Booth v. Continental Ins. Co.

• Decision Date: 20 October 1995
• Citation: 634 N.Y.S.2d 650,167 Misc.2d 429
• Parties: Charles C. BOOTH, Plaintiff, v. CONTINENTAL INSURANCE COMPANY, et al., The New York School for the Deaf, Wayne Degroat, an infant, by his mother and natural guardian, Margaret Degroat, and Margaret Degroat, individually and John F.X. Doonan, Defendants.
• Court: New York Supreme Court

Page 650

634 N.Y.S.2d 650

167 Misc.2d 429

Charles C. BOOTH, Plaintiff, v. CONTINENTAL INSURANCE COMPANY, et al., The New York School for the Deaf, Wayne Degroat, an infant, by his mother and natural guardian, Margaret Degroat, and Margaret Degroat individually and John F.X. Doonan, Defendants.

Supreme Court, Westchester County.

Oct. 20, 1995.

Goldberg & Marin, New York City, for Plaintiff.

Simpson, Thacher & Bartlett, New York City, for Defendants Continental and School.

JOAN B. LEFKOWITZ, Justice.

In a declaratory judgment action, plaintiff moves for an order disqualifying defense counsel from representing the insurer and the named insured. Plaintiff contends that defense counsel is representing adverse interests in violation of public policy as set forth in the Code of Professional Responsibility. Defense counsel sought to be disqualified argues that there is no conflict of interest in the dual representation, that plaintiff lacks standing to make this motion since defense counsel never represented him nor had a fiduciary relationship with him and, if standing exists and a conflict of interest is found, the parties represented by defense counsel have consented to the representation notwithstanding the conflict.

FACTUAL BACKGROUND

Some time in 1989, Wayne Degroat's mother complained that her son, then eleven years of age and a residential student at the New York School For The Deaf (hereinafter referred to as the "School") had been sexually assaulted on school premises during the period September 1988 through March 1989 by staff members. The District Attorney investigated the allegations and found no proof of staff misconduct. The New York State Department of Social Services investigated and specifically found that no charges against Charles Booth, a staff employee of the School, were warranted.

In December 1990, purportedly by summons only, an action was commenced in the Supreme Court, Westchester County entitled Degroat v. New York School For Deaf, Index No. 13034/91. ¹ In October 1991, a supplemental summons and complaint were served which added two party defendants to the action, John F.X. Doonan, a former employee of the School, and Charles Booth (plaintiff herein). The complaint alleged causes of action against the School for injuries Wayne Degroat, an infant student at the School, suffered from sexual assaults by Messrs. Doonan and Booth. The gravamen of the cause of action against the School sounded in negligent hiring, retention and supervision. Three causes of action were asserted against Mr. Doonan and three against Mr. Booth for sexual assault, negligence and assault without intent to cause injury.

Defendant Continental Insurance Company (now known as CNA Insurance Company In April 1995, Booth commenced the subject declaratory judgment action in which he seeks an adjudication of his rights as an insured under the General Liability Policy. He primarily contends that he is entitled to "bodily injury" coverage as an employee of the School (Policy CG 0 0 01 11 85, Section II[2][a]; also New York Board of Education Endorsement 000013); ³ that the sexual molestation exclusion found at Bates Stamp pages 000004 and 000051 is inapplicable as it was not countersigned as required by the policy language; and that Continental failed to timely notify the injured party (Degroat) of its disclaimer, so that coverage exists. In a second cause of action against the School, Mr. Booth alleges that representations were made by School officials that claims of sexual molestation, even if frivolous, were covered by appropriate insurance. In a third cause of action against the School, a claim for breach of contract is made regarding the non-existence of such coverage. Wayne Degroat, his mother and Mr. Doonan are also named as defendants, but no specific relief is sought against them. ⁴

                but hereafter referred to as "Continental") provided a defense to the School, through the law firm of Beesecker & Koors, under a reservation of rights by reason of a sexual molestation exclusion in the General Liability Policy issued to the School.  Continental refused to provide a defense for Mr. Booth who retained counsel to defend him. 2  Doonan defaulted.  Booth has expended $41,000 to date in defending the Degroat action
                

In the underlying personal injury action, the School's answer denies that sexual molestation occurred. In the declaratory judgment action, the insurer and the School allege that no coverage exists by reason of the sexual molestation exclusion and by way of an affirmative defense of unclean hands allege that Mr. Booth committed sexual assaults on the infant.

In June 1995, Continental and the School moved for summary judgment. Plaintiff cross-moved for similar relief and for disqualification of movants' defense counsel. In response to the cross-motion, said defense counsel produced an affidavit from Michael Leary, Director of Fiscal Affairs of the School. That affidavit referred to the insurer's providing a defense in the Degroat action and its prior request of the School to permit it to be defended by the same firm as was defending Continental in the action for declaratory judgment. The affidavit states in part:

"3. ... Because the school did not perceive any conflict with such a joint defense, the School agreed to have Simpson, Thacher & Bartlett defend it in this action.

4. The School still believes there is no conflict with such a joint defense."

In July 1995, a Supplemental Amended Complaint was served in the Degroat action. It added two additional causes of action for negligent supervision of Booth by Doonan and of Doonan by Booth. Presumably, amended answers were served but copies have not been submitted herein.

In view of the amended complaint, the parties withdrew the motion and cross-motion in the declaratory judgment action. Subsequently, in August 1995, plaintiff moved again to disqualify Simpson, Thacher & Bartlett. Defense counsel opposes the motion for the reasons expressed at the outset of this opinion and also notes that prior to

the original representation of the School herein and after the cross-motion to disqualify, the School, as before, was counseled by its regular outside attorney, Eugene Farabaugh, Esq. of Milbank, Tweed, Hadley & McCloy, who advised the School to permit Simpson, Thacher & Bartlett to represent it and to continue to do so.

STANDING TO SUE

Standing to sue is a party's ticket to ride or recognition of a party's right to proceed with presentment of a claim for adjudication. Black's Law Dictionary (6th ed.), pp. 1405-06. Standing principles "are in the end matters of policy, [and] should not be heavy-handed", so that where the petitioning party has a legally cognizable interest, standing exists. Sun-Brite Car Wash v. Bd. of Zoning & Appeals, 69 N.Y.2d 406, 413, 515 N.Y.S.2d 418, 508 N.E.2d 130 (1987); 82 N.Y.Jur.2d, Parties, § 7.

Simpson, Thacher & Bartlett cite several cases for the proposition that one who did not have a prior or current relationship with counsel sought to be disqualified lacks standing to present the issue. See, e.g., Matter of Reichenbaum v. Reichenbaum & Silberstein, P.C., 162 A.D.2d 599, 556 N.Y.S.2d 933 (2d Dep't 1990), lv. dismissed 77 N.Y.2d 873, 568 N.Y.S.2d 915, 571 N.E.2d 85 (1991); Rowley v. Waterfront Airways, Inc., 113 A.D.2d 926, 493 N.Y.S.2d 828 (2d Dep't 1985). While the cited cases are distinguishable, in that in Matter of Reichenbaum, supra, the Court held that disqualification was not warranted on the merits and in Rowley v. Waterfront Airways, Inc., supra, the Court dealt with the non-existence of imparting confidential information, the general rule must be recognized that absent an attorney-client relationship, standing is generally lacking on disqualification motions. Corbelli v. General Accident Ins. Co. of Am., 198 A.D.2d 760, 604 N.Y.S.2d 402 (4th Dep't 1993); 7A C.J.S., Attorney and Client, § 157; 7 Am.Jur.2d, Attorneys At Law, § 184; Ann. 31 A.L.R.3rd 715, 727 (1970), Counsel--Adverse Interests--Civil Case.

However, there are exceptions to the general rule. It has been held that "since an attorney has the authority and obligation to bring a possible ethical violation to the attention of the court ... the adverse party may properly move to disqualify the attorney for an opposite party on the ground of conflict of interest". 7A C.J.S., Attorney and Client, § 157, p. 224; SMI Industries Canada, Ltd. v. Caelter Industries, Inc., 586 F.Supp. 808, 815 (N.D.N.Y.1984) (lack of standing argument "must give way to a maxim that adequately addresses the need to ensure both clients and the general public that lawyers will act within the bounds of ethical conduct"); Vegetable Kingdom, Inc. v. Katzen, 653 F.Supp. 917, 923, n. 4 (N.D.N.Y.1987); Code of Professional Responsibility Disciplinary Rule 1-103(A), 22 NYCRR 1200.4(a).

In Rowe v. DeJesus, 106 A.D.2d 284, 482 N.Y.S.2d 291 (1st Dep't 1984) the Court addressed the merits of plaintiff's motion to disqualify defendants' law firm from representing multiple defendants even though there was no showing that defense counsel ever represented plaintiff. In Matter of Vera, 49 A.D.2d 883, 373 N.Y.S.2d 210 (2d Dep't 1975), app. den. 38 N.Y.2d 709, 382 N.Y.S.2d 1029, 346 N.E.2d 828, mot. for stay den. 38 N.Y.2d 938 (1976) the Court held that the disqualification issue could be raised at nisi prius, sua sponte.

In Wagenheim v. Pomerantz, N.Y.L.J. 7/7/70, p. 13, col. 7 (Supreme Ct. Westchester County) an infant plaintiff passenger in a two-car accident originally sued the owner and driver of one car and not the infant's father, the owner of the second vehicle. Subsequently, the father was added as a party defendant. Plaintiff's attorney previously represented the father on matters unrelated to the litigation and may have been retained by him to prosecute the action. Counsel assigned to the father by the insurance company to defend him, interestingly the same carrier as at bar,...