Maple Med. LLP v. Scott

• Decision Date: 07 July 2019
• Docket Number: 51103/2019
• Citation: 105 N.Y.S.3d 823,64 Misc.3d 909
• Parties: MAPLE MEDICAL LLP, Plaintiff, v. Joseph SCOTT, D.O. and Medical Liability Mutual Insurance Company, Defendants.
• Court: New York Supreme Court

64 Misc.3d 909

105 N.Y.S.3d 823

MAPLE MEDICAL LLP, Plaintiff,

v.Joseph SCOTT, D.O. and Medical Liability Mutual Insurance Company, Defendants.

51103/2019

Supreme Court, Westchester County, New York.

Decided on July 7, 2019

Finger & Finger, Attorney for plaintiff, 158 Grand Street, White Plains, NY 10601

Nolan Heller Kauffman, LLP, Attorneys for defendants, 80 State Street, 11th Floor, Albany NY 12207

Rivkan Rakler LLP, Attorney for Defendants 926 Rxr Plaza Uniondale NY 1156

Lawrence H. Ecker, J. Motion of defendant Joseph Scott, D.O.¹ (mot sequence No. 1), made pursuant to CPLR 3212, for an order granting summary judgment on the counterclaim for a declaratory judgment against plaintiff Maple Medical LLP, and cross motion of plaintiff (mot sequence No. 2), made pursuant to CPLR 3212, for an order granting summary judgment on the complaint as against Scott.

The court determines as follows:

This lawsuit is one of six litigations² before this court that involve plaintiff, as the employer partnership, and individual physicians, as plaintiff's employees. The parties in the separate actions are all represented by the same law firms.

At the heart of all of the actions is the same single legal issue: whether the physician employee or the employer partnership is entitled to a distribution payment made by Medical Liability Mutual Insurance Company ("MLMIC").³ MLMIC is a medical malpractice insurance company that issued policies covering the employee physicians that were paid for by plaintiff as their employer. The parties in all six litigations seek, in essence, a declaratory judgment resolving this one central issue. As such, the court's finding herein will govern and resolve the pending motions in the other five actions.

Plaintiff is a limited liability partnership that operates a multispecialty medical practice in White Plains NY Pursuant to the employment agreement between Scott as employee and plaintiff as employer, Scott performed medical services for plaintiff. As part of Scott's employment compensation package, plaintiff paid the malpractice insurance premiums for coverage for Scott. Plaintiff was designated by Scott to serve as his agent for the purpose of administering the policy, the coverages, the reporting requirements, and the payment of the premium.

The policy insuring Scott was issued by MLMIC. At the time of that the insurance policy was issued, MLMIC was a mutual insurance company owned by its policyholders, one of whom was Scott.

Thereafter, MLMIC negotiated a sale of its business to a subsidiary of Berkshire-Hathaway, which formed a stock company, and paid MLMIC $2.5 Billion for the MLMIC assets. This demutualization plan ("the Plan") was approved by the New York State Department of Financial Services pursuant to Insurance Law § 7307. The Plan includes the methodology for the pro rata distribution of the proceeds of the sale to parties in interest. As for Scott's policy, the amount for the distribution allotted to the policy is $128,148 ("the Payment"). The question presented in this action is whether Scott or plaintiff is entitled to the Payment. Based upon the disagreement of the parties, the Payment is in escrow pending resolution of the dispute.

The complaint asserts four causes of action: declaratory judgment; breach of contract-covenant of good faith and fair dealing; Insurance Law § 7307 ; and unjust enrichment. The answer includes a counterclaim for declaratory judgment.

Each of the parties now moves for summary judgment on its claims, in essence seeking a declaration of which party is entitled to the Payment. The court will accept all papers submitted in this action for its review, notwithstanding Scott's argument that plaintiff did not follow proper procedure. There is no prejudice demonstrated, and this court strongly believes in the resolution of disputes upon the merits.

The court finds that the recent decision of the Appellate Division, First Department in Matter of Schaffer, Schonholz & Drossman, LLP v. Title, 171 A.D.3d 465, 96 N.Y.S.3d 526 ("the Matter of Schaffer "), decided April 4, 2019, is dispositive of the issues raised in this matter. Applying the principles set forth in the Matter of Scaffer decision to the facts presented, the court holds that plaintiff is therefore entitled to the distribution of the sales proceeds of MLMIC.

In the Matter of Schaffer , the parties, pursuant to CPLR 3222(b)(2), filed directly with the Appellate Court a statement of stipulated facts, together with their briefs. The statement of facts includes a section entitled "Controversy Presented ... Issue a declaratory judgment determining whether SS & D or Dr. Title is entitled to the disputed amount..."

A review of the facts in the Matter of Schaffer reveals that the litigation, like this action, involved a physician named as insured on a MLMIC policy. The doctor's employer, similar to plaintiff, purchased the policy and paid all of the premiums and costs related to the policy. Like Scott, the doctor acknowledged that she did not bargain for the benefit of the demutualization proceeds. Under the facts, the court held that:

"Awarding [the doctor] the cash proceeds of MLMIC's demutualization would result in her unjust enrichment (citations omitted)."

Of note, Scott does not try to distinguish the facts in this case from the facts in the Matter of Schaffer . The parties here serve in the same roles as the parties in Matter of Schaffer , and, in fact, MLMIL is the relevant insurance company in both actions. Like in the Matter of Schaffer , the named employer here purchased and paid all of the premiums on the medical professional insurance policy covering the physician who now seeks the distribution payment based on the policy. In addition Scott, like the doctor in Matter of Schaffer , does not claim to have bargained for the benefit of the Payment. Hence, the issues before the Court in the Matter of Schaffer are identical to the issues before this court, namely whether the employee physician, whose MLMIC premiums were paid by the employer, is entitled to the pro rata distribution of the stock sale proceeds.

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