Allianz Ins. Co. v. Otero

• Citation: 353 F.Supp.2d 415
• Decision Date: 28 December 2004
• Docket Number: No. 04 Civ. 647(PKC).,04 Civ. 647(PKC).
• Parties: ALLIANZ INSURANCE COMPANY, as subrogee of Mercedes Benz Credit Corporation Plaintiff, v. Bien OTERO and Peter Williamson, Defendants.
• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

353 F.Supp.2d 415

ALLIANZ INSURANCE COMPANY, as subrogee of Mercedes Benz Credit Corporation Plaintiff, v. Bien OTERO and Peter Williamson, Defendants.

No. 04 Civ. 647(PKC).

United States District Court, S.D. New York.

December 28, 2004.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

David M. Ginsberg, Ginsberg, Becker & Weaver, L.L.P., New York, NY, for plaintiff.

John J. Bailly, Bailly & McMillian, L.L.P., White Plains, NY, for defendants.

MEMORANDUM AND ORDER

CASTEL, District Judge.

This is an action, asserting subject matter jurisdiction by reason of diversity of citizenship, in which the insurer of the owner-lessor of a vehicle seeks to recover from the lessee and her husband, the driver of the vehicle, payments the insurer made to a third-party in settlement of a personal injury claim. The lessee and driver have defended on the ground that they are insureds under the owner-lessor's policies and that New York's antisubrogation rule precludes an insurer from asserting a subrogation claim against its own insured. The parties have cross-moved for summary judgment. For reasons explained below, I deny defendants' motion for summary judgment and grant in part and deny in part plaintiff's motion for summary judgment.

Background

On March 30, 1999, defendant Bien Otero entered into a 38-month lease of a 1999 Mercedes CLK 320, 2-door coupe, from the Mercedes Benz Credit Corporation ("MBCC"). Little more than two weeks later, on April 16, 1999, while her husband, defendant Peter Williamson, was driving the car, it struck a pedestrian, Evelyn McElroy, at the intersection of Broadway and West 80^th Street in Manhattan. Ms. McElroy suffered severe injuries requiring surgery. She retained counsel and negotiation ensued between her attorney and the attorney for Ms. Otero's insurer, Great Northern/Chubb Insurance ("Chubb"). Chubb's policy had limits of $300,000 per occurrence, which was the minimum amount of insurance Ms. Otero was required to carry under her agreement with MBCC. As required by the lease, MBCC was a covered person under the Chubb policy.

Independently (and presumably without the foreknowledge of Ms. Otero), MBCC obtained insurance coverage on all of its owned and leased vehicles from plaintiff Allianz Insurance Company ("Allianz"). Under New York Vehicle and Traffic Law § 388, MBCC had liability exposure for accidents caused by vehicles it owned but were leased to third parties.

Ms. McElroy's injuries required surgery and her attorney refused to settle within the Chubb policy amount. Chubb tendered its policy limits of $300,000. MBCC, as owner, remained exposed for amounts above $300,000. Ms. McElroy's attorney wrote to MBCC asserting that Chubb's $300,000 was inadequate to settle the claim. Eventually, Allianz contributed $200,000 towards a total settlement with Ms. McElroy of $500,000. No suit was ever brought by Ms. McElroy. Now, Allianz, as subrogee of MBCC, has sued Ms. Otero and Mr. Williamson for the $200,000 it paid.

Defendants Otero and Williamson assert that they are insureds under MBCC's policy with Allianz and, under New York's antisubrogation rule, Allianz may not sue its own insureds. In response to the antisubrogation argument, Allianz counters that Endorsement 10 at ¶ 3 of its policy provides that "no insurance is provided by th[e] policy...." to the lessee or her permissive users and, to the extent that Endorsement 10 is contrary to New York law in excluding any coverage for permissive users, then its legal obligation was only a potential obligation to provide the statutory minimum of $25,000 per occurrence. It argues that defendants never, in fact, became its insureds and hence the antisubrogation rule has no application. Alternatively, Allianz argues that New York's interpretation of its antisubrogation rule would, at most, bar recovery for the amount for which the insurer actually or potentially covers the insured and not for sums above that amount. Both sides also call my attention to Endorsement 12 of the Allianz policy, which expressly excludes the lessee and her permissive users as insureds for claims above the amount of insurance that the lease required the lessee to maintain, i.e., $300,000 per occurrence.

After hearing oral argument on this motion and receiving supplemental submissions from the parties, I now conclude that, if at the time of the occurrence giving rise to the claim, defendants were potentially insureds for that claim, then New York's antisubrogation rule applies. However, I also conclude that New York would interpret its antisubrogation rule only to preclude the lessor's insurer from recovering amounts within the insurer's potential layer of coverage of the lessee-insured. At the time of the occurrence giving rise to the claim, Allianz was potentially defendants' primary insurer either to the extent of the $25,000 bodily injury statutory minimum or the $300,000 per occurrence that a reading of Endorsement 12 in conjunction with the lease would imply. In either case, Allianz's coverage, had it been called upon, would have been primary coverage for the first $25,000/$300,000. It is not necessary for me to determine which per occurrence limit applies ($25,000 vs. $300,000) because the sum that Allianz seeks to recover is for the $200,000 over the first $300,000 that was paid for by Chubb, the defendants' primary insurer. Based upon my reading of New York's public policy, a subrogor is not prohibited from enforcing the subrogee's common law and contractual indemnity rights against a third-person for amounts in excess of the potential insurance, even if that third-person is potentially the subrogor's insured for some lesser amount.

Before I travel into what Judges Cardozo and Mulligan have described as the Serbonian Bog of New York insurance law,¹ I will address an issue of personal jurisdiction.

Personal Jurisdiction

Defendants assert a lack of personal jurisdiction by reason of improper service of process, and cross-move to dismiss on this ground. In prior litigation in this Court between the same parties, defendants successfully moved to dismiss the action on the grounds of improper service. Allianz Ins. Co. v. Otero, 2003 WL 262335 (S.D.N.Y. Jan.30, 2003). The plaintiff, unable to personally serve defendants, relied upon the "nail and mail" provision of CPLR 308(4) and attempted service at 11 Pearlbush Lane, Poughkeepsie, New York. In an affidavit submitted to Judge McKenna, defendant Williamson swore that, as of late 1999, he no longer lived at 11 Pearlbush Lane and that his "present address ... [is] 87 Mill Street, Putnam Valley, New York 10579, which is my primary residence." Allianz Ins. Co. v. Otero, 01 Civ. 2598 (Affidavit sworn to on August 14, 2002) (emphasis added). Ms. Otero swore to an affidavit that was identical in this respect and also gave 87 Mill Road as her address at her September 9, 2002 deposition.

Plaintiff's process server attempted to serve defendants at 87 Mill Street, Putnam Valley, New York, On Tuesday, February 3, 2004 at 6:50 p.m. — the early evening. Unsuccessful, he returned again on the morning of February 4 at 7:55 a.m. Again, he did not find either defendant. On February 5, he returned and attempted to personally serve defendants at 2:45 p.m. but was unsuccessful. Ms. Kiessling, a neighbor, confirmed that defendants lived at the foregoing address "but was unable to divulge" their place of employment.

Concluding that the due diligence requirement of CPLR 308(4) had been satisfied, the process server affixed a copy of the Summons and Complaint on the door of 87 Mill Street on February 5 at 2:45 p.m. and mailed a copy to the same address on February 6.

On February 19, defendants, by counsel, appeared in this action by filing an answer and asserting eleven affirmative defenses, including improper service of process. In their answer to the complaint, Otero and Williamson denied "knowledge or information sufficient to form a belief" as to the allegations of their residences.² As was the case with the action filed before Judge McKenna, Otero and Williamson declined in this action to avail themselves of a pre-answer motion to dismiss, as was their right. By timely raising the defense in their answer, defendants have preserved the issue. Rule 12(h), Fed.R.Civ.P.

At an on-the-record telephone conference held on December 9, 2004, I inquired of the parties whether either side was seeking an evidentiary hearing on issues relating to the defense of lack of personal jurisdiction; each side confirmed that they were not. Defendants, accepting the facts in the affidavit of service, contend that they are insufficient to establish proper service. Conversely, plaintiff accepts the facts set forth in the Williamson and Otero affidavits but argues that service was proper nonetheless.

Williamson's affidavit asserts that "[i]n February of 2004 I spent weekends at 87 Mill Street" and that his "weekday residence was 490 West End Avenue." (Affidavit sworn to on October 7, 2004) Pointedly, he does not claim that in February 2004, 87 Mill Street was not his "actual ... dwelling or usual place of abode" or that it ceased to be his primary residence, as he swore it was in his affidavit of August 2002. To repeat, he merely states that "[i]n February of 2004" he "spent weekends" and not weekdays at 87 Mill Street. Otero's affidavit is the same. In the face of the August 2002 affidavit and the Kiessling confirmation, Williamson and Otero's claim covering no more than a 30-day period is insufficient to establish the defense.

CPLR 308(4) permits service by affixation on the door of the "actual place of business, dwelling place or usual place of abode" followed by mailing to the last known address, if, but only if, due diligence has been exercised:

where service under paragraphs one [delivery to the person] and two [delivery to person of suitable age and discretion and mail] cannot be made with due diligence, by affixing the summons...