Aetna Cas. & Sur. Co. v. Schulman

Decision Date05 June 1979
Citation417 N.Y.S.2d 77,70 A.D.2d 792
CourtNew York Supreme Court — Appellate Division
PartiesThe AETNA CASUALTY & SURETY COMPANY, Plaintiff-Respondent, v. Mortimer SCHULMAN and Marcia Schulman, Defendants-Appellants.

H. Goldfarb, New York City, for plaintiff-respondent.

B. Meyerson, Brooklyn, for defendants-appellants.



Order and judgment (two papers), Supreme Court, New York County, (Sutton, J.), entered September 7, 1978 and September 19, 1978, respectively, granting plaintiff's motion for summary judgment, unanimously affirmed, with one bill of costs and disbursements on the appeal.

Plaintiff had issued a policy of liability insurance to defendant Mortimer Schulman providing coverage from December 10, 1975 to December 10, 1976. The policy provided coverage for "extended economic loss" consisting of economic loss as a result of accidents occurring without the state and included a subrogation clause, subrogating the insurer to the extent of any payments made for extended economic loss:

"In the event of any payment for extended economic loss, the Company is subrogated to the extent of such payments to the rights of the person to whom, or for whose benefit, such payments were made. Such person must execute and deliver instruments and papers and do whatever else is necessary to secure such rights. Such person shall do nothing to prejudice such rights."

On March 8, 1976, defendants applied to plaintiff to recover benefits for economic loss resulting from an accident which occurred in Virginia on January 6, 1976. Thereafter, on April 29, 1976, they executed subrogation agreements under which plaintiff was to be subrogated to any rights which defendants had to recover against any persons because of the accident to the extent of any payments received from the carrier. Subsequently, on December 15, 1977, plaintiff paid Mortimer Schulman $14,710 and Marcia Schulman $5,194, representing their claims for benefits for economic loss.

After commencement of the an action in Virginia by defendants against the owner and operator of the other vehicle, defendants settled with the Virginia tortfeasors on January 28, 1977, executing general releases upon payment to Mortimer of $9,500 and to Marcia of $7,500 in satisfaction of their personal injury claims. Mortimer also released the tortfeasors from property damage in consideration for the receipt of $4,012. In the present action, plaintiff asserts that the settlement between defendants and the Virginia tortfeasors was made without its knowledge or consent and violated the terms of the subrogation agreement contained in the policy. The insurer states that, when it brought action in Virginia against the owner and operator of the other vehicle involved in the accident, it was compelled to consent to dismissal when confronted with the general releases which had been executed by defendants. It thereupon brought this action to recover from its insured to the extent of any payment received by them from the Virginia tortfeasors.

We are in agreement with the conclusion reached by Special Term that, on this record, the action taken by defendants substantially affected the insurer's rights under the subrogation clause. Defendants have offered no affirmative proof to substantiate their conclusory assertion that the Virginia settlement amounted to no more than a settlement of defendants' claims for recovery of pain and suffering and did...

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