Hala v. Orange Reg'l Med. Ctr.
| Decision Date | 23 April 2018 |
| Docket Number | 3221/2014 |
| Citation | 60 Misc.3d 274,76 N.Y.S.3d 369 |
| Parties | Veronica HALA and Keith Hala, Plaintiffs, v. ORANGE REGIONAL MEDICAL CENTER, Joseph L. Racanelli, M.D., Barbara Spreitzer, FNP, and Horizon Medical Group, Defendants. |
| Court | New York Supreme Court |
Lauren Pennisi, Esq., Wingate, Russotti, Shapiro & Halperin, LLP, Veronica Hala and Keith Hala, 420 Lexington Avenue, New York, NY 10170, Attorneys for Plaintiffs.
Marsha S. Weiss, Esq., Feldman, Kleidman, Coffey, Sappe & Regenbaum, L.L.P, Barbara Spreitzer, FNP and Horizon Medical Group, P.C., 995 Main Street, P.O. Box A, Fishkill, NY 12524–0395, Attorneys for Defendants.
Francine L. Semaya, Esq., 150 Broadway, Suite 1200, New York, NY 10038, Attorney for the Oceanus Liquidator.
Angela Thompson–Tinsley, Esq., Orange Regional Medical Center, 327 Mill Street, Poughkeepsie, NY 12601, Sholes & Miller, LLP Attorneys for Defendant.
Steve Milligram, Esq., Catania, Mahon, Milligram & Rider, PLLC, Joseph Racanelli, One Corwin Court, P.O. Box 1479, Newburgh, NY 12550, Attorneys For Defendant.
The proceedings held on October 31, 2017 and February 2, 2018, it is ordered that the motion is decided as follows1 :
Procedural History
The issues presented by the motion made in the above-captioned action affects at least fifteen (15) medical malpractice actions pending throughout the Ninth Judicial District (comprised of Westchester, Putnam, Rockland, Orange and Dutchess counties) in which a defendant obtained medical malpractice insurance from the Oceanus Insurance Company ("Oceanus"). Because Oceanus is not a party to these medical malpractice actions, and the Court's case management system does not record non-parties, it is possible that there are additional actions which have yet to be identified. The numerous medical malpractice actions which have been identified are set forth at the conclusion of this Decision and Order.
Oceanus was formed in 2004 as a "risk retention group" and was domiciled in South Carolina. It has conducted business in numerous states, including New York. On August 29, 2017, Oceanus filed for liquidation in South Carolina.2 On September 21, 2017, Hon. L. Casey Manning of the Court of Common Pleas, Fifth Judicial Circuit of the State of South Carolina, Richmond County, entered an Order in Civil Action No. 2017–CP–40–05195, denominated as an "Order Commencing Liquidation Proceedings & Granting An Injunction & Automatic Stay of Proceedings" (the "Order").3 At the same time, the South Carolina Court's appointed Liquidator issued a "Notice of Cancellation of All Policies," which advised all policyholders that, due to the Order, Oceanus will no longer defend or pay for the defense of its insured, and therefore any insured in such situation should make arrangements to employ independent counsel to defend themselves against any legal action which would otherwise be covered under the Oceanus policy."
Thereafter, counsel for several defendants in actions pending in the Ninth Judicial District (collectively, the "Oceanus defendants") contacted the Court, by letter or otherwise, to request that actions be stayed during the pendency of the liquidation proceedings in South Carolina. In order to promote fairness and ensure that a consistent approach was taken in the Ninth Judicial District with respect to these cases, by Administrative Directive dated October 7, 2017, Hon. Alan D. Scheinkman, J.S.C., then Administrative Judge of the Ninth Judicial District, created the "Oceanus Part" to centralize and hear any applications regarding the Order.
An initial hearing regarding requests for stays of actions pending against the Oceanus defendants was held before Justice Scheinkman on October 31, 2017. The Court heard argument from counsel for plaintiffs and the Oceanus defendants and counsel for the Liquidator. At that time, the Court indicated that if any plaintiffs wished to consent to a stay, discontinuance of proceedings, or severance of the claims against the Oceanus defendants, the Court would approve such a stipulation. The Court further advised the parties that in the absence of such a stipulation, a motion to stay the proceedings would be required.
The Court established a briefing schedule for any such motions. Further, in the interest of judicial economy and recognizing that a decision in one action would create a precedent for all others in the Ninth Judicial District, the Court granted leave for any interested party to submit papers in support of or in opposition to any motion for a stay, irrespective of whether a motion was made in the same action in which the interested party was a named party.
Before the instant motion was fully submitted, on January 1, 2018, Justice Scheinkman was appointed Presiding Justice of the Appellate Division, Second Department, and accordingly, he was no longer available to hear the motion. By directive of Hon. Michael V. Coccoma, Deputy Chief Administrative Judge for Courts Outside New York City, serving as Acting Administrative Judge of the Ninth Judge District, the undersigned was designated to preside over the Oceanus Part and any pending applications related to the Oceanus liquidation.
On February 2, 2018, a further hearing was held before the Court. On February 8, 2018, Judge Manning issued a subsequent order in the liquidation proceedings.
The Order provides that Oceanus is "officially declared insolvent" and that it is "dissolved." The Order, inter alia, prohibits the "waste of the insurer's assets," "[t]he institution or further prosecution of any actions or proceedings," "obtaining of preferences, judgments, attachments, garnishments, or liens against the insurer, its assets, or its policyholders," "levying of execution against the insurer, its assets, or its policyholders," and "[a]ny other threatened or contemplated action that might lessen the value of the insurer's assets or prejudice the rights of policyholders, creditors, or shareholders, or the administration of any proceeding under Chapter 27 of Title 38 of the South Carolina Code."
The Order appointed Raymond G. Farmer, the Director of the South Carolina Department of Insurance, as Liquidator of Oceanus. It conferred on him various powers and responsibilities for handling Oceanus' assets and liabilities, and established a "Bar Date" by which proofs of claim must be filed. That date was March 20, 2018.
The Order reads in pertinent part as follows:
On February 8, 2018, Judge Manning issued a subsequent order, apparently in response to the hearings held in New York and elsewhere (the "Clarification Order").
The Clarification Order states as follows:
"It has been brought to the attention of this Court that there is some confusion among the Bench and Bar in other jurisdictions as to whether the injunction and automatic stay set forth in the Order which is ‘applicable to all persons and proceedings’ and which prohibits, among other things, ‘the institution of further prosecution of any actions or proceedings’ includes prohibiting actions against the policyholders of Oceanus which would be the insured physicians which are also referred to as covered providers and additional named insureds of Oceanus Insurance Company.So as to clarify my Order of September 21, 2017, this Order is to confirm that the automatic stay prohibiting ‘the institution of further prosecutions of any actions or proceedings’ includes prohibiting actions or proceedings against policyholders, covered providers and additional named insureds of Oceanus Insurance Company."
The Oceanus defendants argue, inter alia, that the Order and Clarification Order (collectively, the "South Carolina Orders") should be enforced as a matter of federal and state law. They assert that pursuant to the Full Faith and Credit Clause of the United States Constitution, the South Carolina Orders should be honored by this Court and all proceedings stayed involving the Oceanus defendants until such time as the liquidation proceedings are concluded.
The Oceanus defendants further contend that the Uniform Insurers Liquidation Act (hereinafter "UILA") has been enacted by both New York and South Carolina. They argue that the UILA requires New York courts to honor and enforce injunctions issued in an order of rehabilitation or liquidation of a reciprocal state in which the UILA has been adopted, such as South Carolina. The Oceanus defendants also assert that New York courts have abided by orders enjoining prosecution of actions against insurers placed into rehabilitation or liquidation.
The Oceanus defendants also claim that the South...
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