Clarendon Place Corp. v. Landmark Ins. Co.

• Decision Date: 23 July 1992
• Court: New York Supreme Court — Appellate Division
• Parties: CLARENDON PLACE CORPORATION and Alex DiLorenzo, III, Plaintiffs-Respondents, v. LANDMARK INSURANCE COMPANY, Transamerica Insurance Company, Federal Insurance Company, Scottsdale Insurance Company, Alexander & Alexander of New York, Inc., Defendants-Respondents, and Robert S. Black in his capacity as Public Administrator for Bronx County, Defendant-Appellant.

Page 311

587 N.Y.S.2d 311

182 A.D.2d 6

CLARENDON PLACE CORPORATION and Alex DiLorenzo, III Plaintiffs-Respondents, v. LANDMARK INSURANCE COMPANY, Transamerica Insurance Company Federal Insurance Company, Scottsdale Insurance Company, Alexander & Alexander of New York, Inc., Defendants-Respondents and Robert S. Black in his capacity as Public Administrator for Bronx County, Defendant-Appellant.

Supreme Court, Appellate Division First Department.

July 23, 1992.

Susan M. Karten, of counsel (Perry S. Reich and Michael Berman, with her on the brief, Castro & Karten, attorneys), for defendant-appellant.

Thomas Rubertone, Jr., of counsel (Dublirer, Haydon, Strachi & Victor, attorneys), for plaintiff-respondent Clarendon Place.

Noel F. Beck, of counsel (Provizer, Lichtenstein, Pearlman & Phillips and Brody & Fabiani, attorneys), for defendant-respondent Transamerica Ins. Co.

Mary Kay Vyskocil, of counsel (John D. Soriano, David L. De Luca and Thomas J. Spellman, III, with her on the brief, Simpson Thacher & Bartlett, attorneys), for defendant-respondent Federal Ins. Co.

Before MURPHY, P.J., and SULLIVAN, CARRO, ROSENBERGER and WALLACH, JJ.

SULLIVAN, Justice.

The March 25, 1990 Happyland Social Club fire in which eighty-seven persons lost their lives occurred in a building owned by Clarendon Place Corporation, of which Alex DiLorenzo is the sole shareholder. Both DiLorenzo and Clarendon Place, the plaintiffs in the instant action, have been named as defendants in pending actions to recover damages for personal injury and wrongful death arising out of that fire. Landmark Insurance Co., Transamerica Insurance Co. and Federal Insurance Co., defendants in this action, issued to Kingsbury Properties, Ltd. a liability policy which afforded coverage for those properties listed on a schedule Kingsbury furnished the insurers. The Happyland Social Club premises, 877 East Tremont Avenue, in the Bronx, in New York City, is not listed. For this reason, and on other grounds as well, these defendant insurers disclaimed coverage for the Happyland fire.

Federal and Transamerica commenced actions in federal court seeking a judicial declaration upholding their disclaimers. Shortly thereafter, Clarendon and DiLorenzo commenced this state court action in Bronx County seeking a declaration that there is coverage with respect to the underlying tort actions and a concomitant duty to defend. They joined as defendants, among others, Robert S. Black, Public Administrator of Bronx County, as the legal representative of fifty-five of the Happyland fire victims. Significantly, it should be noted, the complaint does not assert a cause of action against Black; nor does it seek any relief from him. Noteworthy too is the fact that Black's presence in the case as a defendant destroys diversity, thereby preventing removal of the action to federal court, and provides a basis for Bronx venue, which would not otherwise exist. The defendants eventually moved to dismiss the complaint in its entirety in favor of the previously filed federal action and, alternatively, as to codefendant Black, on the ground that, as the legal representative of the estates of the fire victims, he had no legal interest in the insurance contracts sufficient to give him standing to participate in the action. The IAS court granted the motion to dismiss as to Black and, on reargument, adhered to its decision. Black appeals. The order should be affirmed.

It is clear, and not disputed by our dissenting colleagues, that the estates of the deceased fire victims through their representative Black are strangers to the insurance contracts at issue. They are not in privity with the insurers; nor are they third-party beneficiaries of these contracts. (See, Stainless, Inc. v. Employers' Fire Ins. Co., 69 A.D.2d 27, 33-34, 418 N.Y.S.2d 76, affd. 49 N.Y.2d 924, 428 N.Y.S.2d 675, 406 N.E.2d 490.) Thus, they may not seek enforcement of the insurers' obligations under the policies on either of these grounds.

With the enactment of chapter 524 of the Laws of 1917, a provision was added to the Insurance Law, codified originally as section 109, later as section 167 and, in 1984 as section 3420, which created a statutory cause of action on behalf of the injured party directly against the insurer. Section 3420(b)(1) permits the bringing of an action against an insurer by one who has a judgment against the insured, provided the judgment remains unsatisfied for 30 days after a copy thereof with notice of entry is served on the insured and the insurer. Compliance with the statute gives the injured party the right to litigate coverage issues as though he or she were a third-party beneficiary under the contract. (Tuzinska v. Ocean Accident & Guarantee Corp. Ltd., 241 App.Div. 598, 272 N.Y.S. 593.) The statute, creating a cause of action on behalf of the injured party against the insurer, has been held to be in derogation of the common law and, thus, subject to strict construction. (Royal Indem. Co. v. Travelers Ins. Co., 244 App.Div. 582, 585, 280 N.Y.S. 485, affd., 270 N.Y. 574, 1 N.E.2d 337.) "[E]very extension of the rights of an injured person, or one claiming under or through him, relative to direct actions against insurance carriers has been the result of legislative enactment, and * * * the courts have consistently refused to grant any other or further privileges than the statute specifically provides." (Morton v. Maryland Casualty Co., 1 A.D.2d 116, 126, 148 N.Y.S.2d 524, affd., 4 N.Y.2d 488, 176 N.Y.S.2d 329, 151 N.E.2d 881.) Indeed, compliance with the requirements of Insurance Law § 3420(b)(1) is considered a condition precedent to the assertion by a tort claimant of any contract claim against the insurer. (Thrasher v. United States Liab. Ins. Co., 19 N.Y.2d 159, 166, 278 N.Y.S.2d 793, 225 N.E.2d 503.) "[N]ew York does not permit direct suits against insurers prior to notice of entry of an unsatisfied judgment against an insured." (Abbate v. Medbrod, 109 A.D.2d 768, 769, 486 N.Y.S.2d 282.) Thus, Black and those he represents, the estates of fifty-five of the Happyland fire victims, have no rights against the insurers unless and until, at the very least, a judgment is entered against the insureds in the underlying tort actions.

Contrary to the position taken by the dissent, Black may not be properly joined as a party to this action pursuant to the permissive joinder provisions of CPLR 1002. As is clear from the complaint, he is not a party "against whom there is asserted any right to relief" and thus cannot be joined as a defendant. (CPLR 1002[b].) If relief is not sought from a party, dismissal as to that party is in order. (See, Dor Motors, Ltd. v. Graphic Arts Mut. Ins. Co., 97 A.D.2d 455, 467 N.Y.S.2d 663.) Nor may Black be permissively joined as a plaintiff pursuant to CPLR 1002(a), since CPLR 3001 authorizes a court to render a declaratory judgment only where a present, genuine legal controversy exists. Black and the estates he represents have no present rights flowing from Insurance Law § 3420(b)(1) since the statutory conditions precedent to an action thereunder have not been satisfied. Absent any legally cognizable interest in the insurance contracts at issue, there is no justiciable controversy between Black and the insurers to give him standing to bring this action. (See, New York Pub. Interest Research Group, Inc. v. Carey, 42 N.Y.2d 527, 399 N.Y.S.2d 621, 369 N.E.2d 1155.) Any request for declaratory relief is premature if the standing for such an action is contingent on the happening of a future event which is beyond the control of the parties and may never occur. (Id. at 531, 399 N.Y.S.2d 621, 369 N.E.2d 1155.) If the Happyland claimants are unsuccessful in obtaining a judgment against...