Levantino v. Insurance Co. of North America

• Decision Date: 09 February 1979
• Parties: Patrick J. LEVANTINO, as receiver of the rights and assets of Stanton Brannin, Plaintiff, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant.
• Court: New York Supreme Court

Page 995

422 N.Y.S.2d 995

102 Misc.2d 77

Patrick J. LEVANTINO, as receiver of the rights and assets of Stanton Brannin, Plaintiff, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant.

Supreme Court, Special Term, Suffolk County, Part I.

Feb. 9, 1979.

Speno, Goldberg, Moore, Margules & Corcoran, Mineola, for plaintiff.

Lester, Schwab, Katz & Dwyer, New York City, for defendant.

LEON D. LAZER, Justice.

On December 19, 1967, Charles Hinton was seriously injured when the car which he was driving was struck by an automobile operated by Stanton Brannin. Brannin's liability for Hinton's grave injuries was so apparent that the Insurance Company of North America ("INA") which covered Brannin for liability to the extent of $50,000.00 on the accident established a reserve of $45,000.00 for the case. On July 30, 1969, during the taking of depositions in the lawsuit that followed, Hinton's lawyer declared for the record that his client would accept INA's policy limit of $50,000.00 in settlement of the action but the carrier made no effort to settle and Hinton obtained a summary judgment in his favor on the liability issue on October 24, 1969. When the damage issue was reached for trial on December 1, 1970, INA for the first time offered its policy limits in settlement of the action but Hinton responded that he would not accept the offer until he was satisfied that no additional insurance coverage was available to Brannin under a family automobile liability policy which INA had issued to the latter's father. Although in actuality the father's policy did not provide additional coverage for Brannin, INA made no effort to have it produced and the ensuing verdict in favor of Hinton resulted in the entry of a judgment in the amount of $165,400.48 against Brannin on December 18, 1970. INA then paid Hinton its policy limit of $50,000.00 leaving Brannin with an excess judgment against him for the difference.

Pursuing recovery of the excess judgment, Hinton obtained the appointment of the instant plaintiff as receiver of Brannin's assets. In the instant action, the receiver seeks to recover Brannin's damages for INA's alleged bad faith failure to settle Hinton's case within the policy limits. At the trial, evidence adduced on the issue of Brannin's damages revealed that when the accident occurred he was barely solvent earning $150.00 per week and that his meager assets were, and always have been, insufficient to satisfy the excess judgment. The only significant change in Brannin's condition in the seven and one-half years which elapsed between the entry of the excess judgment and the current trial was his acquisition of an engineering degree.

During the course of the trial both the court and INA's attorney were under the impression that Brannin had not filed a petition to discharge the excess judgment in bankruptcy. Nevertheless, INA argued that it should be permitted to raise the issue of a potential bankruptcy discharge before the jury as relevant to Brannin's claimed damages. This contention was regarded by the court and the plaintiff as an effort to pose a mitigation question to the jury even though mitigation of damages had not been pleaded as an affirmative defense by INA (see CPLR 3018(b); Davis v. Davis, 49 A.D.2d 1024, 374 N.Y.S.2d 482). After In camera hearings on the issue, INA's attorney was forbidden to question Brannin on the subject of bankruptcy or to mention it in summation. Ultimately, the jury was charged that if it found INA guilty of bad faith, it could consider Brannin's entire economic situation, past, present and future, in evaluating his damages. The jury rendered a verdict in favor of the receiver against INA in the sum of $176,217.30, representing the amount of the original excess judgment plus accrued interest.

The Current Motion

INA has now moved to set aside the verdict on the ground that it is against the weight of the evidence and excessive, or in the alternative for judgment or for a new trial pursuant to CPLR 5015. Since INA's attorney's oral CPLR 4404 motion similar to the first branch of the current motion was denied immediately upon rendition of the verdict, only the alternative requests for relief will be considered here.

INA argues that it recently discovered that Brannin had filed a petition in bankruptcy in the United States District Court for the Western District of New York on January 21, 1977, more than a year before the instant trial. Conceding that the petition was a matter of public record from the date of its filing in the Western District (where Brannin resided), INA contends it is entitled to judgment as a matter of law because of the filing or, in the alternative, to a new trial upon the grounds of newly discovered evidence and suppression of evidence, fraud and misrepresentation on the part of plaintiff's attorneys. INA's attorneys assert that they assumed and they are "confident that the court assumed, that the answer to the (bankruptcy) question would have been in the negative. Plaintiff's counsel knew that the answer would have been in the negative (sic), yet they did not reveal that to the court." Brannin's bankruptcy schedule lists assets of $1,185.00 and debts of only $411.00 owed in 1976 taxes and the $165,400.48 balance due on the judgment. It is not claimed that Brannin was ever discharged in bankruptcy.

INA's Right to Relief

To merit relief on the ground of newly discovered evidence (CPLR 5015(a)(2)), the movant must show that the evidence is material, that it is not merely cumulative, that it is not of such a nature as would merely impeach the credibility of an adverse witness, that it would probably change the results if a new trial were granted and that the evidence has been discovered since the trial and could not have been discovered earlier with due diligence (Mully v. Drayn, 51 A.D.2d 660, 378 N.Y.S.2d 187). It is essential to a CPLR 5015(a)(2) motion to establish that the evidence was unavailable to the moving party in time to move for a new trial under CPLR 4404 (5 Weinstein-Korn-Miller, N.Y.Civ.Prac. P 5015.07). Evidence which is a matter of public record is generally not deemed new evidence which could not have been discovered with due diligence (Daly v. State, 262 App.Div. 661, 30 N.Y.S.2d 717, aff'd, 288 N.Y. 551, 42 N.E.2d 14; Mully v. Drayn, supra; Seventh Ave. Delicatessen v. Manhattan Prov. Co., Sup., 146 N.Y.S.2d 25, aff'd, 1 A.D.2d 1037, 153 N.Y.S.2d 572; Collins v. Central Trust Company, 226 App.Div. 486, 235 N.Y.S. 511) and relief is not available merely because a party failed adequately to prepare for trial (Grossbaum v. Dil-Hill Realty Corp., 58 A.D.2d 593, 395 N.Y.S.2d 246). Here, the failure of INA's investigative service to ascertain the existence of the bankruptcy petition does not constitute a basis for relief in the form of a new trial. Since the alleged fraud and misrepresentation related to the concealment of the bankruptcy petition, evidence which was available to INA, the allegation of fraud in the procurement of the judgment also is insufficient (see Central Funding Co. v. Kimler, 54 A.D.2d 748, 387 N.Y.S.2d 892; see also 755 Seventh Avenue Corporation v. Carroll, 266 N.Y. 157, 194 N.E. 69). However, the grounds enumerated in CPLR 5015, subd. (a) were not intended to limit the traditional power of a court to grant relief from an order or judgment in the interests of justice and the exercise of its discretion (Government Emp. Ins. Co. v. Employers Com., etc., 62 A.D.2d 123, 404 N.Y.S.2d 652), and INA further asserts that the very existence of the bankruptcy petition entitled it to judgment dismissing the receiver's complaint as a matter of law. Whether INA's arguments are sufficient to compel an exercise of the court's traditional power depends to a great degree upon the materiality of the evidentiary matter withheld to the issue determined. That materiality cannot be evaluated without examination of the rules by which damages must be ascertained in actions based upon the asserted bad faith of insurance carriers.

The Payment Rule

The earlier and now generally discredited view of damages in bad faith cases was that no damage existed unless the insured has paid or could pay the excess judgment or a portion of it, on the theory that actual pecuniary loss must be shown (see State Auto. Mut. Ins. Co. of Columbus, Ohio v. York, 104 F.2d 730 (4th Cir. 1939), cert. den., 308 U.S. 591, 60 S.Ct. 120, 84 L.Ed. 495, (but see Lee v. Nationwide Mutual Insurance Co., 286 F.2d 295 (4th Cir. 1961)); Smith v. Transit Casualty Co., 281 F.Supp. 661 (E.D.Tex.1968) (applying Texas Law), aff'd, 410 F.2d 210 (5th Cir. 1969) (rule abandoned in Texas in Hernandez v. Great American Ins. Co. of N. Y., 464 S.W.2d 91 (Tex.)); Dumas v. Hartford Acc. & Indemn. Co., 92 N.H. 140, 26 A.2d 361, overruled in Dumas v. State Farm Mut. Auto. Ins. Co., 111 N.H. 43, 274 A.2d 781). The payment rule has been criticized upon the grounds that the fullness of an insured's purse is a poor measure of an insurer's duty (Wolfberg v. Prudence Mutual Cas. Co. of Chicago, 98 Ill.App.2d 190, 240 N.E.2d 176) and that it provides a windfall to an insurer fortunate enough to have insured an insolvent and motivation for an insurer to be less responsive to its trust duties to such an insured (Brown v. Guarantee Insurance Co., 155 Cal.App.2d 679, 319 P.2d 69; Jenkins v. General Acc. Fire & Life Assur. Corp., 349 Mass. 699, 212 N.E.2d 464). According to the critics, damages in bad faith actions are analogous to those in personal injury actions where the plaintiff need only have Incurred expenses and need not show that he has Paid them (Jenkins v. General Acc. Fire & Life Assur. Corp., supra; see Note, 60 Mich.L.Rev. 517 (1962)).

The Judgment Rule

In most jurisdictions it is not necessary for the insured to allege that he has paid or can pay the excess judgment (see, e. g., Lee v. Nationwide Mutual Insurance Co., supra; Wessing v. American Indemn. Co. of Galveston, Tex., 127 F.Supp....