Aglira v. Julien & Schlesinger, P.C.

• Decision Date: 21 September 1995
• Citation: Aglira v. Julien & Schlesinger, P.C., 631 N.Y.S.2d 816, 214 A.D.2d 178 (N.Y. App. Div. 1995)
• Court: New York Supreme Court — Appellate Division
• Parties: Paula AGLIRA, etc., Plaintiff, v. JULIEN & SCHLESINGER, P.C., et al., Defendants. JULIEN & SCHLESINGER, et al., Third-Party Plaintiffs-Respondents, v. EMPLOYERS INSURANCE OF WAUSAU, et al., Third-Party Defendants-Appellants, and Dennis Sarni, Third-Party Defendant-Respondent, and Federation of Jewish Philanthropies, Inc., et al., Third-Party Defendants.

Page 816

631 N.Y.S.2d 816

214 A.D.2d 178

Paula AGLIRA, etc., Plaintiff, v. JULIEN & SCHLESINGER, P.C., et al., Defendants.

JULIEN & SCHLESINGER, et al., Third-Party Plaintiffs-Respondents, v. EMPLOYERS INSURANCE OF WAUSAU, et al., Third-Party

Defendants-Appellants,

and

Dennis Sarni, Third-Party Defendant-Respondent,

and

Federation of Jewish Philanthropies, Inc., et al.,

Third-Party Defendants.

Supreme Court, Appellate Division First Department.

Sept. 21, 1995.

Karen P. Ryan, of counsel (Lori A. Marano, on the brief, Schiavetti, Geisler, Corgan, Soscia, DeVito, Gabriele and Nicholson, attorneys), for third-party defendant-appellant Employers Insurance of Wausau.

Thomas A. Leghorn, of counsel (Steven Verveniotis and Gerald A. Stein, on the brief, Wilson, Elser, Moskowitz, Edelman & Dicker, attorneys), for third-party defendant-appellant Martin, Clearwater & Bell.

Montgomery L. Effinger, of counsel (O'Connor, McGuinness, Conte, Doyle, Oleson & Collins, attorneys), for third-party plaintiffs-respondents.

Stephen M. Lazare, of counsel (Lazare Potter & Giacovas, attorneys), for third-party defendant-respondent.

Before SULLIVAN, J.P., and KUPFERMAN, WILLIAMS and MAZZARELLI, JJ.

SULLIVAN, Justice Presiding.

This lawsuit is an outgrowth of the settlement of a medical malpractice action brought by an infant, Michael Aglira, and his father, as his guardian and in the father's individual capacity. Julien & Schlesinger, P.C. and Stuart A. Schlesinger (Julien & Schlesinger), defendants and third-party plaintiffs in the within action, represented the infant and his father in that action and are sued herein by the infant and his mother, his conservatee, for their alleged malpractice in failing to secure the appropriate annuity for the infant from the settlement proceeds of the underlying medical malpractice action. Julien & Schlesinger have, in turn, impleaded others, including Martin, Clearwater & Bell, the attorneys for two of the settling defendants in the underlying action, who arranged, on behalf of Employers Insurance of Wausau (Employers), also named as a third-party defendant, the insurer of the two physician defendants represented by Martin, Clearwater & Bell, payment of the settlement funds and the release of Employers. ¹

The underlying medical malpractice action was settled in open court on December 7, 1983 for $1,000,000, of which, according to the terms of the settlement, $600,000 was to be used to purchase an annuity for the infant. The balance of $400,000 was paid directly to Julien & Schlesinger and the infant's father. On December 14, 1983 Martin, Clearwater & Bell wrote to Julien & Schlesinger offering two alternative annuity proposals for the infant. Employers would purchase the annuity from Employers Life Insurance Company of Wausau, which would issue the annuity in Employers' name. A broker's services would not have been required for the purchase of such an annuity. Julien & Schlesinger rejected the proposal. By order of that same date, December 14, 1983, the court confirmed the settlement and directed Employers and the insurer of Bronx Lebanon Hospital, another defendant in that action, to purchase the annuity from a "licensed New York Life Insurance Company" on such terms and provisions as are acceptable to the court.

Thereafter, on December 21, 1983, Litigation Support Corporation, a California corporation and also a third-party defendant herein, acting for Julien & Schlesinger, wrote to the attorneys representing Bronx Lebanon, with a copy to Martin, Clearwater & Bell, to advise that it had, pursuant to the court's order, drafted a structured settlement agreeable to Julien & Schlesinger. Litigation Support advised that the settlement package was to be "underwritten by Executive Life Insurance Company of New York, rated A+ (excellent) Class XIV." The record is clear that no one other than Julien & Schlesinger had any part in the selection of Litigation Support to purchase and administer the annuity.

By supplemental order dated January 16, 1984, the court adopted the terms of Litigation Support's proposal and directed that the annuity be purchased from "Executive Life Insurance Company of New York." On February 9, 1984, Julien & Schlesinger wrote to the settling defendants' attorneys to advise them to "contact Dennis Sarni [of Litigation Support] in order to effectuate the order of [the court] dated January 16, 1984." Following up on Julien & Schlesinger's advice, Martin, Clearwater & Bell wrote to Litigation Support on February 10, 1984, enclosing the court's January 16, 1984 order and specifically referring to the provision that the annuity "be purchased from the Executive Life Insurance Company of New York." By letter dated March 5, 1984, Litigation Support wrote to Martin, Clearwater & Bell to confirm the details of the annuity and advise that the "annuities are being underwritten by Executive Life Insurance Company", not Executive Life Insurance Company of New York, as directed, again referring to the insurer as "rated A+ (excellent)." Litigation Support also advised that the annuity policy would be owned by First Executive Insurance Company, the reinsurer of Executive Life.

At about the same time, Litigation Support forwarded a draft annuity agreement concerning the tender of the settlement funds to be used to purchase the annuity to Martin, Clearwater & Bell, who, on March 21, 1984, forwarded the draft, unchanged, to counsel for Bronx Lebanon. That same day, Martin, Clearwater & Bell sent a revised draft of the agreement to Litigation Support incorporating therein the court's orders directing the purchase of the contemplated annuity from Executive Life Insurance Company of New York and attaching copies of the same.

The draft prepared by Litigation Support provided that "[i]n consideration of the tendering of a lump sum premium payment by [the insurers] which drafts are [to be] made payable to Executive Life Corporation, a California corporation, Litigation Support Corporation agrees to purchase from Executive Life Corporation an annuity, the terms and obligations of which are set forth in ... the Order of the Court, Exhibit 'C'." The final draft, as corrected by Martin, Clearwater & Bell, read instead, "[i]n consideration of the tendering of ... draft[s] ... which drafts are to be made payable to Litigation Support Corporation, a California corporation, Litigation Support Corporation agrees to purchase from Executive Life Corporation an annuity, the terms and obligations of which are set forth in ... the Order of the Court, Exhibit 'C'." Thus, as can be seen, Martin, Clearwater & Bell moved the term, "a California corporation", which followed "Executive Life Corporation" in the original draft, and placed it after "Litigation Support Corporation" in the corrected final draft, thus accurately reflecting the fact that Litigation Support was a California corporation and that the annuity underwriter was not, in accordance with the court's order, a California corporation. In providing that the insurers' drafts were to be made payable to Litigation Support, which, in turn, was to purchase the annuity from Executive Life, the final draft also corrected the original draft, which provided that the drafts were to be made payable to Executive Life Corporation. Although the final draft carried over Litigation Support's erroneous reference to the "Executive Life Corporation", rather than "Executive Life Insurance Company of New York" as provided in the January 16, 1984 order of the court, that order was incorporated in and attached to the final agreement signed in April 1984 by both insurers, Litigation Support and the infant's father, as guardian.

The April 1984 agreement specifically provided for the release of the insurers upon payment of the lump sums due thereunder and their discharge from any obligation with respect to said payments. It further stated that the "release and discharge shall be final, irrevocable and absolute, and that Litigation Support Corporation shall be the sole obligor to the Plaintiff with respect to the Payments."

On May 15, 1984, Martin, Clearwater & Bell concluded the settlement by forwarding to Litigation Support a $275,000 draft, Employers' share of the final phase of the settlement, payable to Litigation Support "pursuant to the settlement negotiations and orders of the Court in the [underlying] action, and the Agreement by and between [the insurers] Joseph Aglira and Litigation Support Corporation, outlining the steps you will take to purchase an annuity." Litigation Support acknowledged receipt of the draft, noting in its May 16, 1984 letter, "Said draft will be used to purchase an annuity per the court order and your agreement with [Litigation Support's] Mr. Sarni".

Although it had previously, in its December 21, 1983 letter, confirmed that the annuity was to be purchased from Executive Life Insurance Company of New York, Litigation Support purchased the annuity from Executive Life Insurance Company of California, now in liquidation. As a result, the infant will, it is alleged, lose approximately 30% of the value of the annuity. There is nothing in the record to explain why Litigation Support, aware that the annuity was to be purchased from a specifically designated life insurer in New York, purchased the annuity from a California insurer.

As to each of the third-party defendants, Julien & Schlesinger pleads claims of negligence, breach of contract and fraud, seeking to recover in contribution or indemnification or both. Martin, Clearwater & Bell, arguing that as counsel for defendants in the underlying action they owed no duty to the infant plaintiff or his counsel, Julien & Schlesinger, and did not commit fraud, moved and Employers, alleging the contractual release, cross-moved to dismiss the third-party complaint pursuant to CPLR 3211. In opposition, Julien & Schlesinger argued that the settlement agreement should be invalidated on the...