Dept. 1995); Ortega v. Bisogno & Meyerson, 2 AD3d 607 (2nd Dept. 2003). In Mansell, an employment discrimination case, plaintiff sought to amend her complaint to assert a claim that she was discriminated against by virtue of her disability. Mansell v. City of New York, 304 AD2d 381 (1st Dept. 2003). The Court concluded that based on the documentary evidence, the claim of discrimination had no merit and therefore, plaintiff's application to amend was properly denied. Id. The Court also concluded that the proposed pleading was bereft of any allegations to support a claim of discrimination. Id. In Leszczynski, the Court denied plaintiff's leave to amend the pleadings after finding that the action was barred by the statute of limitations and plaintiff's pleadings were devoid of merit. Leszczynski v. Kelly & McGlynn, 281 AD2d 519 (2nd Dept. 2001). The Court, in acknowledging that at times an action can be asserted even if the statute of limitations has run by virtue of the "relation-back doctrine," found that plaintiff had the burden of establishing the applicability of said doctrine, which in that case did not apply. Id.

It is well settled that the standard applied when reviewing the merits of a proposed pleading is much less exacting than the standard employed in determining a motion for summary judgment. Thompson v. cooper, 24 AD3d 203 (1st Dept. 2005); Aetna Casualty and Surety Company v. LFO Construction, 207 AD2d 274 (1st Dept. 1994); Baskin and Sears, P.C. v. Lyons, 188 AD2d 307 (1st Dept. 1992). As such, the court in determining the merit of a proposed pleading should first evaluate whether the pleading itself, based on the facts alleged, is legally sufficient to state a cause of action. Daniels v. Empire-Orr, Inc., 151 AD2d 370 (1st Dept. 1989). if the facts pled are legally incongruent the proposed amendment must fail. Id. Second, assuming the pleading is patently sufficient and meritorious, the court should then test the merit of the pleading by looking at the support for the same. Id; Bast Hatfield, Inc. v. Schalmont Central School District, 37 AD3d 987 (3rd Dept. 2007). The merit of a proposed pleading shall [*7]be sustained unless the opponent of the same establishes that the facts alleged and relied upon by the proponent are unreliable or insufficient. Baskin and Sears, P.C. v. Lyons, 188 AD2d 307 (1st Dept. 1992).

Since the court must examine the proposed pleading for patent sufficiency, it is axiomatic that the proposed pleading must be provided with a motion seeking leave to amend the same and that a failure to do so warrants denial of the motion. Hoisting Machinery Company v. Elderfields Reservation, Inc., 195 A.D. 893 (1st Dept. 1921); Loehner v. Simons, 224 AD2d 591 (2nd Dept. 1996); Branch v, Abraham and Strauss Department Store, 220 AD2d 474 (2nd Dept. 1995); Goldner Trucking Corp. v. Stoll Packing Corp., 12 A.D. 639 (2nd Dept. 1960).

Like any other application seeking leave to amend a pleading, when leave to amend an answer is sought, for purposes of asserting an affirmative defense, the inquiry is prejudice and merit. Edenwald Contracting Co., Inc. V. City of New York, 60 NY2d 957 (1983) (Defendant granted leave to amend answer to assert affirmative defense of waiver and release. Court held that amendment had merit and did not prejudice the plaintiff.); Ancrum v. St. Barnabas Hospital, 301 AD2d 474 (1st Dept. 2003) (Upon finding that amendment had merit and no prejudice would result, court granted defendant leave to amend answer to assert affirmative defense of failure to exhaust administrative remedies.); White v. Royal Prudential Induetris, Inc., 224 AD2d 682 (2nd Dept. 1996) (Upon finding that amendment had merit and no prejudice would result, court granted defendant leave to amend answer to assert affirmative defense of discharge due to bankruptcy.).

CPLR §3211(a)(5)

CPLR §3211(a)(5) provides that an action may be dismissed for a litany of reasons, including that, an action has been discharged by virtue of bankruptcy. §3211(a)(5) states

the cause of action may not be maintained because of arbitration and award, collateral estoppel, discharge in bankruptcy, infancy or other disability of the moving party, payment, release, res judicata, statute of limitations, or statute of frauds

Bankruptcy and Liability

It is well settled that the Bankruptcy Court presiding over a bankruptcy proceeding has jurisdiction over all of the debtor's property, wherever located. MacArthur Company v. Johns-Manville Corporation, 837 F.2d 89 (2nd Cir. 1987); Tringali v. Hathaway Machinery Company, Inc., 796 F.2d 553 (1st Cir. 1986); In re Davis, 730 F.2d 176 (5th Cir. 1984). In terms of property, the same has been defined by 11 U.S.C. §541(a)(1), which defines the property of a debtor's estate as "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. §541(a)(1), has been deemed broad in scope encompassing all property, tangible, intangible, and any causes of action. MacArthur Company v. Johns-Manville Corporation, 837 F.2d 89 (2nd Cir. 1987); Tringali v. Hathaway Machinery Company, Inc., 796 F.2d 553 (1st Cir. 1986). Accordingly a debtor's insurance policies have been deemed part of the debtor's estate for purposes of bankruptcy. Id. Said policies, can if the court so chooses, as per the court's equitable and statutory powers, be channeled and allocated towards the bankruptcy estate, free and clear of any third-party interests and claims. MacArthur Company v. Johns-Manville Corporation, 837 F.2d 89 (2nd Cir. 1987); In re Davis, 730 F.2d 176 (5th Cir. 1984). [*8]Stated differently, the court can prevent any claims against a debtor's insurance policies. Id. In MacArthur Company, the court foreclosed the rights of an objector, who was an insured under the debtor's insurance policy and thus prior to the bankruptcy had a claim to said policies. Id. In that case, the court allowed the debtor to settle with his insurers, and as per said settlement, insurers paid proceeds from the insurance policies into the debtor's estate, said funds allocated as pay creditors who filed timely claims against the debtor in the bankruptcy proceeding. Id. In exchange for the settlement the court issued an Order enjoining any and all suits arising from the settled policies. Id.

Once there a discharge subsequent to a bankruptcy, the automatic stay imposed by 11 U.S.C. §362(a) is dissolved and replaced by a permanent injunction pursuant to 11 U.S.C. §524, which reads in pertinent part

(a) A discharge in a case under this title (1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727, 944, 1141, 1228, or 1328 of this title, whether or not discharge of such debt is waived;

(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived; and (3) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect or recover from, or offset against, property of the debtor of the kind specified in section 541(a)(2) of this title that is acquired after the commencement of the case, on account of any allowable community claim, except a community claim that is excepted from discharge under section 523, 1228(a)(1), or 1328(a)(1), or that would be so excepted, determined in accordance with the provisions of sections 523(c) and 523(d) of this title, in a case concerning the debtor's spouse commenced on the date of the filing of the petition in the case concerning the debtor, whether or not discharge of the debt based on such community claim is waived...

(e) Except as provided in subsection (a)(3) of this section, discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt.

Thus, the above statute acts as an injunction, barring "the enforcement of a judgment or the commencement or continuation of an action in other courts to collect or recover a debt as a personal liability of the debtor. In re , 58 B.R. 953, 956 (Bkrtcy. W.D. Wis. 1986), quoting, Collier on Bankruptcy, ¶524.01 at 524-4 (15th ed. 1985). In essence the statute protects the debtor from subsequent action from a creditor whose claim has been discharged in the bankruptcy case. Id The injunction created by U.S.C. §524, by enjoining subsequent action against his assets, is meant to give the debtor a fresh start. In re Jet Florida Systems, Inc., 883 F.2d 970 (11th Cir. 1989).

Generally, a creditor who fails to file a proof of claim during the bankruptcy proceedings waives his right to recover against the debtor. Id. However, it is equally well settled that with regard to applicability of U.S.C. §524(e), the failure to file a notice of claim does not bar the [*9]continuation of a claim by a creditor. Id. As cited above, §524(e) promulgates that the discharge of the debtors debt does not affect the liability of any third-party liable for such debt. Accordingly, while 11 U.S.C. §524(a) serves to bar any actions where the debtor bears personal liability attaching to his assets, 11 U.S.C. §524(e) does not preclude liability against the debtor provided that any damages stemming therefrom would be paid by another, such as a surety or insurance company. In re Jet Florida Systems, Inc., 883 F.2d 970 (11th Cir. 1989); In re Mann, 58 B.R. 953 (Bkrtcy. W.D. Wis. 1986); In re White, 73 B.R. 983 (Bkrtcy. D.C. 1987). In Jet, the court held that the plaintiff could proceed with a civil action for defamation against the debtor whose debts had been discharged in bankruptcy even though no claim for such said action had been filed with the Bankruptcy Court. In re Jet Florida Systems, Inc., 883 F.2d 970 (11th Cir. 1989). The court held that insofar as debtor's liability was a prerequisite to recovery from debtor's insurer for the acts alleged by the defamed plaintiff, U.S.C. §524(e) allowed the civil action for defamation. In re Jet Florida Systems, Inc., 883 F.2d 970 (11th Cir. 1989). Implicit in the court's decision, however, was that in order not to violate 11 U.S.C. §524(a) the civil action had to be limited the determination of the debtor's liability and no damages could be collected from him. Id.

New York State law also hold that a bankruptcy discharge does not bar a pending law suit were the defendant has liability insurance coverage for the events forming the basis of the law suit. Roman v. Hudson Telegraph Associates, 11 AD3d 346 (1st Dept. 2004); Lumbermens Mutual Casualty Company v. Morse Shoe Company, 218 AD2d 624 (1st Dept. 1995); Minafari v. United Artists Theatres, Inc., 5 Misc 3d 474 (Supreme Court, Westchester County 2004); Andriani v. Czmus, 153 Misc 2d 38 (Supreme Court, New York County 1992). Additionally, it is well settled that State courts usually retain the power to determine the effect of any discharges in bankruptcy. Lumbermens Mutual Casualty Company v. Morse Shoe Company, 218 AD2d 624 (1st Dept. 1995). State courts however, have an "inescapable obligation to interpret and apply Federal statutes." Chevron Oil company v. Dobie, 40 NY2d 712, 714 (1976). Insurance Law §3420(a)(1) reads

(a) No policy or contract insuring against liability for injury to person, except as provided in subsection (g) hereof, or against liability for injury to, or destruction of, property shall be issued or delivered in this state, unless it contains in substance the following provisions or provisions which are equally or more favorable to the insured and to judgment creditors so far as such provisions relate to judgment creditors: (1) A provision that the insolvency or bankruptcy of the person insured, or the insolvency of his estate, shall not release the insurer from the payment of damages for injury sustained or loss occasioned during the life of and within the coverage of such policy or contract.

When 11 U.S.C. §524(a), (e) and Insurance Law §3420(a)(1) are read together, it is clear that an insurer to is obligated to provide coverage to and indemnify a defendant even when the same files for bankruptcy, provided the loss or the event sued for occurs during the life of the policy. Roman v. Hudson Telegraph Associates, 11 AD3d 346 (1st Dept. 2004); Lumbermens Mutual Casualty Company v. Morse Shoe Company, 218 AD2d 624 (1st Dept. 1995); Minafari v. United Artists Theatres, Inc., 5 Misc 3d 474 (Supreme Court, Westchester County 2004); Andriani v. Czmus, 153 Misc 2d 38 (Supreme Court, New York County 1992). More over, 11 U.S.C. [*10]§524(e), permits recovery of a debt against any other entity obligated to pay or liable for such debt. Id.

In Minafri, the court denied defendant's motion pursuant to CPLR §3211(a)(5), which sought to dismiss plaintiff's cause of action on the theory that the same was barred by a bankruptcy discharge. Minafari v. United Artists Theatres, Inc., 5 Misc 3d 474 (Supreme Court, Westchester County 2004). In that case plaintiff was suing defendant for personal injuries sustained as a result of a fall in front of defendant's property. Id. Defendant filed for bankruptcy and the Federal Court issued an order enjoining anyone from proceeding with any suits against the defendant. Id. The court held that to the extent that defendant had insurance for the event therein, the suit could continue because the insurer would be liable for any damages awarded. Id. The court further added that based on §3420(a)(1), plaintiff was not required to file an notice of claim in the bankruptcy proceeding as the defendant's insurer's obligation to pay despite a bankruptcy was mandated by statute. Id. In Andriani v. Czmus, 153 Misc 2d 38 (Supreme Court, New York County 1992), a case with similar facts, the court came to the same conclusion.

When the foregoing is read together, the law can be reconciled and it becomes obvious that when a debtor's insurance policies are not channeled and allocated as part of the bankruptcy state, 11 U.S.C. §524(a) does not become a bar to the prosecution of an action against the debtor for the limited purpose of securing a damages award from the debtor's insured, as authorized by 11 U.S.C. 524(e) and Insurance Law §3420(a)(1). If, however, the bankruptcy court includes such policies in the debtor's estate and channels and allocates the same as part of the bankruptcy settlement, no cause of action can be maintained, as recovery, even against the debtor's insured, is barred.

Discussion

Saint, Minkowitz, and Yen's motion seeking an Order granting them leave to amend their answer to assert an affirmative defense, namely that the action herein has been discharged due to bankruptcy, is hereby granted. Generally, leave to amend a pleading shall be freely granted absent prejudice or surprise resulting directly from the delay. Even if there is no prejudice resulting from the proposed amendment, before leave is granted, it must be demonstrated that the proposed amendment has merit. Like any other application seeking leave to amend a pleading, when leave to amend an answer is sought, for purposes of asserting an affirmative defense, the inquiry is prejudice and merit.

In this case, the evidence submitted by Saint, Minkowitz, and Yen evinces that the amendment sought, namely the interposition of an affirmative defense asserting that the action herein is barred by bankruptcy discharge, has merit. Saint, Minkowitz, and Yen submit a host of documents including the United States Bankruptcy Court's Order dated July 27, 2007, wherein the court confirmed Saint's first amended plan of reorganization, thus finalizing Saint's Chapter 11 bankruptcy proceeding. Saint, Minkowitz, and Yen also submit the first amended plan, detailing the terms of the bankruptcy and the organization pursuant thereto. Within said Order and plan, it is clear that with regard to Saint, its insurers, and some of its employees, no action could be maintained against them, including any action sounding in medical malpractice. Accordingly, to the extent that the evidence submitted demonstrates that the amendment sought has merit, in that there was a bankruptcy proceeding, which at least as to Saint and its insurers [*11]bars an action such as this one, the application seeking leave to amend must be granted. Plaintiff's opposition to this portion of Saint, Minkowitz, and Yen's application is meritless and unavailing. Plaintiff avers that the instant amendment would prejudice her, insofar as the same seeks dismissal of the her claims against Saint, Minkowitz, Yen, thereby barring recovery against the same's insurers. Plaintiff further avers that the instant application should have been made three years ago, when Saint initially filed for bankruptcy. Plaintiff's in essence contends that since Saint, Minkowitz, and Yen have a legal defense to the instant action she is prejudiced thereby. Prejudice is the impairment of a litigant's ability to defend/prosecute an action on the merits. Slate v. Schiavone Construction Company, 10 AD3d 1 (1st Dept. 2004). Prejudice does not result from the loss of a procedural or technical advantage. Id. Thus, for example, the expiration of the statute of limitations, does not, by itself, constitute prejudice. Id. In this case, plaintiff avers that she will be prejudiced by the amendment sought insofar as if the Court grants Saint, Minkowitz, and Yen's application, she loses the technical advantage afforded to her were the defense sought not available. This is not prejudice and is exactly the kind of assertion proscribed by the case law. Plaintiffs's contention that Saint, Minkowitz, and Yen's delay in seeking leave to amend their answer warrants denial of the instant motion is also lacking in merit. Mere lateness or delay is not a bar to granting a party leave to amend a pleading. The threshold inquiry is lateness coupled with prejudice. This Court has already concluded an absence of prejudice. Thus, Saint, Minkowitz, and Yen's application seeking leave to amend their answer is hereby granted.

`Saint, Minkowitz, and Yen's motion seeking an Order dismissing the within action pursuant to CPLR §3211(a)(5), on grounds that the instant action has been discharged by a prior bankruptcy, is granted in part, to the limited extent of dismissing the within action against Saint only and precluding plaintiff from recovering any damages award from professional/malpractice liability insurance policies purchased by Saint and in effect on the date of the accident alleged herein. It is well settled that as per CPLR §3211(a)(5) an action warrants dismissal if the same has been discharged by a prior bankruptcy. It is well settled that the Bankruptcy Court presiding over a bankruptcy proceeding has jurisdiction over all of the debtor's property, wherever located. Accordingly a debtor's insurance policies can be made part of the debtor's estate for purposes of bankruptcy. Said policies, can if the bankruptcy court so chooses, as per the court's equitable and statutory powers, be channeled and allocated towards the bankruptcy estate, free and clear of any third-party interests and claims. Thus, the bankruptcy court can prevent any claims against a debtor's insurance policies. Once there a discharge subsequent to a bankruptcy, the automatic stay imposed by 11 U.S.C. §362(a) is dissolved and replaced by a permanent injunction pursuant to 11 U.S.C. §524, which acts as an injunction, barring the enforcement of a judgment or the commencement or continuation of an action in other courts. Generally, a creditor who fails to file a proof of claim during the bankruptcy proceedings waives his right to recover against the debtor. However, it is equally well settled that with regard to applicability of 11 U.S.C. §524(e), which promulgates that the discharge of the debtors debt does not affect the liability of any third-party liable for such debt, the failure to file a notice of claim does not bar the continuation of a claim by a creditor. Accordingly, while 11 U.S.C. §524(a) serves to bar any actions where the debtor bears personal liability attaching to his assets, 11 U.S.C. §524(e) does not preclude liability against the debtor provided that any damages stemming therefrom would be paid by [*12]another, such as a surety or insurance company. Thus, when a debtor's insurance policies are not channeled and allocated as part of the bankruptcy state, 11 U.S.C. §524(a) does not become a bar to the prosecution of an action against the debtor for the limited purpose of securing a damages award from the debtor's insured as authorized by 11 U.S.C. 524(e) and Insurance Law §3420(a)(1). If however, the bankruptcy court includes such policies in the debtor's estate and channels and allocates the same as part of the bankruptcy settlement, no cause of action, despite 11 U.S.C. §524(e), can be maintained, as recovery, even against the debtor's insured, is barred.

In this case it is beyond cavil that insofar as Saint did in fact file for bankruptcy and said bankruptcy resulted in reorganization as per the Bankruptcy Court's Order dated July 27, 2007, 11 U.S.C. §524(a) enjoins the instant action insofar as any damages are sought from Saint directly. Moreover, a review of the aforementioned Order and plan evinces that the any action against Saint for the limited purpose of establishing liability so as to collect damages from Saint's insurers is also enjoined and barred. A review of the United States Bankruptcy Court's Order dated July 27, 2007 and the first amended plan it confirms, evinces that Saint's professional liability insurance policies, which would indemnify Saint for an action such as this one, were channeled by the bankruptcy court and allocated. Said policies, as per the Order and plan, would be limited to pay damages in medical malpractice actions which were duly noticed in the bankruptcy proceeding. It is conceded that plaintiff never filed timely notice of this action with the bankruptcy court and as such, she cannot maintain the instant action against Saint, even if the purpose is to collect from Saint's insurers. Plaintiff's reliance on In re Jet Florida Systems, Inc., 883 F.2d 970 (11th Cir. 1989) and Minafari v. United Artists Theatres, Inc., 5 Misc 3d 474 (Supreme Court, Westchester County 2004) is misplaced since as already discussed, in those cases there was no mention that the debtor's insurance policies had been made part of the debtor's estate, channeled or otherwise allocated. Thus, the instant action is hereby dismissed as to Saint as the same is barred by a bankruptcy discharge.

Saint, Minkowitz, and Yen's motion seeking an Order dismissing the within action pursuant to CPLR §3211(a)(5), on grounds that the instant action has been discharged by a prior bankruptcy, is denied insofar as dismissal is sought on behalf of Minkowitz and Yen. Saint, Minkowitz, and Yen argue that Minkowitz and Yen are entitled to dismissal insofar as they are covered persons under the aforementioned Order and first amended plan. As per the first amended plan, a covered person is a physician or employee of Saint, entitled to indemnification from the same. Under the first amended plan, only those who filed timely claims during the bankruptcy proceeding can recover under Saint's insurance policy for the acts of covered persons. Thus, Saint, Minkowitz, and Yen argue that insofar as Minkowitz and Yen were employed by Saint when the malpractice alleged was committed, they would be entitled to indemnification from Saint and would thus be entitled to coverage under Saint's insurance policy. Saint, Minkowitz, and Yen aver that insofar as plaintiff is not a timely claim holder any such claims are now barred. Saint, Minkowitz, and Yen's arguments fail to establish entitlement to dismissal on behalf of Minkowitz, and Yen. While it is true that if upon disposition of this case, it is established that Saint is vicariously liable for the acts of Minkowitz and Yen, by virtue of the aforementioned Order and plan, no recovery from Saint or its insurers could be had. However, insofar as Minkowitz and Yen were not parties to the bankruptcy proceeding nothing enjoins individual action against them. Further, a review of the complaint evinces an absence of any [*13]claim asserting that Saint is vicariously liable for the acts of Minkowitz and Yen. Thus, they are being independently sued for their individual acts. It could very well be that Minkowitz and Yen are individually liable for said acts, therefore not entitling them to indemnification from Saint and thereby recovery from Saint or their Insurance policies. Thus, with respect to Minkowitz and Yen, the instant motion insofar as dismissal is sought pursuant to CPLR §3211(a)(5), on grounds of a bankruptcy discharge, is hereby denied.

Saint, Minkowitz, and Yen's motion seeking dismissal of the within action pursuant to CPLR §3211(a)(7) is hereby denied as moot with regard to Saint and denied for the reasons stated above with regard to Minkowitz and Yen.It is hereby

ORDERED that plaintiff's complaint be hereby dismissed as against Saint with prejudice. It is further

ORDERED that should plaintiff prevail as against Maskowitz and Yen, any recovery from Saint's insurance policies, for their acts, be hereby barred. It is further

ORDERED that Saint, Maskowitz, and yen serve a copy of this Order with Notice of Entry upon all parties within thirty (30) days hereof.

This constitutes this Court's decision and Order.

Dated : December 17, 2008

Bronx, New York

______________________________ Nelson S. Roman, J.S.C.