Union Mut. Fire Ins. Co. v Klein

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Union Mut. Fire Ins. Co. v Klein 2020 NY Slip Op 31555(U) May 8, 2020 Supreme Court, New York County Docket Number: Index No. 655979/2016 Judge: David Benjamin Cohen Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [* 1] INDEX NO. 655979/2016 NYSCEF DOC. NO. 139 RECEIVED NYSCEF: 05/11/2020 SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. DAVID BENJAMIN COHEN PART IAS MOTION 58EFM Justice ---------------------------------------------------------------------------------X UNION MUTUAL FIRE INSURANCE COMPANY, .. 655979/2016 INDEX NO. 06/04/2019 MOTION DATE Plaintiff, 003 MOTION SEQ. NO. - v. RUDOLF KLEIN, DEVORA KLEIN, BENGAL ·CONTRACTING, CO. D/8/A RAFIQUL ANWAR, RAFIQUAL ANWAR, ARCH INSURANCE COMPANY, SHUKHRAT ESHONKULOV DECISION + ORDER ON MOTION ~ .. Defendant. ---------------------------------------------------------------------------------X The following e-filed documents, listed by NYSCEF document number (Motion 003) 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 125,126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137 '· were read on this motion to/for ·, ' ; . ,...- ,. - . ' I ~ ·· > -:.- ,. . RENEW/REARGUE/RESETTLE/RECONSIDER ' Defendants Rudolf Klein and Devora Kleins' (the "Klein defendants") motion to renew is . > f . ;I denied. •' . .•,._ ' f J. . ' ,· . j ,·r-. On or about February 11, 2016, the Klein defendants entered into a homeowner insurance . ,., policy contract with plaintiff Union Mutual Fire Insurance Company ("Union"). This policy . l : .. -'I- .~ " _,, ' excluded coverage for injuries resulting from home improvement work under the Independent or Sub-Contractors Conditions Endorsement and the exclusion for Designated Ongoing Operations. -!""" i -. . . - ., Shortly thereafter, the Klein defendants entered into a home improvement contract with Bengal .- ' ~ Contracting (the "Bengal/Klein contract"). Bengal Contracting had an insurance policy with Arch Insurance Company ("Arch"). Although the Bengal/Klein contract had a line item for Y ~. J '. "insurance," the Bengal/Klein contract does not require that the Klein defendants be named as an ' . "additional insured" in Bengal's policy with Arch. The Arch policy has a blanket additional .• '· ' ~ -'· . ·. . , ,. I .;.. . . ~ . , . ' . ' 655979/2016 UNION MUTUAL FIRE INSURANCE vs. KLEIN, RUDOLF Motion No. 003 .. Page 1of7 ~ '· ',• . . . 1 of 7 ~ .. ' . [* 2] INDEX NO. 655979/2016 NYSCEF DOC. NO. 139 RECEIVED NYSCEF: 05/11/2020 •. insured endorse1nent that states that additional insured persons are those "who are required under a written contract with you to be named as an additional insured." One of Bengal's employees was injured in the Klein defendants~ home during the constn1ction and commenced an action in Supreme Court, Kings County entitled Shukhrat Eshonkulov v. An1var Rafiqul, Bengal Contracting, Co., Rudolf Klein, and Devora Klein, Index number 505668/2016 (the "underlying action"). The Klein defendants submitted an insurance claim to Union. Union disclaimed coverage and commenced this action, seeking declarations that it was not responsible for coverage under ,: the insurance contract it had with the Klein defendants and declaring that Arch was obligated to defend and indemnify the Klein defendants in the underlying action as additional insureds under Bengal's policy with Arch. The Klein defendants answered, counterclaimed against Union seeking a declaration of entitlement to coverage, and crossclaims against Arch seeking a ' .. declaration of entitlement to coverage as an additional insured. ,. ; . i Initially, Arch moved to dismiss Union's declaratory claim that Arch was required to ; . cover the Klein defendants, the Union and Klein defendants opposed. This Court initially denied the motion by decision and order dated June 16, 2017, finding Union's pleadings were legally " ·,. • i,: • sufficient. ,, Arch then moved to reargue and Union cross-moved for summary judgment. In January '· ~ . 2018, the parties held a conference call ~n t~is matter, and it was agreed that the Klein defendants would be permitted to file late opposition. On March 12, 2018, this Court granted Arch's motion ~ ~ • ..... .. )', ·: • ; 4_ {') for leave to reargue and, upon re-argument, after it analyzed the Bengal/Klein contract and the ; 'i.' insurance policies, found that the Klein defendants were not entitled to coverage from Arch as •. additional insureds on Be~gal' s policy, ,an·d granted Arch's motion to dismiss all claims against •. ' ·' ' " ' r 655979/2016 UNION MUTUAL FIRE INSURANCE vs. KLEIN, RUDOLF Motion No. 003 Page 2 of 7 ( '· .. 2 of 7 . ( .. . [* 3] INDEX NO. 655979/2016 NYSCEF DOC. NO. 139 RECEIVED NYSCEF: 05/11/2020 Arch. This Court also granted Union's motion for summary judgment on its claims that it was not obligated to provide coverage to the I<lein defendants. ~. t Following the January 2018 conference call but before this Court rendered its decision, .. the I<lein defendants co1n1nenced a new action in Supreme Court, Kings County (Index No.: 500523/2018) against Bengal only, seeking reformation of the Bengal/Klein contract (the "reformation action") to provide that Bengal was required to provide liability insurance coverage . ; to the Klein defendants as additional insureds under the Bengal/Klein contract. The affidavit of service of the Summons and Complaint in the reformation action states that service of process k '~ • .'- was effectuated on February 3, 2018. Although the reformation action had been filed (and served) prior to the Klein defendants filing their opposition Arch's pending motion to reargue in this action, the Klein defendants did not advise this Court of the filing of the reformation action, '· .. . _ although it likely would have impacted thi~ Court's analysis of Arch's motion . . . ~- .... Bengal failed to appear in the reformation action. Although this Court dismissed this action on March 12, 2018, eight months elapsed following this Court's dismissal before the Klein defendants filed their motion for a default judgment in the reformation action. When ' .. \ . - ~::. moving for the default judgment, the Klein defendants did not check the box in the Request for . . ~- ' Judicial Intervention ("RJf') to indicate that there were related cases, nor did they list the instant ' L coverage action or the underlying action as related cases. The Klein defendants default judgment ·r,,,. ... :.·: . .. t' . '; .._.. 'f #~• • motion was granted on default on December 18, 2018 and the contract was ordered reformed. ~ ~1.,~ :.. ' ,. ol. ~ ~. <. ....: ' .. "f ~ ,; t ' • ".4 -:-A "' • - ' ·/ •- .· . ·. ·~ · On June 4, 2019, the Klein defendants filed the instant motion to renew based upon new . ' " ,~ ... __ ' •. ~ '· .. ·, '-::: t - ' evidence -- namely the newly reformed Bengal/Klein contract which now obligates Arch to ,• ,l ... . " provide coverage to the Klein defendants as additional insureds under the reformed contract. . .-,_ ' "· "";1, ~. . ·, ~ . ~, -,", ~ ' ' - . ·, - ';. . - - •. - ~- '"! 655979/2016 UNION MUTUAL FIRE INSURANCE ·.• Motion No. 003 . ., . ·" . .. . .. . .. . vs. ~- . .. KLEIN, RUDOLF . ' ' ~ ·" Page 3of7 .. ,. '·_ -.... I ·\ ,..- " ' ..; . . t : ' !· 3 of 7 ' ··:'- . ' .. ~(... .~ .... ' \ ... '~· \ ... ' .. .. "' ' )'. "' [* 4] INDEX NO. 655979/2016 NYSCEF DOC. NO. 139 RECEIVED NYSCEF: 05/11/2020 Arch and Union assert that the motion to renew must be denied as: (1) there are no new facts, (2) this Court's decision in March 2018 is res judicata with respect to interpretation of the Bengal/Klein contract and the insurance policies, precluding the Klein defendants from relitigating their coverage claims under the contract and policies, and (3) the Klein defendants had a full and fair opportunity to raise a countercl~im for reformation in this action and their failure to do so bars them from effectively doing so at this junction. The Klein defendants argue that there is a new fact -- the now reformed contract -- and that they were not required to seek reformation in this action as this Court's equitable jurisdiction had not been invoked through proper allegations in pleadings. Further, this Court must grant renewal, as it must accept the newly reformed contract as it is based upon a final order from . . Kings County Supreme Court, which is res judicata as between the Klein defendants and Bengal. ,, As a threshold matter, this Court agrees that the Order of reformation constitutes a new fact that was not in existence when this Court issued its decision in March 2018. The insurance . ..' ' , '•. companies nevertheless argue that res judicata bars the Klein defendants from relitigating the I . r- interpretation of the Bengal/Klein contract in this Court. . ·• , ., < Under the doctrine of res judicata, a party may not litigate a claim where a judgment on the merits exists from a prior action between the same parties involving the same subject matter. The rule applies not only to claims actually litigated but also to claims that could have been raised in the prior litigation. The rationale underlying this principle is that a party who has been given a full and fair opportunity to litigate a claim should not be allowed to do so again (see O'Connell v. Corcoran, 1 N.Y.3d 179, 184-185, 770 N.Y.S.2d 673, 802 N.E.2d 1071 [2003]; Gramatan Home Invs. Co1p. v. Lopez, 46 N.Y.2d 481, 485, 414 N.Y.S.2d 308, 386 N.E.,.2d 1328 [1979]). Additionally, under New York's transactional analysis approach to res judicata, "once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy" .... "Resjudicata is designed to provide finality in the resolution of disputes," recognizing that"[c ]onsiderations of judicial economy as well as fairness to the parties mandate, at some point, an end to ·..,., ..... • ; ,',; ~,_ -;-' . , . " 655979/2016 UNION MUTUAL FIRE INSURANCE vs. KLEIN, RUDOLF Motion No. 003 ; , 4 of 7 ·~ 1 Page4of7 : ., i._, \ \., •. _: { [* 5] INDEX NO. 655979/2016 NYSCEF DOC. NO. 139 RECEIVED NYSCEF: 05/11/2020 •' litigation" In re Hunter, 4 NY3d 260, 269 [2005]. Here, the insurance companies assert that the Klein defendants could have brought the refonnation cause of action as a counterclaim in this action and as everything arises out of the sarne facts and transaction, should be barred. Generally speaking, New York is a pennissive counterclaim jurisdiction (l)aramount Pictures Co1p. vA/lianz Risk Tran~jer AG, 141AD3d464 [1st Dept 2016], affd, 31NY3d64 [2018]). This means that under normal circumstances, a defendant may bring a claim in a subsequent lawsuit, even though it could have brought the claim as a counterclaim and did not. Although New York is a permissive counterclaim jurisdiction, it does not, however, permit a party to remain silent in the first action and then bring a second one on the basis of a preexisting claim for relief that would impair the rights or interests established in the first action (Henry Model! and Co., Inc. v Minister, Elders and Deacons ofRefm. Prot. Dutch Church of City of New York, 68 NY2d 456 [1986]). If a party defendant in a first action remains silent and then brings a second suit on the basis of a pre-existing claim for relief that would impair the rights or interests established in the first action, the second action is barred by res judicata (Classic Automobiles, Inc. v Oxford Resources, Corp., 204 AD2d 209 [1st Dept 1994]). The permissive · - counterclaim allowance is inapplicable in the instance where if a plaintiff is successful on the causes of action it asserts in the second action, it would impair the rights that were established in '1 ! the prior court proceedings (Wax ex rel. Wax v 716 Realty, LLC, 151AD3d902 [2d Dept .. 2017]). 1 1 In addition, although New York is generally a permissive counterclaim jurisdiction, it would seem to be against the principles discussed in In re Hunter (4 NY3d 260 [2005]) to apply the general rule in an instance where a party brings one counterclaim, but not another counterclaim and now seeks to commence a separate action based upon the not-brought counterclaim. Based on the underlying reasons for the doctrine of res judicata, once a defendant decides to pursue a 655979/2016 UNION MUTUAL FIRE INSURANCE vs. KLEIN, RUDOLF Motion No. 003 5 of 7 Page 5 of 7 [* 6] INDEX NO. 655979/2016 NYSCEF DOC. NO. 139 RECEIVED NYSCEF: 05/11/2020 : Here, this Court has rendered a final determination of the interpretation of the Bengal/Klein contract and insurance policies with respect to the additional insured coverage issue. Revisiting the I<Iein defendants' counterclaim at this time, would impair the rights that were established previously in this action, and is therefore barred. As to the Klein defendants argument that their equitable counterclaim should now be granted because this Court does not have "the power to undo a matter decided by the Kings County Supre1ne Court," this Court cannot sanction m1 outcome that rewards the Klein defendants for failing to timely inform Union, Arch, and this Court of the reformation action, and failing to advise the Kings County Supreme Court of the two related actions - this action and the underlying action. Further, this Court will not in equity and good conscience, sanction an outcome that rewards the Klein defendants for bringing a separate reformation action, in a manner which impaired the rights of Union and Arch, after having counterclaimed in this action ' ), for a declaration of coverage, but having failed to raise reformation as a counterclaim in this action. As this Court has already rendered a final determination, interpreting the Bengal/Klein '· , contract and the insurance policies as not providing addition insured coverage, any reformation of that very contract is barred by res judicata. Accordingly, the Klein defendants' motion for renewal is denied, and it is hereby ORDERED that the motion for renewal is denied; and it is further "J ' ' \ •'1 counterclaim, he should be required to pursue all available counterclaims. Here, the Klein defendants brought a counterclaim seeking that the contract and policies be enforced as written. To permit them to subsequently bring another action seeking to reform the same contract would permit the exact scenario that the doctrine of res judicata seeks to avoid (see Steinbach v Relief Fire Ins. Co., 77 NY 498 [l879][holding that dismissal was appropriate pursuant to the doctrine of res judicata when a litigant brought a second action seeking reformation of a contract after said litigant sought in the first action to have the contract enforced as written and was defeated]). 655979/2016 UNION MUTUAL FIRE INSURANCE vs. KLEIN, RUDOLF Motion No. 003 6 of 7 Page 6of7 \ .. [* 7] .. INDEX NO. 655979/2016 ~,,, NYSCEF DOC. NO. 139 RECEIVED NYSCEF: 05/11/2020 '. ,- , ·~·; ,.·· i:...· . ORDERED that all claims and crossclaims against defendant Arch are dismissed; and it : . ,. •. is further _!~ ORDERED that the Klein defendants' counterclaim against Union is dismissed; and it is ,. .. ,, further ORDERED the plaintiff Union shall, within 20 days of the date of this order, ~ubmit a 1..-", .:\ . .. ~ proposed judgment to the Court by e-filing, consistent with this ruling granting Union the ' I declaratory relief sought by Union in the Complaint as against the Klein defendants . ... . . . '"'- .' ·. ..... 5/8/2020 DATE . CHECK ONE: X , . DAVID BENJAMIN COHEN, J.S . . ' CASE DISPOSED GRANTED f,..,. .0 NON-FINAL DISPOSITION DENIED GRANTED IN PART ' r !: . APPLICATION: . · ·: · SETTLE ORDER CHECK IF APPROPRIATE: .., . INCLUDES TRANSFER/REASSIGN SUBMIT ORDER : , FIDUCIARY APPOINTMENT .. .• t ·. D D OTHER . ' REFERENCE " ,i j . ,, . ·?' .. .. • ~. <' " ~ / . ' ' ' ' ... · ..r ' ,,;.· ... l ... ,·, .. ,. t-.' · .. -i·- " .. . . '~·· . . I .Y - ~· ' . '' •1 '·' ;' '· ;· 655979/2016 UNION MUTUAL FIRE INSURANCE vs. KLEIN, RUDOLF Motion No. 003 . , ·. ,, ~· Page 7 of 7 ~ l ' ., 7 of 7 i . ,..

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