BERNSTEIN FOR COM'R OF BANKING v. GREATER NY MUT.

• Citation: 706 F. Supp. 287
• Decision Date: 27 February 1989
• Docket Number: No. 85 Civ. 9062 (MBM).,85 Civ. 9062 (MBM).
• Parties: George BERNSTEIN, acting for and on Behalf of the COMMISSIONER OF BANKING AND INSURANCE OF THE STATE OF VERMONT as Receiver for the purpose of rehabilitation of Ambassador Insurance Company, assignee of William Grant, Plaintiff, v. The GREATER NEW YORK MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

706 F. Supp. 287

George BERNSTEIN, acting for and on Behalf of the COMMISSIONER OF BANKING AND INSURANCE OF THE STATE OF VERMONT as Receiver for the purpose of rehabilitation of Ambassador Insurance Company, assignee of William Grant, Plaintiff, v. The GREATER NEW YORK MUTUAL INSURANCE COMPANY, Defendant.

No. 85 Civ. 9062 (MBM).

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

February 27, 1989.

Leigh R. Isaacs, Kroll & Tract, New York City, for plaintiff.

Harold M. Foster, (Edward B. Safran, on Brief), New York City, for defendant.

MEMORANDUM AND ORDER

MUKASEY, District Judge.

Defendant Greater New York Mutual Insurance Company (GNY), a New York Corporation with its principal place of business in New York, moves for summary judgment dismissing the diversity action of plaintiff George Bernstein, acting for and on behalf of the Commissioner of Banking and Insurance of the State of Vermont as Receiver for the purpose of rehabilitation of Ambassador Insurance Company (Ambassador), a Vermont corporation with its principal place of business in Vermont, assignee of William Grant, a New Jersey domiciliary. Fed.R.Civ.P. 56(b). Bernstein moves for sanctions, asserting that GNY's motion is frivolous. Fed.R.Civ.P. 11. For the reasons given below, defendant's motion is granted and plaintiff's motion is denied.

On April 24, 1979, Grant was injured in New York City, allegedly by a truck owned by Interstate Dress Carriers, Inc. (Dress Carriers). Grant was left paralyzed, and has incurred medical expenses of over $200,000.00. Grant applied for reimbursement of his medical and hospital expenses from Dress Carriers' primary insurer, GNY, pursuant to New York's No-Fault Insurance Law. The Comprehensive Motor Vehicle Insurance Reparations Act, codified at N.Y.Ins.Law §§ 5101-08 (McKinney 1985 & Supp.1989). Reimbursement of these expenses is called payment of "first party benefits." N.Y.Ins.Law § 5102(b) (McKinney 1985). GNY denied Grant's claim for first party benefits, asserting that there was no proof that a Dress Carriers truck had hit him. On February 18, 1981, Grant sued Dress Carriers in New Jersey Superior Court for damages arising out of the accident. GNY tendered its $25,000-per-accident policy limit into court, and turned over the defense of its action to Ambassador, Dress Carriers' excess insurer. Ambassador settled the action for close to 50 cents on the dollar, or $102,012.69, and received in return an assignment from Grant of "any and all rights, claims or causes of action" Grant had against GNY.

In August 1983, Ambassador submitted to arbitration Grant's claim for first party benefits to arbitration, pursuant to a New York law that provides for arbitration of claims between insurers. N.Y.Ins.Law § 5105 (1985). On October 7, 1985, the arbitrator granted GNY's oral motion to dismiss the arbitration for lack of subject matter jurisdiction. On November 18, 1985, this action began. In his complaint, Bernstein, acting on behalf of Ambassador's receiver, alleges that GNY did not pay Grant $50,000 in first party benefits, as the New York No-Fault Law requires it to do. Bernstein seeks to recover that money from GNY, plus interest and attorneys' fees.

GNY moves for summary judgment alleging, among other things, that Ambassador has no standing to prosecute Grant's claim. In response, Bernstein moves for sanctions, asserting that the motion is frivolous.

Bernstein asserts that the assignability of Grant's claim is governed by the New York General Obligations Law. That statute provides in relevant part that "any claim can be transferred, except in one of the following cases: (1) Where it is to recover damages for personal injury." N.Y.Gen.Oblig.Law § 13-101 (McKinney 1978). Therefore, unless another statute specifically authorizes the assignment of a personal injury action, in New York, personal injury actions are not assignable. Juba v. General Builders Supply Corp., 7 N.Y.2d 48, 53, 194 N.Y.S.2d 503, 506, 163 N.E.2d 328, 331 (1959) (citing predecessor statute); Calhoun v. Kruczkiewicz, 129 A.D.2d 546, 514 N.Y.S.2d 40 (App.Div.2d Dep't 1987) (Motor Vehicle Accident Indemnification Corporation, a state created organization, is exempt from the prohibition on assigning personal injury claims); M.W. Zack Metal Co. v. International Navigation Corp. of Monrovia, 112 A.D.2d 865, 493 N.Y.S.2d 145 (App.Div. 1st Dep't 1985), aff'd, 67 N.Y.2d 892, 501 N.Y.S.2d 803, 492 N.E.2d 1219 (1986), see First Fed. Sav. & Loan Assoc. of Pittsburgh v. Oppenheim, Appel, Dixon & Co., 629 F.Supp. 427, 447 (S.D.N.Y.1986). In contrast, assigning the proceeds of a personal injury action is permissible if it occurs prior to the settlement or adjudication of a claim. Miller v. Liberty Mut. Fire Ins. Co., 29 A.D.2d 982, 289 N.Y.S.2d 726 (App.Div.2d Dep't 1968); Grossman v. Schlosser, 19 A.D.2d 893, 244 N.Y.S.2d 749 (App.Div.2d Dep't 1963). In addition, an insurer who pays its insured's claim for damages receives by subrogation the rights of his insured to recover for personal injuries, and therefore does not come within the purview of the General Obligation Law's prohibition. Liberty Mut. Ins. Co. v. Perricone, 54 A.D.2d 975, 388 N.Y.S.2d 670 (App.Div.2d Dep't 1976).

Applying these principles to this case, Ambassador was assigned all of Grant's claim against GNY, including Grant's right to recover for first party benefits, which are defined by statute 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 ...," minus certain monetary adjustments. N.Y.Ins.Law § 5102(b) (1985) (emphasis added). Therefore, Ambassador was assigned Grant's right to recover for personal injuries, not merely the proceeds of any recovery that Grant might receive. Under New York law, that assignment is void, and does not give Ambassador standing to recover on Grant's claim. McCormack v. Bloomfield S.S. Co., 399 F.Supp. 488 (S.D.N.Y.1974); Barry v. New York City Transit Auth., 121 A.D.2d 586, 503 N.Y.S.2d 634 (App.Div.2d Dep't 1986).

Moreover, there is no specific statutory authority that gives Ambassador the right to sue to recover for Grant's personal injuries. Under New York's No-Fault Law and the regulations promulgated thereunder, Grant's first party benefits may be paid to him, his guardian, employer, or a person legally obligated to provide him with necessities. N.Y.Ins.Law § 5103(a)(1), (a)(4), (d) (McKinney 1985); N.Y.Comp. Codes R. & Regs. tit. 11, § 65.15(i) (1988). Ambassador is not Grant's employer, and is not legally obligated to provide necessities to him. Therefore, it cannot take advantage of these provisions in New York law allowing persons other than Grant the right to recover for his personal injuries. Moreover, although the No-Fault Law gives insurance companies limited rights to recover first party benefits from uninsured drivers, that remedy does not allow Ambassador to sue GNY. N.Y.Ins.Law § 5104(b) (McKinney 1985); see Safeco Ins. Co. of Am. v. Jamaica Water Supply Co, 83 A.D. 2d 427, 444 N.Y.S.2d 925 (App.Div.2d Dep't 1981) (explaining the operation of § 5104(b)), aff'd, 57 N.Y.2d 994, 457 N.Y.S. 2d 245, 443...