Newsom v. Republic Financial Services, Inc.

• Decision Date: 19 December 1985
• Citation: 130 Misc.2d 780,497 N.Y.S.2d 830
• Parties: Deborah NEWSOM, Plaintiff, v. REPUBLIC FINANCIAL SERVICES, INC., Republic Insurance Company, Republic-Vanguard Life Insurance Company, Vanguard Insurance Company, Blue Ridge Insurance Company, Vanguard Underwriters Insurance Company and Republic Underwriters Insurance Company, Defendants.
• Court: New York Supreme Court

Page 830

497 N.Y.S.2d 830

130 Misc.2d 780

Deborah NEWSOM, Plaintiff, v. REPUBLIC FINANCIAL SERVICES, INC., Republic Insurance Company, Republic-Vanguard Life Insurance Company, Vanguard Insurance Company, Blue Ridge Insurance Company, Vanguard Underwriters Insurance Company and Republic Underwriters Insurance Company, Defendants.

Supreme Court, Special Term,

Suffolk County, Part I.

Dec. 19, 1985.

Gramer & Melbardis, Coram, for plaintiff.

Wiesen, Gurfein & Jenkins, New York City, for defendants.

DANIEL F. LUCIANO, Justice.

ORDERED that this motion by the defendants, Republic Financial Services, Inc., Republic Insurance Company, Republic-Vanguard Life Insurance Company, Vanguard Insurance Company, Blue Ridge Insurance Company, Vanguard Underwriters Insurance Company and Republic Underwriters Insurance Company, for an order dismissing the complaint pursuant to Civil Practice Law and Rules 3211(a)(7) for failure to state a cause of action is granted to the extent that the complaint pleads causes of action to recover money damages. To the extent that the complaint seeks a judgment declaring the rights and obligations of the parties with respect to the duty of the defendant insurers to defend one Anthony H. Dawson in connection with the plaintiff, Barbara Newsom' action for personal injuries against the said Anthony H. Dawson, the motion to dismiss the complaint is denied. It is further

ORDERED that this matter is stayed from proceeding any further until the said Anthony H. Dawson and one Pauline Gilbert have been joined as parties to this action. It is further

ORDERED that this cross-motion by the plaintiff, Deborah Newsom, for summary judgment is denied.

This is an action commenced by the plaintiff, Deborah Newsom, against several insurers, who have refused to defend and indemnify one Anthony H. Dawson who, the plaintiff, Deborah Newsom, asserts negligently caused her to sustain personal injuries when he threw a firecracker in the vicinity of the plaintiff, Deborah Newsom. It is asserted by the plaintiff, Deborah Newsom, that Anthony H. Dawson was a member of the household of one Pauline Gilbert to whom the defendant insurers had issued a policy of insurance. The defendant insurers disclaimed liability asserting that the said Anthony H. Dawson was not a member of the household.

In the current action the plaintiff, Deborah Newsom, seeks a judgment declaring that the defendant insurers are obligated to defend and indemnify the said Anthony H. Dawson, and for monetary damages based upon an alleged breach of the insurance contract, professional malfeasance and malpractice and for punitive damages.

The defendant insurers have moved to dismiss the complaint pursuant to Civil Practice Law and Rules 3211(a)(7) for failure to state a cause of action. The plaintiff, Deborah Newsom, has opposed the motion to dismiss and cross-moved for summary judgment.

To the extent that the plaintiff, Deborah Newsom, has sought a judgment declaring the rights and obligations of the parties, the Court concludes that the complaint states a cause of action and should not be dismissed. (Turnquest v. Smalls, 26 A.D.2d 841, 274 N.Y.S.2d 451; Shukry v. Johnsson, 17 A.D.2d 835, 233 N.Y.S.2d 53; Birnbaum v. New Amsterdam Casualty Co., 54 Misc.2d 72, 281 N.Y.S.2d 458; Curreri v. Allstate Insurance Co., 37 Misc.2d 557, 236 N.Y.S.2d 719; Antushkiw v. Peterson, 37 Misc.2d 311, 235 N.Y.S.2d 134; DeAbreu v. Lumberman's Mutual Casualty Co., 32 Misc.2d 634, 223 N.Y.S.2d 953; see also Ojeda v. General Accident Fire and Life Assurance Corp., 88 A.D.2d 798, 450 N.Y.S.2d 495; Wilkerson v. Apollon, 81 A.D.2d 141, 440 N.Y.S.2d 16.)

The Court notes, however, that neither Pauline Gilbert, to whom the insurance policy in controversy was issued, nor Anthony H. Dawson, the individual whose negligence purportedly caused the personal injury suffered by the plaintiff, Deborah Newsom, have been joined as parties to this action. Since the rights to be declared will necessarily affect the said Pauline Gilbert and Anthony H. Dawson, and presume to bind them they are necessary parties to this proceeding. (Cf. Dor Motors Ltd. v. Graphic Arts Mutual Insurance Co., 97 A.D.2d 455, 467 N.Y.S.2d 663.) To the extent that a different conclusion is suggested in DeAbreu v. Lumberman's Mutual Insurance Co., supra, this Court cannot agree with the conclusion therein. Accordingly, this action shall be stayed from proceeding any further until the said Pauline Gilbert and Anthony H. Dawson have been joined as parties herein. (See Civil Practice Law and Rules 1001(b).) The nonjoinder of parties is an issue which the Court may raise sua sponte. (2 Weinstein-Korn-Miller, New York Civil Practice, paragraph 1001.03.)

To the extent that the plaintiff, Deborah Newsom's, complaint purports to state causes of action for money damages based upon a violation of 11 New York Codes, Rules and Regulations (NYCRR) section 216.3 and for malfeasance and malpractice the Court concludes that the motion to dismiss the complaint for failure to state a cause of action must be granted.

Section 216.3 of the Insurance Regulations provides, in part, as follows:

Misrepresentation of policy provisions.

(a) No insurer shall knowingly misrepresent to a claimant the terms, benefits or advantages of the insurance policy pertinent to the claim.

* * *

That the plaintiff, Deborah Newsom, is a claimant within the definition of 11 NYCRR 216.1(b) does not seem to be subject to serious dispute. The issue which has arisen is whether the regulations give rise to the implied private cause of action which the plaintiff, Barbara Newsom, seeks to assert. The Court is constrained to conclude that they do not.

First, the regulations of the State Superintendent of Insurance do not create an implied cause of action which does not exist under the statute. Insurance Law section 2601(a) concerns improper business practices by insurers. That section provides, in part:

Unfair claim settlement practices; penalties

(a) No insurer doing business in this state shall engage in unfair claim settlement practices. Any of the following acts by an insurer, if committed without just cause and performed with such frequency as to indicate a general business practice, shall constitute unfair claim settlement practices: (1) knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverages at issue;

* * * The Appellate Division, First Department, has indicated that the forerunner to Insurance Law section 2601(a) (former Insurance Law section 40-d) "does not create a private right of action but rather affords a public right of redress by the Insurance Department for violations ... after a hearing and determination...." (Cohen v. New York Property Insurance Underwriting Association, 65 A.D.2d 71, 78-79, 410 N.Y.S.2d 597; accord, Royal Globe Insurance Company v. Chock Full O'Nuts Corp., 86 A.D.2d 315, 316, 449 N.Y.S.2d 740, motion for leave to appeal dismissed, 58 N.Y.2d 605, 459 N.Y.S.2d 1028, 445 N.E.2d 655, 58 N.Y.2d 800, 459 N.Y.S.2d 266, 445 N.E.2d 649.) The statutory right to a hearing and the provisions for penalties continue in the current Insurance Law (section 2601(b) and (c).) The Court of Appeals has stated that even if it is assumed that a private cause of action may be implied from section 2601, (referring to former section 40-d), one instance of a violation does not establish a general business practice within the meaning of the statute, (Halpin v. Prudential Insurance Company of America, 48 N.Y.2d 906, 908, 425 N.Y.S.2d 48, 401 N.E.2d 171, motion to reargue denied, 49 N.Y.2d 801, 426 N.Y.S.2d 1029, 403 N.E.2d 466; accord, Hubbell v. Trans World Life Insurance Co. of New York, 50 N.Y.2d 899, 430 N.Y.S.2d 589, 408 N.E.2d 918), and thus does not establish a violation of the statute.

Section 301 of the Insurance Law empowers the State Superintendent of Insurance to prescribe regulations "not inconsistent" with the Insurance Law. Since the plaintiff, Deborah Newsom, may not maintain a cause of action pursuant to the statute, it is clear, therefore, that she may not maintain a cause of action pursuant to the regulations.

Moreover, the preamble to Part 216 of the Insurance Regulations reflects that section 216.3 was written with the full understanding of the import of section 2601 of the Insurance Law. The preamble states, in part:

(a) Section 2601 of the Insurance Law prohibits insurers doing business in the state from engaging in unfair claims settlement practices and provides that, if any insurer performs any of the acts or...