Aetna Cas. and Sur. Co. v. Jackowe

• Decision Date: 31 October 1983
• Court: New York Supreme Court — Appellate Division
• Parties: The AETNA CASUALTY AND SURETY COMPANY, Plaintiff-Respondent, v. Isidore JACKOWE, et al., Appellants, General Tire & Rubber Co., Inc., Defendant-Respondent.

Page 153

468 N.Y.S.2d 153

96 A.D.2d 37

The AETNA CASUALTY AND SURETY COMPANY, Plaintiff-Respondent, v. Isidore JACKOWE, et al., Appellants General Tire & Rubber Co., Inc., Defendant-Respondent.

Supreme Court, Appellate Division Second Department.

Oct. 31, 1983.

Rosenbaum, Wise, Lerman, Katz & Weiss, New York City (Arthur N. Seiff and Elliot L. Katz, New York City, of counsel), for appellants.

John P. D'Ambrosio, P.C., Elmsford, for plaintiff-respondent.

A. Paul Goldblum, Brooklyn, for defendant-respondent.

Before TITONE, J.P., and GULOTTA, WEINSTEIN and BRACKEN, JJ.

WEINSTEIN, Justice.

The instant appeals arise in the context of a no-fault insurance claim by two injured parties and their spouses. On December 30, 1976, defendants Isidore and Martin J. Jackowe sustained personal injuries while operating and riding in a motor vehicle owned by Knolls Ambulance Service and insured by plaintiff, The Aetna Casualty and Surety Company (hereinafter Aetna). The accident allegedly resulted from the blow-out of a tire manufactured by defendant General Tire & Rubber Co., Inc. (hereinafter General Tire). Aetna had insured Knolls Ambulance Service under a commercial automobile liability policy. The policy contained the standard New York no-fault indorsement covering so-called "basic economic loss" and contained an "ADDITIONAL PERSONAL INJURY PROTECTION" indorsement which required the insurer to pay first-party benefits for so-called "extended economic loss" sustained as a result of an accident. Under subdivision 2 of section 673 of the Insurance Law the insurer had a statutory lien to the extent of payments made to cover basic economic loss, and under the additional personal injury protection indorsement it was subrogated to the extent of payments made to cover extended economic loss.

As a consequence of the accident, Aetna paid the insured defendants a total of $107,899.14 in no-fault benefits pursuant to the terms of its policy. Thereafter, in or about June, 1977, Isidore and Martin J. Jackowe, together with their wives, commenced an action against General Tire. The injured parties sought damages for personal injuries, including hospital expenses, medical care, loss of employment earnings and pain and suffering, while their wives sought damages for loss of consortium. By letters dated April 16, 1979, to the respective attorneys for the Jackowes and General Tire, Aetna asserted liens on any settlement which might result between those parties as a result of the Jackowes' claim. Said liens assertedly arose from the payments for basic economic loss made by Aetna under the no-fault provisions of its policy with Knolls Ambulance Service. Aetna also asserted a right of subrogation to recover payments it had made for extended economic loss.

The Jackowes' case against General Tire went to trial in September, 1980 and was settled pursuant to stipulation on September 16, 1980. At that time, the attorneys for the Jackowes and General Tire entered into the following agreement in the Supreme Court, Bronx County, before Justice SIDNEY H. ROSEN:

"The Actions [sic] by Isidore Jackowe and his wife Elizabeth Jackowe against the Defendant, General Tire and Rubber Company, [is settled in the] total sum of $100,000, and the action of Martin Jackowe and his wife, Nancy Jackowe against said defendant, [is settled] for the sum of $100,000; that these settlements are subject to any and all liens which may exist, and they are subject to any claims which may attain the status of a lien, and I am particularly referring to the claim by Aetna Casualty and Surety Company for No-Fault Benefits paid by it to Isidore Jackowe and Martin Jackowe, which I have been advised is in the approximate amount of $105,000 as of the present time."

The sum of $106,000 was paid to the Jackowes' attorneys to be held in escrow by them in an interest bearing account until such time as Aetna's claim to recover moneys which it already had paid to the Jackowes was finally judicially determined or until a release was obtained from Aetna in favor of General Tire and the Jackowes for whatever sum it paid in no-fault benefits.

Pursuant to the terms of the stipulation entered into on the record, two general releases, one subscribed by Isidore and Elizabeth Jackowe and the other subscribed by Martin J. and Nancy Jackowe, were executed. Each release purported to discharge General Tire from, inter alia, "all actions, causes of action, suits, debts * * * accounts * * * claims, and demands whatsoever, in law, admiralty or equity" in consideration of the payment of $100,000 to each couple.

Aetna thereupon instituted the present action seeking a declaration that it is entitled to recover the benefits which it paid to Isidore and Martin J. Jackowe from the proceeds of the settlement between General Tire and all four Jackowes. After the joinder of issue, Aetna moved for summary judgment on its behalf, while the Jackowes cross-moved for an order dismissing Aetna's complaint on the ground that Aetna failed to prove that any portion of the settlement proceeds was attributable to basic economic loss.

In a decision dated December 7, 1981, 113 Misc.2d 242, 448 N.Y.S.2d 347, Aetna was granted summary judgment against defendants Jackowe and the complaint, as it related to General Tire, was dismissed, based upon the following rationale:

"The settlement record reflects the claim of defendants' Jackowe that the settlement was for pain and suffering only and that, since no proof of economic loss in the nature of medical expenses or loss of earnings was offered on the trial, claims relating thereto were not included in the settlement. It was the position of General Tire & Rubber Co. Inc. that the complaint sought damages for economic loss as well as pain and suffering and, therefore, all claims made were included within the settlement agreement.

"Section 673(2) of the Insurance Law provides that in any action for personal injuries brought by a person covered by no-fault insurance against a noncovered person and arising out of the operation and use of a motor vehicle, the insurer which paid first party benefits on account of such injuries 'shall have' a lien against any recovery to the extent of benefits paid to covered persons.

"Isidore and Martin J. Jackowe were covered persons under section 673(2) of the Insurance Law and General Tire and Rubber Co., Inc. was the noncovered party sued in an action for personal injuries, encompassing pain and suffering and economic loss, which arose out of the use or operation of a motor vehicle. Plaintiff herein is the insurer which paid first party benefits for the personal injuries sustained in that accident by the covered persons.

"Section 671(2) of the Insurance Law defines first party benefits as 'payments to reimburse a person for basic economic loss on account of personal injury arising out of the use or operation of a motor vehicle.' Basic economic loss includes necessary expenses for medical and hospital services and loss of earnings (Section 672(1)(a)(b), Insurance Law).

"It has been held that the term 'personal injuries' used in that settlement of an action involving the use and operation of a motor vehicle does not include basic economic loss in a case where the complaint seeks damages for pain and suffering only. Consequently, an insurer's lien for first party benefits is not affected by the settlement (Record v. The Royal Globe Insurance Company, [83 AD2d 154, 443 N.Y.S.2d 755]; Government Employees Ins. Co. v. Halfpenny, 103 Misc.2d 128 ).

"However, in the settlement of an action for pain, suffering and personal injuries, the insurer which had paid first party benefits had the right of subrogation in the sum received through settlement equal to the amount paid by the insurer (Kozlowski v. Briggs Leasing Corp., 96 Misc.2d 337 ).

"In the underlying tort action instituted by the Jackowes, an unlimited general release was given to General Tire & Rubber Co., Inc., and the complaint therein sought damages for pain, suffering and economic loss in the form of medical and hospital expenses and loss of earnings. Thus, the settlement of that action was within section 673(2) of the Insurance Law and plaintiff's lien attached to the settlement despite the contention to the contrary that the settlement did not include economic loss. The settlement disposed of the causes of action alleged in the complaint."

An order and judgment based thereon were subsequently entered accordingly.

On appeal defendants Jackowe maintain that summary judgment was improperly granted in the insurer's favor inasmuch as Aetna failed to sustain its burden of proving what portion, if any, of the moneys received by the Jackowes in the course of their settlement with General Tire represented payment by the tort-feasor for basic and extended economic loss. The insurer's statutory lien attaches only to that portion of the settlement proceeds which is attributable to the covered persons' claim for basic economic loss. As respects extended economic loss, Aetna is subrogated to the rights of the Jackowes against General Tire but it has no statutory lien on the settlement proceeds therefor. The matter for our determination is whether a question of fact exists as to how much of the settlement proceeds is allocable to basic and extended economic loss. We conclude that such a question exists and that a hearing as to the allocation of damages is necessary.

The law is well settled that a release is merely a species of contract and, as such, its construction is governed by the same principles of law applicable to other contracts (Mangini v. McClurg, 24 N.Y.2d 556, 562, 301 N.Y.S.2d 508, 249 N.E.2d 386; Record v. Royal Globe Ins. Co., 83 A.D.2d 154, 158, 443 N.Y.S.2d 755; 19 NY Jur 2d, Compromise, Accord, and Release, § 76). With respect to these generic principles of interpretation, the Court of Appeals has held that:

"These rules are based on a realistic recognition...