Scottsdale Ins. Co. v Alphonse Hotel Corp.

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Scottsdale Ins. Co. v Alphonse Hotel Corp. 2011 NY Slip Op 32853(U) October 18, 2011 Supreme Court, New York County Docket Number: 115474/09 Judge: Joan A. Madden Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. SCANNED ON 1012512011 [* 1] L - .. - SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY Index Number : 115474/2009 INDEX NO. SCOTTSDALE INSURANCE vs. ALPHONSE HOTEL MOTION DATE MOTION 8EQ. NO. SEQUENCE NUMBER : 001 - AMEND SUPPLEMENT PLEADINGS MOTION CAI.. NO. FILED OCT 25 2011 NEW YORK COUNTY CLERK S OFFICE n Check one: u FINAL DISPOSITION Check if appropriate: KNON-FINAL DlSPOS* DO NOT POST SUBMIT ORDER/ JUDG. 0 REFERENCE 0 SETTLE ORDER/ JUDG. [* 2] -against- Joan A. Madden, J. Index No. 1 15474109 NEW YoRK CLERKS~F,~~ Defendant Alphonse Hotel Corporation d/b/a Hotel Carter and Hotel Lafaye e ( Alphonse ) moves for leave to file an amended answer to assert an affirmative defense of lack of capacity to sue and also moves for summary judgment dismissing the complaint against it based on the added defense. Plaintiff Scottsdale Insurance Company ( Scottsdale ) opposes the motion, which is denied. Backmound This action arises from a transaction in which Scottsdale, an Ohio corporation, wrote a surplus lines insurance policy (the 7nsurance Policy ) for general liability insurance for Alphonse at the request of Alphonse s insurance broker. The policy period of the insurance appears to have commenced on April 29,2006, and ended on April 29,2007. Scottsdale acknowledges that Alphonse paid $55,680.00 as a deposit towards the insurance it requested, but maintains that Alphonse owes an additional $98,385.04 in insurance premiums to Scottsdale. Scottsdale claims that it rendered monthly accounts of the indebtedness owed by Alphonse, including account statements for the amount of $98,3 85.04, which were accepted without objection by Alphonse. On or around November 4,2009, Scottsdale filed a complaint against Alphonse, which asserts causes of action for breach of contract and for an account stated. [* 3] In its answer, Alphonse generally denies the allegations in the complaint and asserts affirmative defenses of failure to state a claim and that Alphonse paid all amounts due and owing to Scottsdale in full. During the course of discovery, Alphonse demanded that Scottsdale produce evidence that it is licensed or authorized to conduct insurance business in New York. In response to this discovery demand, Scottsdale produced various documents including a printout (the Printout ) from the website of the New York State Department of Insurance (the Insurance Department ), which Scottsdale asserts shows that it is a licensed insurer in New York. However, Alphonse maintained that the discovery documents provided by Scottsdale and the deposition witness produced by Scottsdale did not establish capacity for Scottsdale to sue in New York. On February 10,2011, upon the consent of Scottsdale, a preclusion order was issued prohibiting Scottsdale from producing at trial any document or testimony which has not been produced to date concerning Scottsdale s authority to conduct insurance business in the State of NewYork. 8 Alphonse now seeks to amend its answer pursuant to CPLR 30250) in order to assert the additional affrmative defense that Scottsdale may not maintain this action since it is a foreign corporation, which is not licensed or authorized to conduct insurance business in the State of New York. Alphonse asserts that the proposed defense of lack of capacity is meritorious and seeks summary judgment based on the defense. In particular, Alphonse argues that discovery produced by Scottsdale does not establish that Scottsdale is licensed to write insurance in New York as required under New York Insurance Law ( Insurance Law ) § 1 102(a). Scottsdale must Insurance Law 5 1 102(a) provides in pertinent part that No person, firm, association, corporation or joint-stock company shall do an insurance business in [New York] unless authorized by a license.. . or exempted by the provisions of [the Insurance Law] from such 2 [* 4] be licensed to do insurance business and that, in the absence of such authority, it lacks the capacity to sue. In addition, Alphonse argues that Scottsdale has not shown that it is in compliance with the regulations contained in 11 NYCRR 5527.0-27.24 ( Regulation 41 ), which concern the limited circumstances in which insurers who are not authorized in New York may write policies for sale in New York. In particular, Alphonse asserts that the Printout fails to sufficiently indicate that Scottsdale is authorized or licensed to conduct insurance business in New York and is not competent evidence without an affidavit or certificate from an appropriate official from the Insurance Department. Alphonse also submits correspondence between Scottsdale and the Insurance Department, including a letter dated March 26,1990 fiom Wendy E. Cooper (the Superintendant ), Acting Superintendant of Insurance, to Jack A. King ( King *), Vice President, Legal of Scottsdale. In the March 26 Letter, the Superintendant appears to assert that Scottsdale is an unlicensed insurer and, as such, must comply with the requirements of Regulation 41 in order to transact business with New York licensed excess lines brokers. Alphonse also contends that Scottsdale is prohibited from bringing this action by Business Corporation Law ( BCL, ) 5 1312, which provides that a foreign corporation doing business in [New York] without authority shall not maintain any action or special proceeding in [New York]. Alphonse argues that, pursuant to BCL § 1304(a), a foreign corporation becomes authorized to do business in New York by applying for a certificate of authority fiom the New York Department of State (the State Department ). Alphonse asserts that the evidence shows that Scottsdale was doing business in New York because Geoffrey Hasbach, the witness Scottsdale produced for deposition, testified that Scottsdale writes coverage in New York and has a high volume of business in New York. requirement. 3 [* 5] In opposition, Scottsdale asserts that the Printout shows that Scottsdale is licensed to conduct insurance business in New York State, as it specifies Scottsdale s current writing powers, and lists Scottsdale s name, address and website, and that the court can take judicial notice of the information of the website. Scottsdale also contends that, while it is licensed to write insurance in New York, it is not doing business in New York for the purposes of invoking BCL 5 1312 as a foreign corporation s acts of soliciting sales or placing orders in New York are not enough to invoke the statute, Scottsdale asserts that, in light of the above, Alphonse s request to amend its answer must be denied. Scottsdale also requests that the court search the record and grant summary judgment in its favor and in support of this request it submits Alphonse s insurance application, terms and conditions of Alphonse?s insurance policy, audit worksheets and statements of account. In reply, Alphonse argues that Scottsdale s request that the court search the record and award it summary judgment is improper and that if Scottsdale seeks affirmative relief, it must do so by the proper method of filing a notice of cross motion. Alphonse also asserts that the evidence provided by Scottsdale is not self-explanatory and is insufficient to establish Scottsdale s entitlement to affirmative relief. giscussion Leave to amend a pleading should be freely given (CPLR 3025 [b]) as a matter of discretion in the absence of prejudice or surprise. Zaid Theatre Cam. v. Sona Realty Cot 18 9 A.D.3d 352,355-356 (1st Dept 2005)(intemal citations and quotations omitted), However, in order to conserve judicial resources, an examination of the underlying merits of the proposed causes of action is warranted. Eighth Ave. Garage Corn. v. H,K.L Realty Corno 60 A.D.3d 404,405 (1st Dept), Iv dismissed, 12 N.Y.3d 880 (2009). At the same time, leave to amend will 4 [* 6] I be granted as long as the proponent submits sufficient support to show that proposed amendment is not palpably insuficient or clearly devoid of merit. MBIA Ins Corn. v. Greystwe & Co., &, 74 A.D.3d 499 (1st Dept 2010)(citation omitted). In addition, [olnce a prima facie basis for the amendment has been established, that should end the inquiry, even in the face of a rebuttal that might provide a subsequent basis for a motion for summary judgment Pier $9 -3. L.P. v. Chelsea Piers. L.P,, 40 A.D.3d 363, 365 (1st Dept 2007). Since no prejudice has been shown based on Alphonse s delay in adding an afirmative defense of lack of capacity, the only question here is whether the proposed affirmative defense of lack of capacity is of sufficient merit. While Insurance Law $1102(a) has been interpreted to require an insurance company to be licensed in New York State before bringing an action here a l l y v, Bremmerman, 23 A.D.2d 346,351 (4th Dept 1965), afr, NY2d 195 (1967); Simal 21 Mutt.hdem. Ass n. Ltd. v. Rice Mohawk U.$ Const., 1996 WL 337294 (S.D.N.Y. 1996); Couch . on Insurance, 9 3:40 [2011] ), the information on the Printout is supplied by the Insurance Department and shows that Scottsdale became a recognized insurance provider in New York on June 28, 1994. The Printout further shows that Scottsdale has writing powers fox various lines of insurance business, including in relevant part Personal Injury Liability and Property Damage Liability, and that the definitions of these terms can be found in New York hsurance Law ( Insurance Law ) 6 1113. As such, the relevant information on the Printout, which the court verified on the Insurance Department s website, shows that Scottsdale is a licensed insurance provider in New York. & Jones Lang LaSalle of New York, LLC v. New York City School Constr. A u a , 3 1 Misc.3d 424,427 (Sup. Ct. N.Y. County 201 l)(court takes judicial notice that New York Secretary of State s website reflected plaintiffs name change). 5 [* 7] 4 Moreover, the letter from the Superintendent of Insurance, dated March 26, 1990, is not evidence to the contrary as it was written in 1990, over four years before the recognized date listed for Scottsdale on the Printout. Furthermore, since the evidence shows that Scottsdale is a licensed insurance provider in New York, the court need not address Alphonse s arguments that Scottsdale is barred from maintaining this suit by virtue of Regulation 41, which pertains to unauthorized insurers. While Scottsdale has not shown that it has a certificate of authority to conduct business from the State Department, it is not required to do so in order to demonstrate that it has authority to write insurance in New York. Although BCL 5 1304(a) specifies that a corporation becomes authorized to do business in New York by applying for a certificate of authority from the State Department, foreign insurance companies such as Scottsdale are expressly exempted from the provisions of BCL 5 1304(aj under Insurance Law 6 108. Section 1OS provides that [ilf any provision of the business corporation law conflicts with any provision of this chapter, the provision of this chapter shall prevail.. ,. Of relevance here, under Insurance Law 6 108(e), BCL $1304 is not applicable to a foreign insurer, like Scottsdale. As such and in consideration of the evidence that Scottsdale is licensed to conduct insurance business in New York, Scottsdale is not barred by BCL 8 1312 from bringing this action. Accordingly, as Scottsdale has the legal capacity to sue, the motion to amend and for summary judgment dismissing the complaint must be denied. Scottsdale s request that the court grant summary judgment in its favor upon searching the record is also denied. %le Scottsdale attaches Alphonse s insurance application, the terms Additionally, Insurance Law 8 108(g)(1j-(2) provides that when applying the business corporation law to insurance companies, unless the context indicates otherwise, secretary of state means superintendent of insurance and department of state means insurance department. 6 [* 8] f and conditions of the Insurance Policy, audit worksheets, and statements of account, Scottsdale provides no affidavit from a person with knowledge to confirm the validity of the business records and provide an explanation of those documents which are not self-explanatory. ! g & itzer v. Schussel, 17 Misc.3d 1120(A),*3 (Supreme Court, New York County 2007)(unauthenticated, unexplained business records submitted by defendant s attorney were insuffcient to establish prima facie entitlement to summary judgment); %e also McDonald v. T i s h a n Interiors Corn 290 A.D.2d 266,267 (1st Dept 2002). ., Conclusion In view of the above, it is ORDERED that the motion to amend and for summary judgment by defendant Alphonse Hotel Corporation d/b/a Hotel Carter and Hotel Lafayette is denied; and it is further ORDERED that plaintiff Scottsdale Insurance Company s request that the court search the record and grant summaxy judgment in its favor is also denied; and it is further II p&&J)Zb ORDERED that the parties shall appear for a pre-trial conference on Octo + ?Ol1 9:30 am in Part 11, room 351,60 Centre Street, New York, NY. at . J.S.C. FILED OCT 25 2011 NEW YORK COUNTY CLERK S OFFICE 7

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