N.Y.S. Workers' Comp. Bd. v. Murray Bresky Consultants, LTD
| Decision Date | 22 November 2017 |
| Citation | 65 N.Y.S.3d 590,155 A.D.3d 1408 |
| Parties | In the Matter of NEW YORK STATE WORKERS' COMPENSATION BOARD, as Administrator of the Workers' Compensation Law and Attendant Regulations and as Successor in Interest to the Manufacturing Self Insurance Trust Fund, Respondent, v. MURRAY BRESKY CONSULTANTS, LTD, Appellant. |
| Court | New York Supreme Court — Appellate Division |
Adams Bell Adams, PC, Rochester (Daniel P. Adams of counsel), for appellant.
Hinman Straub PC, Albany (David T. Luntz of counsel), for respondent.
Before: EGAN JR., J.P., DEVINE, CLARK, MULVEY and RUMSEY, JJ.
Appeal from an order of the Supreme Court (McNally Jr., J.), entered September 7, 2016 in Albany County, which, among other things, granted petitioner's application, in a proceeding pursuant to CPLR article 77, for judicial apportionment of settlement proceeds.
The Manufacturing Self Insurance Trust Fund (hereinafter the trust) is a former group self-insured trust that was formed in 1997 to allow its members—employers subject to the Workers' Compensation Law—to self-insure against the payment of workers' compensation claims (see Workers' Compensation Law § 50 [3–a] ; 12 NYCRR 317.2 [i]; 317.3). In 2007, petitioner determined that the trust was significantly underfunded and terminated its status as a group self-insurer, thereby assuming administration and final distribution of the trust's assets and liabilities (see 12 NYCRR 317.20 ). Respondent was a member of the trust from 2001 until it was terminated. In January 2008, petitioner commenced an action to recover the trust's deficit against employers who had been members of the trust, including respondent, alleging that each was jointly and severally liable for the deficit (see State Finance Law § 18 ). Thereafter, respondent entered into a settlement agreement to resolve petitioner's claim against it, pursuant to which respondent paid its pro rata share of the deficit—approximately $1.2 million —and petitioner and respondent each released the other from further claims associated with the trust.1
Having reserved such right under the settlement agreement, respondent then commenced an action against certain former trustees and administrators to recoup the amount it paid petitioner to settle its portion of the trust deficit.2 Petitioner thereafter commenced an action for damages against many of the same defendants and discovered that certain of the defendants common to both actions were covered by an eroding $1,000,000 liability errors and omissions insurance policy, pursuant to which any defense costs incurred on behalf of an insured reduced the coverage available to pay any claims. In light of the fact that continued litigation would deplete the coverage available to satisfy their respective claims, the parties entered into a memorandum of understanding by which they agreed, among other things, to cooperate in settlement of their actions and that, if a mutually agreeable settlement was reached, a proceeding would be commenced, pursuant to CPLR article 77 or a similar mechanism, for judicial approval of any settlement agreements and allocation of the settlement proceeds. Ultimately, the parties jointly recovered approximately $945,000 in settlement of both actions.
Petitioner then commenced this proceeding pursuant to CPLR article 77, requesting, among other things, that Supreme Court approve the subject settlement agreements and allocate all settlement proceeds to petitioner to reduce the trust deficit. Notice of the proceeding was sent to all former members of the trust, after which respondent objected to petitioner's application, arguing, among other things, that petitioner failed to provide a verified account as required by CPLR 7702 and asserted a counterclaim alleging that it was entitled to, among other things, all recovered settlement proceeds. As relevant here, Supreme Court approved the subject settlement agreements, awarded petitioner all jointly-recovered settlement proceeds and dismissed respondent's objections and counterclaim. Respondent now appeals.
Allocation of the available settlement proceeds turns on the interpretation of the two applicable agreements—the settlement agreement and the memorandum of understanding—in accordance with well-known principles of contractual interpretation. ( Beal Sav. Bank v. Sommer, 8 N.Y.3d 318, 324–325, 834 N.Y.S.2d 44, 865 N.E.2d 1210 [2007] [internal quotation marks and citations omitted] ).
The provisions of the settlement agreement and the memorandum of understanding relevant to the instant dispute regarding allocation of the jointly-recovered settlement proceeds are clear and unambiguous. In that regard, the settlement agreement: (1) contains respondent's express reservation of its claims against any former trustees, the trust's former administrator and any professionals engaged by the former trustees or former administrator; and (2) provides that any damages recovered by petitioner from third parties were to be applied first to satisfy the trust's obligations and that any remaining surplus would then be allocated to the settling trust members on a pro rata basis. In relevant part, the memorandum of understanding required judicial allocation of all proceeds received upon settlement of the parties' respective actions against the former trustees, administrator and professionals by the court in the CPLR article 77 proceeding to be commenced upon settlement.
Notably, it is apparent from the plain language of the memorandum of understanding that the parties intended to maximize the insurance proceeds available for settlement of their respective actions, but did not agree on how the settlement proceeds were to be allocated when they executed that agreement. The parties agreed that respondent had the right to seek proposed allocation of the jointly-recovered...
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