NEW YORK SUPREME COURT - QUEENS COUNTY

Transcription

1 Short Form Order NEW YORK SUPREME COURT - QUEENS COUNTY Present: HONORABLE HOWARD G. LANE IAS PART 22 Justice Index No. 9091/08 JOANNE GIOVANIELLI and EDWARD CALLAHAN, Motion Plaintiffs, Date December 16, against- CERTAIN UNDERWRITERS AT LLOYDS, LONDON, Motion Cal. No. 17 Motion Defendant. Sequence No PAPERS NUMBERED Notice of Motion-Affidavits-Exhibits Opposition Reply Upon the foregoing papers it is ordered that the motion is determined as follows: I. PROCEDURAL and FACTUAL BACKGROUND This action is brought pursuant to Insurance Law 3420 to require defendant insurance company Certain Underwriters at Lloyds, London (hereinafter referred to as Lloyds ) to pay to plaintiffs the amount of a money judgment entered on September 19, 2007, against Eduardo Rivera, in an action entitled Giovanielli v. Rivera, Index No /04 for money damages for personal injuries sustained arising out of a motor vehicle accident, which was filed June 17, 2004 in Queens County, Supreme Court (hereinafter the underlying action ). That judgment is based upon an inquest held on June 14, 2007, after the Appellate Division, Second Department, decided November 28, 2005 that defendant Eduardo Rivera (hereinafter Rivera ) was in default in the underlying action. Thereafter, plaintiffs demanded an uninsured motorist arbitration against plaintiff, Joanne Giovanielli s own insurer American International Insurance Company, but in a related 1

2 uninsured motorists arbitration Article 75 petition entitled, American International Insurance Company v. Joanne Giovanielli, Index No /07 that insurer on or about February 26, 2007 petitioned this Court to stay the arbitration on the ground that Eduardo Rivera was insured by Lloyds. Lloyds, which was joined as additional respondent in the proceeding to stay arbitration, appeared and participated in the proceeding. On April 6, 2008, the Supreme Court, Queens County (Rios, J.) conducted a framed issue hearing on the issue of, inter alia, insurance carrier Lloyds duty to defend and indemnify its insured Rivera. As a result of the hearing, an order (hereinafter referred to as the NY Judgment ) was issued dated July 14, 2008 (entered on August 5, 2008) which ordered, inter alia, that Lloyds shall defend and indemnify Eduardo Rivera for the subject loss Giovanielli v. Rivera, Index No /04. On September 3, 2008, Lloyds filed a Notice of Appeal with the Appellate Division, Second Department, appealing the NY Judgment. In or about February 7, 2007, Lloyds filed a declaratory judgment action in Superior Court of New Jersey, Hudson County against Eduardo Rivera, and necessary parties Joanne Giovanielli and Edward Callahan (the defendant and the plaintiffs, respectfully, in the underlying action) seeking a declaration that Lloyds is not obligated to defend or indemnify Eduardo Rivera in the underlying action. In that action, although Rivera defaulted in appearing, on or about November 2, 2007, the complaint against Joanne Giovanielli and Edward Callahan was dismissed with prejudice for lack of personal jurisdiction. On or about September 3, 2008, Lloyds made a motion for a default judgment against Rivera and for a declaration that Lloyds is not obligated to defend or indemnify Rivera in the underlying action. On September 30, 2008, the motion was heard and an order (hereinafter referred to as the NJ Judgment ) was issued ordering, inter alia, that a default judgment be entered against defendant, Rivera, that Lloyds is not obligated to defend Eduardo Rivera for any allegations contained in the Complaint in Giovanielli v. Rivera, Index No /04 pending in Queens County New York and that Lloyds is not obligated to pay any judgment entered against Eduardo Rivera in the Complaint in Giovanielli v. Rivera, Index No /04 pending in Queens County New York. (See copy of Order appended as Exhibit F to defendant s Affirmation in Opposition.) Plaintiffs commenced this Insurance Law 3420 action against defendant Lloyds to enforce a money judgment. The complaint alleges that at the time of the motor vehicle accident, the subject of the underlying action, Lloyds had a valid insurance agreement in place to defend and/or indemnify the 2

3 insured motorist Rivera. On September 19, 2007, a money judgment in the amount of $1,037,500.00, plus costs and interest was entered against Rivera. On September 19, 2007, Lloyds was notified of the judgment against Rivera, Lloyds insured motorist. The complaint further alleges that Lloyds has been in possession of the judgment for more than thirty (30) days and has not paid. Lloyds answered the complaint and asserted as an affirmative defense, inter alia, that the insured Rivera was not covered under the policy of insurance. Plaintiffs now move pursuant to CPLR 3212 for an order granting summary judgment. Plaintiffs contend that the policy agreement with Rivera, the tortfeasor motorist in the underlying action, was in full force and effect as of the day of the accident. Indeed, plaintiffs argue that the NY Judgment ordering Lloyds to defend and indemnify for the subject loss, is conclusive on the issue of Lloyds liability to plaintiffs. Defendant Lloyds opposes the motion essentially arguing that the NJ Judgment for declaratory judgment obtained on default from the New Jersey Superior Court has decided its obligation under the insurance agreement and therefore, Lloyds is not liable to plaintiff. In the alternative, Lloyds argues that this Court should not grant summary judgment as there is currently an appeal pending from the NY Judgment. II. LAW A. Summary Judgment A party moving for summary judgment is obliged to prove through admissible evidence that the movant is entitled to judgment as a matter of law (Zuckerman v. City of New York, 49 NY2d 557 [1980]). The court s function on this motion for summary judgment is issue finding rather than issue determination (Sillman v. Twentieth Century Fox Film Corp., 3 NY2d 395 [1957]). Since summary judgment is a drastic remedy, it should not be granted where there is any doubt as to the existence of a triable issue (Rotuba Extruders v. Ceppos, 46 NY2d 223 [1978]). Thus, when the existence of an issue of fact is even arguable or debatable, summary judgment should be denied (Stone v. Goodson, 8 NY2d 8 [1960]; Sillman v. Twentieth Century Fox Film Corp., supra). Facts appearing in the movant s papers which the opposing party does not controvert may be deemed to be admitted (Sportchannel Assoc. v. Sterling Mets., L.P., 25 AD3d 314 [1st Dept 2006]). If the facts are not disputed, and the only issue is one of law, 3

4 summary judgment can be granted (see, Farkas v. Cedarhurst Natural Food Shoppe Inc., 51 AD2d 793[2d Dept 1976]). B. Insurance Law 3420 "Insurance Law 3420 grants an injured plaintiff the right to sue a tortfeasor's insurance company to satisfy a judgment obtained against the tortfeasor" (Lang v. Hanover Ins. Co., 3 NY3d 350, 352 [2004]). A plaintiff must obtain a valid and enforceable judgment obtained against a tortfeasor, serve the insurance company with a copy of the judgment and await payment for 30 days (see, Insurance Law 3420[a][2]; see also, Creinis v. Hanover Ins. Co., 872 NYS2d 544 [2d Dept 2009]). Compliance with these requirements is a condition precedent to a direct action against the insurer (Lang v. Hanover Ins. Co., 3 NY3d at 355 [2004]). "Once the statutory prerequisites are met, the injured party steps into the shoes of the tortfeasor and can assert any right of the tortfeasor-insured against the insurance company" (Lang v. Hanover Ins. Co., supra). In an action brought by an injured party to seek payment pursuant to Insurance Law 3420, an insurance company that disclaims coverage, and declines to defend the underlying lawsuit without seeking a declaratory judgment concerning its duty to defend or indemnify the purported insured, may litigate only the validity of its disclaimer and cannot challenge the liability or damages determination underlying the judgment (Lang v. Hanover Ins. Co., 3 NY3d at 356 [2004]) III. DISCUSSION A. Plaintiffs have made a prima facie showing of entitlement to summary judgment. The plaintiffs made a prima facie showing of entitlement to judgment as a matter of law under Insurance Law 3420(a)(2) (see generally, Alvarez v Prospect Hosp., 68 NY2d 320 [1986]). Defendant does not dispute and plaintiffs have proved the existence of an unsatisfied judgment in plaintiffs favor in the underlying action to recover damages for personal injuries (see, Lang v. Hanover Ins. Co., supra). Plaintiffs have also demonstrated and it is undisputed by defendant that the requisite 30-day waiting period after the service upon defendant of the judgment with notice of entry has expired without the judgment being satisfied. 4

5 B. Defendant has failed to establish that there are no triable issue of fact or law. In this case, Lloyds disclaimed coverage, unsuccessfully defended the underlying action, as well as sought a declaratory judgment from a New Jersey Court concerning its duty to defend or indemnify the purported insured Rivera. In a prior Article 75 proceeding, in which the insurer Lloyds was a party, the Supreme Court, Queens County, determined that Lloyds had a duty to defend and indemnify the insured Eduardo Rivera. Accordingly, as Lloyds participated in and defended the underlying lawsuit, in this action brought by plaintiffs seeking payment pursuant to Insurance Law 3420, Lloyds cannot challenge the liability or damages determination underlying the money judgment (Lang v. Hanover Ins. Co., 3 NY3d 350 [2004]). Lloyds opposition papers do not dispute the essential facts asserted by plaintiffs, but instead, Lloyds rests its opposition on two arguments. First, Lloyds does not challenge the money judgment, instead, it argues that the NJ Judgment, specifically orders that Lloyds is not obligated to defend Eduardo Rivera for any allegations contained in the Complaint in the underlying action or to pay any judgment entered against Rivera in the matter of Giovanielli v. Rivera, Index No /04 pending in Supreme Court, Queens County, New York. Lloyds argues that the NJ Judgement, issued subsequent to all of the New York orders and judgments in this case, is conclusive on the issue that it is not liable to plaintiffs in this case. Second, Lloyds argues that summary judgment is inappropriate as the NY Judgment which ordered that Lloyds shall defend and indemnify Rivera in the underlying action and upon which plaintiffs rely to support their instant Insurance Law 3420 action is currently under appeal. 1. NJ Judgment obtained on default is not entitled to Full Faith and Credit. Here the Court is confronted with the issue of deciding between facially conflicting judgments, one entered in New Jersey in favor of the insurance carrier and one entered in New York against the insurance carrier on the identical issue of coverage, i.e., whether Lloyds is obligated to defend and indemnify Eduardo Rivera. For the reason set forth below, the Court determines that the NJ Judgment obtained on default is invalid and unenforceable as against plaintiffs, and is not entitled to full faith and credit by this Court. Therefore, the NY Judgment controls the outcome of this action. 5

6 Generally, a judgment by a court of a sister State is accorded the same credit, validity, and effect, in every other court of the United States, which it had in the state where it was pronounced (Hampton v. M Connel, 3 Wheat [16 US] 234, 235; All Terrain Properties, Inc. v. Hoy, 265 AD2d 87, 92 [1st Dept 2000]). CPLR 5401 provides in pertinent part that: foreign judgment means any judgment, decree, or order of a court of the United States or of any other court which is entitled to full faith and credit in this state, except one obtained by default in appearance... (see, CPLR 5401)(emphasis added). New York courts do not accord full faith and credit to a default judgment because it is not regarded as a disposition on the merits (All Terrain Props., Inc. v. Hoy, 265 AD2d 87,92 [1st Dept 2000]). It is the preference of the courts that cases be decided on the merits rather than on default (see, DFI Communications, Inc. v. Golden Penn Theatre Ticket Service, 87 AD2d 778 [1st Dept 1982]). Where jurisdiction over the person is not obtained, the ensuing judgment is ineffective and voidable unless the defendant waives the issue (Feinstein v. Bergner, 48 NY2d 234, 241 [1979]). Furthermore, both New York and New Jersey courts require persons who might be inequitably affected by a judgment or whose ability to protect their interest might be impaired by a judgment to be joined as necessary parties (see, CPLR 1001 and NJ Court Rules R4:28-1). In the present case, it is undisputed that the NJ Judgment was obtained on default due to the non-appearance of Eduardo Rivera. However, although plaintiffs Giovanielli and Callahan were necessary parties whose rights were affected by the judgment, they were not parties to the New Jersey action. Indeed, they were dismissed from the action by the New Jersey court as personal jurisdiction had not been obtained against them by Lloyds. There is no evidence to show that plaintiffs waived their right to personal jurisdiction in the New Jersey action. It is undisputed that the NY Judgment arose out of a proceeding in which all interested parties, including Lloyds and plaintiffs, had a fair opportunity to fully litigate the issue of the insurance carrier s disclaimer of coverage. The Queens County, Supreme Court s determination that Lloyds was obligated to defend and indemnify the insured Eduardo Rivera was made on the merits after a thorough consideration of all relevant facts and circumstances surrounding the case, including the terms and conditions of the insurance agreement and circumstances present at the time of the accident. On the other hand, the NJ Judgment 6

7 was rendered on default, and without affording plaintiffs a fair opportunity to participate in the proceeding. In light of these considerations, the judgment by the New York court is more in keeping with New York s public policy of preferring judgments on the merits. In addition, the law is well settled that it is an abuse of discretion for a court to entertain jurisdiction where another action is pending between identical parties, especially a proceeding which encompasses all issues (Latham & Co. v. Mayflower Indus., 278 App Div 90). In reviewing the papers submitted to the New Jersey court which defendant has attached as exhibits to its opposition papers, it appears that defendant did not disclose to the New Jersey court that there was another active, prior proceeding between identical parties in a New York court that arose out the same subject matter automobile accident, that encompassed the identical issue of Lloyds obligation to defend and indemnify Eduardo Rivera 1. Being fully aware of the Article 75 proceeding in New York and in order to avoid duplicative litigation and inconsistent results, defendant should have notified the New Jersey court of the New York arbitration proceedings and of the final decision dated July 14, Not only were the proceedings related to the accident instituted in New York prior in time to the New Jersey action 2, the NY Judgment was issued on July 14, 2008 (and entered on August 5, 2008), some 78 days prior to the issuance of the New Jersey order on September 30, Therefore, for all the aforementioned reasons, the Court decides, that the NJ Judgment obtained on default in appearance by Rivera and without having obtained personal jurisdiction over 1 The Court notes that the attorney for Lloyds submitted a certification dated September 25, 2007 to the Superior Court of New Jersey in support of a motion for an Order reinstating Lloyds Complaint for a declaratory judgment stating that the judge hearing the matter in Queens County, New York determined that the coverage issue should be resolved in the New Jersey Declaratory Judgment suit. ( 7 Certification of Robert F. Boll dated September 25, 2007 attached as Exhibit I to plaintiffs Notice of Motion.) This representation by counsel is belied by the record before the court, as the hearing judge in Queens County did in fact determine the issue of coverage. 2 The underlying action in New York was commenced by filing of a Summons and Complaint on June 17,

8 the plaintiffs is not entitled to full faith and credit and therefore, is not dispositive of the issues present in this case, and that the NY Judgment controls the outcome of this action. Since the Supreme Court, Queens County has determined in the proceeding to stay arbitration that Lloyds insured the offending vehicle, Lloyds is collaterally estopped from litigating the issue of coverage at this juncture, since the question was already determined adversely to it in the proceeding to stay arbitration - a proceeding in which it had a full and fair opportunity to appear and litigate the issue. 3 (See, Kleynshvag v. GAN Ins. Co., 21 AD3d 999, 1003 [2d Dept 2005]; Creinis v. Hanover Ins. Co., 872 NYS2d 544, 548 [2d Dept 2009]). The preclusive effect of this determination satisfies plaintiffs burden of demonstrating their entitlement to summary judgment pursuant to Insurance Law 3420(a)(2) (Creinis v. Hanover Ins. Co., at 548). Defendant s submissions are insufficient to raise triable issue of fact or law (see, Zuckerman v. City of New York, 49 NY2d 557 [1980]). Accordingly, plaintiffs motion for summary judgment is granted. 2. Stay Pending Appeal. Second, defendant Lloyds also argues that summary judgment is inappropriate as the NY Judgment upon which plaintiffs rely to support their instant Insurance Law 3420 action is currently under appeal, citing In Re Estate of Cramer, 24 AD3d 864 [3d Dept 2005] (holding a judgment is not final until any appeals are complete ). It is also well settled that a perfected appeal does not stay the execution of the judgment or order appealed from, and that to obtain a stay certain statutory requirements must be 3 The Court notes that in Gaston v. American Tr. Inc. Co., 11 NY3d 866 (2008) the Court of Appeals held that it is inappropriate to apply the doctrine of collateral estoppel where there are conflicting judgments on the coverage issue at the trial level. Here, the judgment in New York was against the insurance carrier and the judgment from New Jersey was in favor of the carrier. As this Court has determined that the NJ Judgment is void and unenforceable as against plaintiffs and is not entitled to full faith and credit, there is no issue of a conflicting judgment from the New Jersey Court and therefore, the doctrine of collateral estoppel applies. 8

9 complied with either as to giving an undertaking or getting an order of the court. While an appeal regularly taken and perfected is taking its course in the appellate court the respondent may, notwithstanding, unless stayed, proceed to enforce his judgment or order, and the appellant's only remedy is to enforce restitution when he becomes entitled to it. (Ex parte Meyer, 209 NY 59 [1913]). In the instant case, defendant Lloyds has not shown any of the statutory requirements for having received a stay of enforcement of the judgment from the underlying action. Hence, Lloyds mere filing of an appeal without a stay is no impediment to plaintiffs proceeding to enforce their judgment by seeking an order for summary judgment. 3. Pre and Post-Judgment interest in underlying action. That branch of plaintiffs motion for an Order awarding plaintiffs pre-judgment interest and post-judgment interest relative to the Judgment obtained in the underlying action of Giovanielli v. Rivera, Index No /04 entered September 19, 2007 plus costs, disbursement and/or fees, to be calculated by this Court pursuant to CPLR 5002, 5003 and directing defendant Certain Underwriters at Lloyds, London to pay same is granted to the following extent: Pre-judgment interest is appropriate in this case. CPLR 5002 provides that "[i]nterest shall be recovered... from the date the verdict was rendered to the date of entry of final judgment." Additionally, CPLR 5003 governs the awarding of post-judgment interest and provides that "[e]very money judgment shall bear interest from the date of its entry." As the Court of Appeals stated, "interest is not a penalty. Rather, it is simply the cost of having the use of another person's money for a specified period" and is "intended to indemnify successful plaintiffs for the nonpayment of what is due to them'..." (Love v. State, 78 NY2d 540 [1991]). Accordingly, plaintiffs having established the statutory requirements of Insurance Law 3420, and having demonstrated entitlement to interest, and defendant having not sufficiently shown the presence of an issue of fact, summary judgment in this case is appropriate. Plaintiffs motion is hereby granted. A courtesy copy of this order is being mailed to counsel for the respective parties. Dated: May 14, Howard G. Lane, J.S.C. 9