Metropolitan Property and Liability Ins. Co. v. Cassidy

• Decision Date: 04 March 1985
• Parties: METROPOLITAN PROPERTY AND LIABILITY INSURANCE COMPANY, as subrogee of Helen Buxbaum, Plaintiff, v. William P. CASSIDY and William M. Cassidy, Defendants.
• Court: New York Supreme Court

Page 843

486 N.Y.S.2d 843

127 Misc.2d 641

METROPOLITAN PROPERTY AND LIABILITY INSURANCE COMPANY, as subrogee of Helen Buxbaum, Plaintiff, v. William P. CASSIDY and William M. Cassidy, Defendants.

Supreme Court, Dutchess County.

March 4, 1985.

Rivkin, Leff, Sherman & Radler, Garden City, for plaintiff.

Owen & Grogan, Goshen, for defendants.

GERARD E. DELANEY, Justice.

This matter involves the determination of the rights of subrogation of an insurance company upon its payment of funds to its insured under "Supplementary Uninsured Motorist Insurance" (commonly known as "Underinsurance") under Insurance Law § 167(2)(a).

On August 5, 1980, Helen Buxbaum, while operating a motor vehicle owned by her husband, Jeffrey Buxbaum, was involved in a collision with a vehicle owned by William P. Cassidy and operated by William M. Cassidy on a public roadway in East Fishkill, New York. Helen Buxbaum was injured.

At the time of the accident, the defendant, William P. Cassidy, was insured under a contract of automobile liability insurance with the Allstate Insurance Company (hereinafter Allstate) with limits of liability for bodily injury of $50,000.00/$100,000.00. Helen Buxbaum was insured through her husband, Jeffrey's policy with the Metropolitan Property and Liability Insurance Company (hereinafter Metro), which policy contained an endorsement for Supplementary Uninsured Motorist Insurance with a limited liability of $100,000.00 pursuant to Insurance Law § 167(2)(a). Such additional coverage is commonly known as "Underinsurance" and, indeed, the policy issued by Metro to Mr. Buxbaum included as an amendment (Subdivision 2b) the following definition:

"The term 'underinsured motor vehicle' means a motor vehicle with respect to the ownership, maintenance or use of which the sum of the limits of the liability under all bodily injury liability bonds and insurance policies applicable at the time of the accident is less than the applicable limits of liability under this insurance."

In a separate action, the Buxbaums brought suit against the Cassidys in Dutchess County Supreme Court under Index Number 35 52/81. The Honorable Justice Joseph Jiudice granted plaintiffs' motion for summary judgment by order dated May 3, 1982, stating "that this motion, being unopposed, is granted on the issue of liability only". The damages issue was severed, later to have been determined by a jury.

Prior to any assessment of damages, defendants' insurer, Allstate, offered to settle for the amount of $50,000.00, the limits of its policy and plaintiff granted a "conditional" release to the Cassidys on July 11, 1983, which stated in substance that for the consideration of $50,000.00 the Buxbaums, the releasors, their "heirs, executors, administrators, successors and assigns" released William P. Cassidy and William M. Cassidy from all actions, causes of actions, suits and claims which arose out of the August 5, 1980, automobile accident. Such release further stated "this release is conditional and limited to the cause of action for non-economic loss of Helen Buxbaum in the sum of $50,000.00 and 00/100 ($50,000.00), the releasee's limit of available liability insurance. This release in no way impairs the rights of Helen Buxbaum or Metropolitan Property and Liability Insurance Company, as her subrogee, for any element of her damages above the sum of $50,000.00 and 00/100 ($50,000.00) paid to her by the releasee."

Helen Buxbaum then filed a claim against Metro on her own underinsured motorist supplemental coverage. Inasmuch as Metro was facing a $50,000.00 maximum payment under the terms of its policy and Insurance Law § 167(2)(a) ($100,000.00 supplementary uninsured motorist insurance less the $50,000.00 settlement with Allstate) Metro negotiated a settlement with Helen Buxbaum for $40,000.00 in return for which Helen Buxbaum executed a release and trust agreement in favor of Metro dated July 11 and July 5, 1983. It is noted that such actions between plaintiff subrogor, Helen Buxbaum, and subrogee, Metro, occurred on or before the actual release date of Helen Buxbaum to the Cassidys.

On or about September 19, 1983, Metro commenced suit as subrogee of Helen Buxbaum against William P. Cassidy and William M. Cassidy to recover the $40,000.00 payment to Helen Buxbaum under her "underinsurance" coverage with Metro. The instant motion is one for summary judgment brought by Metro inasmuch as it is claimed that the prior order of Justice Jiudice determined the issue of liability against defendants and there can, therefore, be no meritorious defense to this action.

"Underinsurance" is alluded to in Insurance Law § 167(2)(a) by the terminology "supplementary uninsured motorist insurance". See Gull v. General Accident, 121 Misc.2d 721, 724-725, 469 N.Y.S.2d 1004 (1983); Garry v. Worldwide Underwriters Insurance Company, 120 Misc.2d 91, 465 N.Y.S.2d 483 (1983). "If a motorist is involved in an accident with an automobile carrying less bodily injury liability insurance coverage than is carried on his automobile, he has been involved in an accident with an underinsured motorist". Gull v. General Accident, supra, p. 725, 469 N.Y.S.2d 1004. In New York State, a motorist is either "insured" or "uninsured". Insurance Law § 5202(A)(3), (4).

Under the circumstances, plaintiff, Metro, as subrogee of Helen Buxbaum is a proper party in interest for purposes of bringing this action. Cf. CPLR § 1004. Subrogation is not a transfer of a cause of action. Cf. Liberty Mutual Fire Insurance Company v. Perricone, 54 A.D.2d 975, 388 N.Y.S.2d 670 (2nd Dept.1976).

By virtue of the previous settlement between the individual plaintiffs and the defendants, Cassidy, the $50,000.00 liability limits of the Cassidy Allstate policy was exhausted, which served as the condition precedent to the obligation of the insurer, Metro, to pay under the supplementary uninsured motorist insurance coverage issued to the Buxbaums [see Insurance Law § 167(2)(a) ] assuming that liability was established, and what turned out to be a settlement between Metro and Helen Buxbaum was reasonable. Otherwise, such monies might be considered voluntarily paid by Metro, and such payments would not be recoverable. Cf. Codling v. Paglia, 38 A.D.2d 154, 161, 327 N.Y.S.2d 978 (1972), affd. 32 N.Y.2d 330, 345 N.Y.S.2d 461, 298 N.E.2d 622 (1973). Even had Helen Buxbaum settled for a lesser amount than the full amount of liability insurance carried by the defendants, Cassidy, it would not be determinative of the amount of damages actually sustained by Helen Buxbaum. Settlements are often made for reasons which have little to do with the amount of damages sustained by the injured party. Cf. Matter of Colonial Penn v. Salti, 84 A.D.2d 350, 354, 446 N.Y.S.2d 77 (1st Dept.1982).

"Upon payment of an existing debt by a party who is secondarily liable, the paying party is subrogated to the position of his principal and may proceed against the party primarily responsible. This right arises upon payment to the subrogor and, in general, may be created by contract or by operation of law. As an equitable doctrine in the context of insurance, an insurance carrier, upon payment of a loss, becomes subrogated to the rights and remedies of its assured to proceed against a party primarily liable without the necessity of any formal assignment or stipulation * * * (t)he right arises by operation of law out of the underlying relationship between the parties." New York Board v. Trans Urban, 91 A.D.2d 115, 119, 458 N.Y.S.2d 216 (1st Dept.1983). Compare Niemann v. Travelers Insurance Company, 368 So.2d 1003 (La.1979) and Boudreaux v. Government Employees Ins. Co., 454 So.2d 135 (La.App. 1st Circuit 1984) withSuhor v. Gusse, 388 So.2d 755, 757 n. 5 (La.1980).

As indicated above, the initial action by the plaintiffs, Buxbaum, against the defendants, Cassidy, resulted in a "default" judgment only on the issue of liability. Defendants argue that the prior motion for summary judgment was not opposed and was, therefore, not a determination on the merits but rather, a judgment decision to waive the right to contest the liability "in that case only, to shorten the trial, defend the case on damages and the failure of the plaintiff, Helen Buxbaum, to mitigate those damages by the failure to properly use her seat belt". However, it is now evident that New York has adopted the full and fair opportunity test in applying the doctrine of collateral estoppel. Zdanok v. Glidden Company, 327 F.2d 944, 956 (2nd Circuit), cert. denied 377 U.S. 934, 84 S.Ct. 1338, 12 L.Ed.2d 298 (1964). "New York law has now reached the point where there are but two necessary requirements for the invocation of the doctrine of collateral estoppel. There must be identity of issue which has necessarily been decided in the prior action and is decisive of the present action, and, second, there must have been a full and fair opportunity to contest the decision now said to be controlling." Shaid v. Consolidated Edison Co., 95 A.D.2d 610, 613-614, 467 N.Y.S.2d 843 (2nd Dept.1983). Collateral estoppel is "a component of the broader doctrine of res judicata which holds that, as to the parties in a litigation and those in privity with them, a judgment on the merits by a court of competent jurisdiction is conclusive of the issues of fact and questions of law necessarily decided therein in any subsequent action" and "[as] a corollary to the doctrine of res judicata, [collateral estoppel] permits in certain situations the determination of an issue of fact or...