Allstate Ins. Co. v Trans Hudson Express, Inc.
Annotate this CaseDecided on July 14, 2004
Supreme Court, Richmond County
ALLSTATE INSURANCE COMPANY, as subrogee of JADWIGA JESIONOWSKI and MICHAEL JESIONOWSKI, Plaintiff,
against
TRANS HUDSON EXPRESS, INC. AND LUIS N. ORTIZ Defendants.
11494/03
Joseph J. Maltese, J.
The plaintiff's motion to dismiss the defendants' counterclaim pursuant to CPLR § 3211 [a][6] is granted only to the extent of limiting the counterclaim to use as a setoff.
Facts
Prior to March 18, 2002, the plaintiff, Allstate Insurance Company, issued an insurance policy to plaintiff's subrogor, Jadwiga Jesionowski and Michael Jesionowski, covering a 2001 Lexus motor vehicle. This insurance policy included collision coverage. On March 18, 2002 Jadwiga Jesionowski ("subrogor") was involved in a traffic accident on Arden Avenue, in the County of Richmond, City and State of New York, with a bus driven by the defendant, Luis Ortiz. The 1989 Fix Bus was owned by defendant Trans Hudson Express, Inc.
The subrogor's vehicle sustained damages in the amount of $19,290.59. This sum was [*2]paid by the plaintiff to its subrogor less the amount of $500.00, which represented the deductible regarding the aforesaid insurance policy. The plaintiff contends the contact and collision was caused solely as the result of the negligence of the defendants without any negligence on the part of the plaintiff's subrogor. The plaintiff, as subrogee, seeks judgment against the defendant in the sum $19,290.59, together with interest from March 18, 2002, plus costs and disbursements for this action.
The defendant maintains that as a result of the plaintiff's negligence, the bus sustained substantial damage. The defendant entered a counterclaim against the plaintiff in the amount of $4,158.37 for vehicle damage sustained from the collision with the subrogor. The plaintiff argues that based on existing case law, a defendant may not maintain a counterclaim against the plaintiff for claims it has directly against the subrogor.
Discussion
The plaintiff argues that a defendant may not seek to recover from a plaintiff subrogee by way of a counterclaim for any claims it may have against the subrogor. The plaintiff relies on case law, affirmed by the Appellate Division, First Department, that was based on a no longer applicable New York contributory negligence standard. (See Potomac Ins. Co. v Schmedes, 63 N.Y.S.2d 548 [App Term 1st Dept 1946].) However, the law was fundamentally changed on September 1, 1975, when CPLR article 14-A effectuated "a policy of comparative negligence for all actions to recover damages for personal injury, property damage, or wrongful death where such causes of actions accrued on or after September 1, 1975." (Cosmopolitan Ins. Co v. Feil, 91 Misc.2d 59 [Civ Ct, New York 1977].)
The measure of the liability of the insurer was established in Seibert v. Dunn ( 216 N.Y. 237 [1915]), where the court found "the assignee, in suing the claim stood in the place of the assignor, succeeding to the benefits which it might bring, but chargeable to the extent of it with the liabilities of the assignor....." (emphasis added). Relying on this Seibert rule, the court in Occidental Ins. Co v. Herman (179 Misc 499 [Civ Ct, Oueens County 1946]), denied a defendant's counterclaim against a plaintiff subrogee because they determined the applicable New York contributory negligence standard would make it impossible for the defendant to recover against the plaintiff subrogee. The court found that the subrogee would have to determine that the defendant was fully negligent and the plaintiff's subrogor was free from any negligent responsibility. If the subrogee failed to show full negligence on the part of the defendant, the court determined that the defendant still could not successfully succeed on the counterclaim. The subrogee was not the liability carrier of the subrogor and the court determined that pursuant to the holding in Seibert, a ruling against the plaintiff subrogor would be beyond the "extent" of the plaintiff's coverage. (Id. at 500.) The Occidental ruling did not address the issue of what would happen if the subrogee was also the liability carrier. The ruling left the defendant with the cumbersome choice of having to pursue an independent action against the individual subrogor. [*3]
After September 1, 1975, in order to be in compliance with the comparative negligence guidelines set forth in CPLR article 14-A, the court applied different standards for evaluating defendant's counterclaims. Particularly, in Cosmopolitan Ins. Co. v. Feil (91 Misc 2d 59 [Civ Ct, New York 1977]), the court found that comparative negligence will allow a defendant with or without a counterclaim to successfully assert diminution of damages. The court was critical of the multiplicity of lawsuits that the Occidental ruling generated. The court reasoned "the obligation of the subrogated carrier to go forth with proof of the defendants negligence and to defend against culpable conduct claimed in diminution of damages is the same whether or not defendant alleges a counterclaim, and remains unaffected by the type of contract between the subrogated plaintiff and its insured." (Id. at 60.)
The Cosmopolitan court found that a defendant's counterclaim should be allowed to be interposed when the plaintiff is the liability carrier for the subrogor. The court noted that:
Where a contract contains liability coverage, as well as collision coverage with the same carrier upon which plaintiff is subrogated, then surely there exists a special situation permitting departure from the established rule. Plaintiff here has failed to deny that its contract with the subrogor included liability coverage, and accordingly the counterclaim should be interposed. (Id. at 61.)
Liability coverage is compulsory in the State of New York and the insurer must assert that they are not the liability carrier. (Id. at 61.) The plaintiff in the current action has not made any denial that they are not the liability carrier.
In Motors Ins. Corp v. Coral Service Corp. (100 Misc.2d 468 [Civ Ct, New York 1979]), a case similar to the current action, the court found that a defendant's counterclaim against the plaintiff subrogee could be used as a setoff of damages. The court maintained that when applying comparative negligence standards, the "plaintiff can pursue the claim without risk of an affirmative judgment against it and the defendant can fight the claim with all available weapons." (Id. at 470.) The court emphasized that the "all or nothing" contributory negligence standard of Occidental is no longer applicable to counterclaims against subrogee. (Id. at 470.)
Pursuant to the holdings in Cosmopolitan and Motors Ins. Corp, the defendant should be allowed to maintain their counterclaim as a setoff or diminution of damages. The plaintiff has failed to successfully maintain they are not the liability carrier for the subrogor. Additionally, the comparative negligence standard set forth in CPLR article 14-A allows the defendant to have greater flexibility in pursuing affirmative relief. The rigid contributory negligence guidelines maintained in Occidental and Potomac Ins. Co. are no longer the applicable standards to apply to counterclaims against the plaintiff subrogee. If the defendant deems necessary, they may also implead the subrogor on the counterclaim.
Accordingly it is hereby:
ORDERED that the plaintiff's motion to dismiss the defendants' counterclaim pursuant to [*4]CPLR § 3211 [a][6] is granted only to the extent of limiting the counterclaim to use as a setoff.
ENTER,
DATED: July 14, 2004
Joseph J. Maltese
Justice of the Supreme Court
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