Gov't Emps. Ins. Co. v. Saco

• Decision Date: 10 December 2018
• Docket Number: 12-CV-5633 (NGG) (ST),15-CV-634 (NGG) (ST)
• Citation: Gov't Emps. Ins. Co. v. Saco, 12-CV-5633 (NGG) (ST), 15-CV-634 (NGG) (ST) (E.D. N.Y. Dec 10, 2018)
• Parties: GOVERNMENT EMPLOYEES INSURANCE COMPANY, Plaintiff, v. DIANE SACO and PATRICIA HARGETT, as Administrator of the Estate of Suzanne Kusulas, Defendants. PATRICIA HARGETT, as Administrator of the Estate of Suzanne Kusulas, as Assignee of the Rights of Diane Saco, Plaintiff, v. GOVERNMENT EMPLOYEES INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of New York

GOVERNMENT EMPLOYEES INSURANCE COMPANY, Plaintiff, v. DIANE SACO and PATRICIA HARGETT,

as Administrator of the Estate of Suzanne Kusulas, Defendants.

PATRICIA HARGETT, as Administrator of the Estate of Suzanne Kusulas,as Assignee of the Rights of Diane Saco, Plaintiff, v. GOVERNMENT EMPLOYEES INSURANCE COMPANY, Defendant.

12-CV-5633 (NGG) (ST)

15-CV-634 (NGG) (ST)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

December 10, 2018

MEMORANDUM & ORDER

NICHOLAS G. GARAUFIS, United States District Judge.

The motion before the court is the latest volley in a long-running dispute between the Government Employees Insurance Company ("GEICO") and Suzanne Kusulas¹ stemming from a February 23, 2006, car accident between Kusulas and Diane Saco. A brief summary of theprevious actions in this case is necessary before proceeding further: In 2007, Kusulas instituted an action against Saco in Kings County Supreme Court (the "Underlying Action"). In 2010, the state court granted Kusulas's motion for summary judgment as to liability, holding that Saco was fully liable for Kusulas's injuries resulting from the accident; after a damages trial, a jury awarded Kusulas $3,369,066.75 in compensatory damages. Saco, who held two insurance policies issued by GEICO, demanded that GEICO pay the full jury award. GEICO then sought a declaratory judgment from this court that (1) GEICO was not required to make any payments in excess of the limits on the GEICO policies (the "Policies") held by Saco; (2) the Policies do not require payment for Saco's personal attorney's fees; and (3) GEICO is not subject to any claim for bad faith in relation to its obligations to Saco. In her answer, Kusulas—to whom Saco assigned her rights against GEICO—included two counterclaims: that (1) GEICO breached its contract in failing to tender to Saco the full policy limits plus prejudgment interest on that amount; and (2) GEICO acted in bad faith towards Saco in its failure to settle the Underlying Action. Last year, following cross-motions for summary judgment, this court concluded that GEICO was entitled to summary judgment as to its liability for prejudgment interest in excess of the policy limits, but denied GEICO's motion for summary judgment as to whether it discharged its duty of good faith to Saco in the Underlying Action. (See Mar. 30, 2017, Mem. & Order ("2017 M&O") (Dkt. 133 in No. 12-CV-5633; Dkt. 44 in No. 15-CV-634).)²

Before the court is a motion in limine (also described as a motion for partial summary judgment) by GEICO to limit damages in the forthcoming trial. (GEICO Mot. for Partial Summ. J. ("Mot.") (Dkt. 148).) GEICO argues that its obligation to make monthly payments to Kusulas for future pain and suffering and future medical expenses terminated upon her death, thuslimiting the future-damages portion of the estate's judgment to $300,848.07. (Mem. in Supp. of Mot. ("Mem.") (Dkt. 148-16) at 4-8.) Patricia Hargett, in her capacity as administrator of Kusulas's estate (the "Estate"), opposes this motion. (Estate Mem. in Opp'n to Mot. ("Estate Opp'n") (Dkt. 149).) For the following reasons, the court DENIES GEICO's motion to limit damages.

I. BACKGROUND

A. Facts

A recounting of the events leading to the court's involvement in this matter is set forth in the court's prior opinion in this case. (See 2017 M&O at 2-4.) The following statement of facts, which restates and supplements the facts of the case as necessary to decide the motion before the court, is largely taken from the parties' Local Rule 56.1 statements and deposition testimony, with the evidence "constru[ed] . . . in the light most favorable to the non-moving party." Wandering Dago, Inc. v. Destito, 879 F.3d 20, 30 (2d Cir. 2018) (internal quotation marks and citation omitted). (See GEICO Supp. Rule 56.1 Statement of Material Facts ("GEICO 56.1") (Dkt. 148-15); Estate Resp. to GEICO 56.1 ("Estate 56.1") (Dkt. 149-1).) The parties agree on the following facts, except where otherwise noted.

On March 5, 2012, a jury in the Underlying Action considering only the issue of damages awarded Kusulas a verdict of $3,369,066.75 against Saco. (GEICO 56.1 ¶ 1.) On May 11, 2012, GEICO paid Kusulas $1,283,500.00. (Id. ¶ 2.) Following further proceedings, the state court entered judgment for Kusulas in the amount of $2,857,900.55 on October 10, 2014 (the "Underlying Judgment"). (Id. ¶ 3.) Significantly for the motions considered here, the Underlying Judgment awarded a total of $1,204.497.75 based on future damages to Kusulas: $41,364.12 per year, plus four-percent annual interest, for future pain and suffering, "extendingfor the shorter of 10 years or the life of Kusulas; and $18,489.84 per year, plus four-percent annual interest, for future medical expenses, "extending for the shorter of" 36 years or the life of Kusulas. (Id. ¶¶ 5-6; see J. in Underlying Action ("Underlying J.") (Dkt. 148-10) at 4-5.) The damages were made retroactive to the verdict date of March 5, 2012. (GEICO 56.1 ¶ 4.) The Underlying Judgment also directed Saco "to offer and purchase and guarantee payment to [Kusulas] of an annuity contract" for these annual payments. (Underlying J. at 4; see GEICO 56.1 ¶ 7.) Saco did not make any of these periodic payments, nor did she purchase an annuity contract to satisfy the payments. (See GEICO Aug. 1, 2017, Letter (Dkt. 141) at 1.) Kusulas, meanwhile, did not seek to have the judgment modified to require a lump-sum payment for future damages. (See id. at 1-2.)

On December 23, 2014, Saco assigned her rights against GEICO to Kusulas in exchange for a promise that Kusulas would not execute her judgment against Saco or any of Saco's personal assets. (GEICO 56.1 ¶ 8; see Estate 56.1 ¶ 8.) On October 17, 2016, Kusulas died. (GEICO 56.1 ¶ 9.) Hargett was appointed administrator of the Estate on May 5, 2017. (Id. ¶ 10.) Hargett died on October 2, 2018, and the Estate has not yet named a new administrator. (See Nov. 29, 2018, Letter (Dkt. 155).)

B. Procedural History

On March 31, 2017, this court denied GEICO's motion for summary judgment as to whether it discharged its duty of good faith to Saco in the Underlying Action. (2017 M&O.) On August 1, 2017, GEICO requested a pre-motion conference to address the issue of whether Kusuas's death limits the amount of future damages she can collect at trial. (GEICO Aug. 1, 2017, Letter.) The court granted GEICO leave to move for an order resolving this question(Aug. 9, 2017, Min. Entry) and the motion was fully briefed on November 20, 2017 (see Mot.; Mem.; Estate Opp'n; GEICO Reply (Dkt. 150)).³

II. SUMMARY OF RELEVANT LAW

Before proceeding to the legal questions underpinning GEICO's motion, the court provides a brief overview of legal principles relevant to this action, namely, Article 50-B of the New York Civil Practice Law and Rules ("CPLR") and the rules governing bad-faith actions and the assignment of claims.

A. Article 50-B

In 1985, the New York State Legislature confronted what it believed to be a significant problem. Under the law at the time, all tort damages—including future damages—were payable immediately in a lump sum of the present value of the award. See Desiderio v. Ochs, 791 N.E.2d 941, 943 (N.Y. 2003). The State Legislature and Governor Mario Cuomo expressed their concern at an "alarming" increase in insurance costs—costs which they claimed were "ultimately borne by the consumer." Governor's Program Bill Mem., reprinted in N.Y. Bill Jacket, L. 1985, ch. 294, at 7. The State Legislature attempted to solve these problems through the enactment of CPLR Articles 50-A (in 1985) and 50-B (in 1986), which it hoped would "moderate the cost of [insurance] premiums, while assuring adequate and fair compensation for injured persons."⁴ See Alisandrelli v. Kenwood, 724 F. Supp. 235, 238 (S.D.N.Y. 1989). For the purposes of this case, only the substance of Article 50-B is relevant; however, because the two laws are "cognate[s]" of each other, the court considers the legislative and interpretive history of both articles in tandem.Desiderio, 791 N.E.2d at 951 (Read, J., concurring); see Stinton v. Robin's Wood, Inc., 842 N.Y.S.2d 477, 481 (App. Div. 2007); see also 10 Jack Weinstein, Harold B. Kom & Arthur R. Miller, New York Civil Practice: CPLR ¶ 5041.00, at 50-B-6 (2d ed. 2015) ("[T]he provision of the pre-2003 amendments to Article 50-A are substantively identical to those in Article 50-B . . . .").⁵

The "dramatic" changes enacted by Article 50-B may seem "technical and complicated," but the law's "basic operation is easily stated." Rohring v. City of Niagara Falls, 638 N.E.2d 62, 63 (N.Y. 1994); 10 Weinstein, Korn & Miller, supra, ¶ 5041.01, at 50-B-6. While past damages are still paid in a lump sum, the award of future damages, "which are awarded by the jury without reduction to present value," is now bifurcated: "The first $250,000 in future damages is paid as a lump sum. The remainder, after subtraction of attorney's fees and other adjustments, is to be paid in periodic installments." Rohring, 638 N.E.2d at 63 (citations omitted); see CPLR 5041(b), (e).⁶ In order to ensure the payment of future damages above $250,000, "the court must enter a judgment for the amount of the present value of an annuity contract that will provide for the payment of the remaining amounts of future damages." 10 Weinstein, Korn & Miller, supra, ¶ 5041.02, at 50-B-7; see CPLR 5041(e). Courts of New York have interpreted this provision as requiring the defendant to purchase an annuity contract, see Desiderio, 791 N.E.2d at 943; Rohring, 638 N.E.2d at 63, though Article 50-B is silent as to what happens if thedefendant fails to do so.⁷ Additionally, in a "substantial change in the law of damages," a defendant's obligation to pay future non-economic damages terminates upon the plaintiff's death. 10 Weinstein, Korn & Miller, supra, ¶ 5045.00, at 50-B-28; see CPLR 5045(a). The structured-judgment provisions of Article 50-B do not apply to future-damages awards of $250,000...