National Fire Ins. Co. v Wrynn

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National Fire Ins. Co. v Wrynn 2011 NY Slip Op 33563(U) December 30, 2011 Sup Ct, NY County Docket Number: 100526/2010 Judge: Paul Wooten 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. lNED ON 113112012 [* 1] SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY I I PRESENT: HON. P,AUL,,,WOOTElN PART Justice PialI t iff, 10052612010 INDEX NO. -against- I I I I The following papers dere,read on the rnotlon by defendants to dlsmlss. Notlce of Motlonl Order tp Shpw Causa -r Affidavits Reply Affidavits - 001 MOTION SEQ. NO. JAMES WRYNN, SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YOPK, AS ADMINISTRATOR Q F THE NEW YORK PROPERTY/ CASUALTY IN$UR~NCE$PC rJD AND AS ANCILLARY RECElVkk IN8U R4NCE COMPANY and THE NEW Y O f W LIQUIDATION BUREAU, Pefendants. Answering Affidavits 7 I e x bits (I'dIerY~o) , ,, -- Exhiblts ... 1 PAPERS NUMqERED , I - Exhib I JAN 3 0 2012 BACKGROUND I I NEW YcJfq/( Reliance Insurance Company (Reliance) wasa P e n n s y l v a n i a - ~ k ~ ~ i ~ ~ I that was placed in liqyidatioq on October 3, 2001, pursuant to an order of the Pennsylvalpia Superior Court (Motion, e t B). On December 14, 2001, the New Ysrk State Supreme 1 1 Court, New York County, ehterkd an order appointing the Superintendent of lhsurance of the State of New York (Superintendent) as ancillary receiver of Reliance (Motion, exhibit C). On October 21 , 1999, Charles Lanza (Lanza), an employee of Westchester Waste Services, was struck by a truck owned by A - I Compaction, Inc. (A-1) that was being operated by Paul G. Troy (Troy). A - I was E I subsidiary of Waste Management, Inc. (Waste Management), which waPiinsured by Reliance. On or about February 8, 2002, Lanza and his wife instituted a person81 injury action in the y e w York State Supreme Court, WeSfchester County, against A-I and Troy (the underlying action), I I Page 1 of 8 1 I I [* 2] The Reliance policy was a commercial auto/truckers insuranw policy, with q $1 million aomprehensive single limit of coverage and a $5,000.00 deductible (Mptibn, eqhibit A). I Transcontinental Insurance Company (Transcontinental) insured Waste Mgnagement and its subsidiaries with a commercial liability exckss insurance policy, effective November 1, 1998 to January 1, 2000, with limits of $25 million each accident and in the aggregate (id.). Plaintiff is the successor-in-interest to Transaontinental. The New York PrQparty/Cq$uaItyInsurance Security Fund (PIC Fund) pl ovidkd a defense to A - I and Troy in connection with the underlying matter, which, everWlly, went tg trial on the issue of liability. The jury in the underlying action found A-I and Troy 100% liable for Lanza s injuries. At the damage portion of the trial, the jury awardqd Lanza $2.5 million (id.), 11 The underlying action was appealed, and the pqRies ?greed lq Settle the matter f w $1,842,000.00, of which the P/C Fuyd agr& to pay ?;6,000.00 ($1 million less the $S,bOO.OO deductible), upqn alloNance by the ancillary recBivership court, and plaintiff agreed to pay $842,000,00 (Motion, exhibit D). On February 23, 2010, plaintiff served a surnmons and verified complaint on the NYLB, t ew Ywk JnwranceLaw (Ins. Law) Article 76 Thg P/C Fund is a $tAtUtory fpnd cy (AHiiole 76) tb, piotect insureds and mjbred th triventally affected a$ insolvenqy of insurance PornpWies IiWnsed Matter of Re lance Ins. CQ., AD3d 191 [ I s 36 Taxdtton dn Fiqance (Comrnisgidher) is the custodian of ofAm Insurers v Chu, 77 NY2Q573 [1991]). Under Ins Law 5 7603 (g)(l), the P/C Fund may be used only for the payment of allowed claims remainiqg unpaid, in whale or in part, by reason of the inability due t4 insplvency sf an authorized insqrer to meet its inqurance obligations under policies. In order to be entitled to receive p ayment from the PIC Fund, a claimant must meet the requirements Set forth in Article 76 (See Matferof Reliance Ins. GO.,35 ADSd 191 [Ist Pept 20091: (1) the claimant must be insured with an authorized Insurer that cannot bq paid because the idsurer is insolvent; (2) the claim ariseF gut of a policy recognized under Ins. Law 7603 (a) (1); and (3) the claimant resides or the risk is loqated In New Ydrk Pursuant to Ins. Law, once a claim is submitted, it is reviewed and handled by New York LlquldatiQnBureau (NYLB), which performs claims handling on behalf of the PIC FunU administrator. If NYLB determines thqt the claim is eligible for payment from the PIC Fund, NYLB subhits the claim to court for allowance within the receivership proceedings of the insolvent iflsuranw c0mpany. If the claim is allowed by the court, NYLB is required to submit a request for payment to the Comm/s$iotIer, who authorizes disbursement from the P/C Fund (Ins. Law 5 7608 [a]). i 1 Page 2 i f 8 , , ., . .,.. ,,I . ., [* 3] l and on July 12, 2010, the complaint was amended to include the other defendants (Motion, exhibits E and A), The amqnded complaint asserts only one cqusp s action for bgd,fait4 claiq f I handling with reFpect to defeqdants' failure to settle the underlying action. Qefandants now move, pursuant to CPLR 321 1 (a)(2) and (7), to dismiss plaintiff's amended complaint. It is defendants' position that they are irqmune frpm quit, pursuant to the doctrine of sovereign immunity, because they are, or represent, a Stqtelagency. Defendants assert that, if plaintiff wishes to pursue P/C Funds, it must eithdr comrhence a proceeding pursuant to CPLR Article 78, seek relief in the Court of Claims, or submit a claim in the Reliance ancillary receivership proceeding, pursuant to Articles 74 and 76. It is ndted that plaintiff has not ~~ submitted a claim pursuant to Articlet7Ei. As at^ qtternative argument, defendants assMt that there is no cause of Action under New York la(w fdr "bad fqifh" laws Superintendent or NYLB, l $'SqeHdd against the: I Deferldants also claim that, pursuTnt to the1$ncill& receivership order, pldintiff's action l is enjoined. The ancillary receivership order statw, in' pertihent part, th'at 81 pefsbnS'Who have 1 claims agaipst Reliance: "arq hereby enjoined and restrained, from bringing or lfut?he[ Iprpsecuting any actidn ai 'lap, suit in equity, special ot ather proceeding against company or estate, the Superintendmt an sudoessqrS ih office, 4s Ancillary Receivefl or tHa NBw York State IngurAnce bepartm Bureau with respect to claims Against [Ret from making or execufhd any levy upon the property or estate of $aid comp'any, br the Superintendent as Ancillary Receiver, or tb& hew York State Insurance Department-Liquidation Bureau, or frgm in any Way iqterfering with the SuRqrrirMendent br his successors in office, iq his or their e$sion, cqntrol or y pf said company, or in the nagementlqf the pr charge of his bt their duties As Ancillary Receiver thereof, or in thQ liquidation of the business of said company (hotiod, exhibit C)," In opposition to the instant motion, plaintiff maintains that, despite several offers to settle Page 3 of 8 I ' " I I " I [* 4] the underlying action within the limits'of tha policy (Opp., exhibits E, H, I, L, N, 9, Q, T, U), P, liability an the part gf plaintiff. defendants refused to settle the matter, ther&y,engmdering The court notes that the variou$ exhibits provided by plaintiff indiQatethat Lanza was initially willing to settle the case for $875,Q00.00, but that NYLB wag offering between $100,000.00 and $1 75,000.00, and that it never wwered from those amounts. Furthermore, plaintiff wntends that, acting in the role of liquidator, defendants are I acting in a private capacity in the role of the insolvent Insurer and, hence, are amenable to wit. In addition, plaintiff points out that dQfbndants have failed to provide a single New York judicial authority that prohibits "bad faith" claims from being asserted as agaivst the named defendarlts. . L _ . . In reply, defendants argue that the cohplqint always refers tg the Sdpe('iptendent in his capaqity as administrator of the PIC Furld, hoflas tha ancillad reqeiver", tIidtinguiSheS the role of adrrlinistratQ- from receiver I l is praviding a public function and is immune fromisuit. h r q p v e r , defen Superintehderrt is not the receiver because REtlianGe is not a Nkyv York that the Pehnsylvania court appointed the Pennsylvania CorhrniSsibner of Insurance as Reliance's liqulidator. Defendants Aver that the Superintendent's sole functiorl is tv administer claims for Reliance undel'the P/C PI,I~~,atid that the Superiritenqent holqg no qssets and I I processes no claims for Reliance. I Defendants assert that the complaint alleges a mishandling of the undel'lyinb dction, which was haedled by the Administrator, whereas the Superintendent, as ancillary administrator, does not handle qr settld claims, and is only responsible for submitting clAims to for allowqnce. The Court VQtes that, in some of the submissions provid l is, in fact, making settlement offgrs, as noted above. However, defen w e n if they did play a rolb in the settlement negotiations in the underlying action, plaintiff is still enjoined from pursuing this matter, based on the court injunctive restraints previously imposed I [* 5] qnd noted above. I1 Defendants also argue thzlt1pWlic policy snly for the limited circumstance5 for bad faith, because it is intended to make pay I appearing in Article 76. MOTION TO DISMISS STANDARC) I CPLR 321 1 (a), Motio n to dismiss $ay$e blf actiatl, W e 6 that: l I ore causes 4f [a] party may action asserte * (2) the court has dot jurisdiction bf the cause of actiw; or * (7) the pleading fail? to state .~ a opus@ I I ) motion, !we liberally construe theca I y submission$ in oD@Sitio,n ih the CdrYrlpldint an accept 3s true the fasts al 1 I nd Owhers Corp. v Jenhihr Realty Co., 98 NY2 missal mQtionJ (51.1 9941; Sokoloff v Harrimah EstatdS [?a02]; see Ceoi v Marthez, 84 NY2d 8;3, 87 [I . I 96 NY2d 409 [2001]; v Skala, 80 NY2d 628 [1992]). We a l s ~ accsld plai benefit of every possi ra,blelinference (5dl W. 232nd Owners Cclrp., 98 NY2diat 152; , I Swkoloff v Warrithan &dates Dev. Q r @ ,96 NY2d at 414). l otion to dismiss for failure to state a cause sf actisn,,tkiel Upoh a CPLR 32 I I I question for us is whether the requisite allegqtions of any valid cause of d o n wgnizablg, by \ the state courts cap be fairly gathered from all the averments (Foley v D Agostigo, 21 AD2d I 60,65 [ I s t Deptl9641, quoting Condon vAssociated Hosp. Sew., 287 NY 411, 414 [1942]). In I order to defeat a pre-pswer mlotiqn to dismiss pursuant to CPLR 321 1, ttw opposing I I need only a s w r t filcts gf an evidevtiary nature which fit within any cognizable legal theok (q@ I Bpnnie & Eo. Fashions, Inc. v. Bankers Trust Co., 262 AD2d 188 [ I st Dept 19991.) . *, I 5 1 [* 6] pl$CUsSlON In sum and substance, rjefen nts argue three thepries in q ~ p p o fof their motion to l dismiss: (I) are immune from quit as a state agency; (2) New York law does not provide they for a bad faith cause of action againat they; and (3) the suit is prohibited by the injunction I placed on claims asserted against Rdiance. The Court finds all of these argument3 I unpersuasive and therefore dt$fendants tnotion to digmiss is denied. It has long been held that the Supeqintenderrt of In$ur&ce Serves in two distiect capacities: one, as supervisor and tegulator of New York a insurance industry; ahd two, as a court-appointed receiver on behalf of distressed insurers (see Matter ofDif?sl/o v DiNapoli, 9 NY3d 94, 97 [2007]). When acting $s a court-apppinted reckivw, as in the in3tant matter, the I Superintendent is sewing B p qrged with rehabitit conserving the assets of insol Ibs (id.), Further, as liquidatw and receiver, the Superintendent is I and stands in the sho owh or the insurer s f the(insukr (se6 Ins. Law 5 74Q5; MWBr 1 of Midland Ins. Co., 79 NY2d 253 [I 9923). 7 As Reliance s ancillary receiver, thq Superintendent [occupies a legal personqlity s4parate ,and distinct from his role as public rdglulator, and may be sued for his own negligence ih the handlip0 bf an insolvent estate (see generally Mafter of Ideal I I Mut. Ins. Co.,140 AD2d 62 [I $tlRpp 8],[negligence c h i asserted against Superintendent for his actions in his regulatory role before he was appointed receiver]), In the case at bar, the bWse df action asserted against defendants alleges malfeilsancs in their private, non-public, role. Under these circumstances, defendants may not assert a I defense of sovereign irnrnut$fY, whic reserved for public functions. Further, the fact that the complaint refers to t h e Superintendent as the administrdtw of the PIC Fund, his title, does not override the factual assertions, which all concern his fvnctioh I Page6of 8 # I [* 7] as receiver and liquidgtar of Reliance. The Court is npt swayed by this argument of forb over substance. I Lastly, the Court does not agree with the defendants' argument that the Superintendent is not the receiver because Reliance was a Pennsylvania-ba$ed insurer and a receiver was appointed by thQ Penrpylvqniq coyrt. The Superintqndent was appointed Reliance's ancillary receiver to deal with New York Assets and clairps, qnd hence is the receiver for all New York I purposes. I Defendants' second theory, that of predlusim of this suit based on the injutIctivel language quoted above in the otder issued when the superintendent was appointed ancillary receiver, is a misreading of the order. -The order in1 j? j o i i s claims against Reliance; this suit a claim agilinst d I t $n insurance claim @inst I I I d1 thd court doeb notibar the by liance, Mepce, t I t Sent aCtion. Finally, defendqhts have present@$r10New Ybrk judicial authority to support theii > - contention that a claim' for "bad faiihl' agalrht the $upwint&hnt does not exist in this state andl, conseque , they hgve failed to m I A muse af action for bad faith in aghinst insurers whd espect to this argument. f ettlb claims is permitted ty bg asserted I accept thle Qbliqdtidn to defend an adtigy asserted 9 s aghirist their insureds (see Pavia v Srhte Faim Mutual Automobile lnsurance Cdmpany, 82 NY2d 445 [1993]; Federal Ins. Ca. v North Am. Specialty Ins. Co., 83 AD3d 401 [I Dept 201 I]). As noted st above, in his position as ancillAry teceivkr, the Superintendent is standing in the Shoes of ttie in$urer (see Matter df (deal Mutua sumnce Company,140 AD2d 62, supra), and is in no I 1 1 bgtter position that the insurer lwoyld be (see Matter of Midland Ins. Co,, 79 NY2d at 265). Therefore, if a c w s e of action p a y be maintained against an insurer for failing to settle a claim in good faith, that cause of action may be asserted as against the receiver who is standidg in I [* 8] the shoes of t h e insurqr. Furthermore, defendants' argument that it is ooly wtharized t~ txstsen! cl 4 I court for approval is a mischaractefization of their function. The Superintendent, the PIC Fhdd l and NYLB are charged with reviewing qlaims to determine their Iqgitimiray, and then to present As them to the court (Matterof Midlahd Ins. Co., 16 NY3d 536 [go1 I]). part of this obligation, receivers may attempt to setti6 c14i to minirniqe the redukfion of the in$urer' I before submitting the Claims to the court for approval. Court approval id needed only for I payment of claims that fall within the purview dlf the insurance lgw; defendants have pever alleged that Lanza's claim was net a legitirhate elaim. In additiod, the fddt that defendant$ ___ .. engaged in settlement neqotiations in the instant matter underscores their functign as I Reliance's ancillary receiver, Howg ' I hich daqnbt be resolhd in a rkflrsing to settle the claim renihins d t l 1 - smis5. I CbNdLUSION I Based on the fwegqing, it is hereby QRDERED that defendaribs' m o t h to. di ORDERED that def&nd;r'htS are directed 1 n answer fq the qornpl \ I1 I day6 after service of q copy gf this Order with qb I 24, 2012 at Centre Street, New York, Now q.m. 1 . 1 This constitutes the D - e - e aind Ord the Court. d Page8 of 8 I , ,

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