Nyahsa Servs., Inc. v. People Care Inc., No. 4697–10.

CourtUnited States State Supreme Court (New York)
Writing for the CourtRICHARD M. PLATKIN, J.
Citation5 N.Y.S.3d 329 (Table)
Docket NumberNo. 4697–10.
Decision Date05 December 2014
PartiesNYAHSA SERVICES, INC. SELF INSURANCE TRUST, Plaintiff, v. PEOPLE CARE INCORPORATED, Defendant. NYAHSA Services, Inc. Self Insurance Trust, Plaintiff, v. Recco Home Care Services, Inc., Defendant. Index No. 4134–11 RJI No. 01–12–105990 (Action No. 2).

5 N.Y.S.3d 329 (Table)

NYAHSA SERVICES, INC. SELF INSURANCE TRUST, Plaintiff
v.
PEOPLE CARE INCORPORATED, Defendant.


NYAHSA Services, Inc.
Self Insurance Trust, Plaintiff
v.
Recco Home Care Services, Inc., Defendant.


Index No. 4134–11 RJI No. 01–12–105990 (Action No. 2).

No. 4697–10.

Supreme Court, Albany County, New York.

Dec. 5, 2014.


Bond, Schoeneck & King, PLLC, (Stuart F. Klein of counsel), Albany, for Plaintiff.

Hiscock & Barclay, LLP, (Linda J. Clark and David M. Cost, of counsel), Albany, for People Care Inc. and Recco Home Care Services, Inc.

Peckar & Abramson, P.C., (Kevin J. O'Connor and Denis Serkin, of counsel), River Edge, NJ, for LeadingAge New York Services, Inc. and LeadingAge New York.

Keidel, Weldon & Cunningham, LLP, (Robert J. Grande, of counsel), White Plains, for Cool Insuring Agency, Inc. and Cool Risk Management, Inc.

Opinion

RICHARD M. PLATKIN, J.

Plaintiff NYAHSA Services, Inc. Self–Insurance Trust (“Trust”) moves pursuant to CPLR 3211 seeking dismissal of the counterclaims alleged by defendant PeopleCare Inc. (“PeopleCare”) in Action No. 1. In addition, third-party defendants Cool Insuring Agency, Inc. (“Cool Insuring”), Cool Risk Management, Inc. (“Cool Risk”), LeadingAge New York Services, Inc. f/k/a/ NYAHSA Services, Inc. (“LeadingAge Services” or “Services”) and LeadingAge New York f/k/a New York Association of Homes and Services for the Aging (“LeadingAge”) move pursuant to CPLR 3211 for dismissal of the third-party complaints filed by PeopleCare and Recco Home Care Services, Inc. (“Recco”) in Actions Nos. 1 and 2 respectively.

BACKGROUND

A. The Trust

The Trust is a group self-insured trust (“GSIT”) formed in 1995 pursuant to the Workers' Compensation Law (“WCL”). Members of the Trust were employers within the home health-care industry that conducted business in New York State and were required to provide workers' compensation insurance to their employees. Unlike many other GSITs, members of the subject Trust bear financial responsibility only for the claims of their own employees. The Trust ceased providing workers' compensation insurance as of December 31, 2011, but it continues to meet its obligations with respect to open claims.

On or about July 1, 1999, the Trust entered into two agreements with Cool Insuring and Cool Risk (collectively “Cool”). Pursuant to a Program Administrator Agreement (“PA Agreement”), Cool agreed to administer the self-insurance program by, inter alia: developing and conducting loss control, risk management and safety programs; coordinating claims and actuarial services; acting as the Trust's liaison to the Workers' Compensation Board (“WCB”); evaluating the suitability of prospective trust members; monitoring the Trust's financial condition; ensuring legal compliance; using its best efforts to market and promote the Trust; and acting as a broker to provide insurance services to the Trust. Under this agreement, the Trust paid Cool a fee of 10.5% of the manual premiums.

The second agreement was a Third–Party Administrator Services Agreement (“TPA Agreement”). As third-party administrator for the Trust, Cool was responsible for administering employee claims, assisting in the performance of the Trust's required regulatory obligations and providing for medical management and banking services.

Also on July 1, 1999, Cool entered into a Marketing Agreement with LeadingAge Services, whereby the association agreed to market the Trust's self-insurance program to its membership in exchange for a fee of 1.5% of the aggregate manual premiums.

B. PeopleCare

PeopleCare became a member of the Trust effective June 15, 2000 by assenting to a Self–Insurance Agreement and Declaration of Trust (“Declaration of Trust”) and an Indemnity Agreement. In executing these documents, PeopleCare acknowledged its understanding of the potential benefits and liabilities of membership in the Trust, including the joint and several liability that exists pursuant to the WCL, and it agreed to be bound by the Declaration of Trust, the Indemnity Agreement and the Trust's by-laws.

Upon joining the Trust and for each year of membership thereafter, PeopleCare entered into a Contribution Agreement with the Trust setting forth the specific financial terms of its self-insurance coverage for a one-year period, including the dollar value of its payroll and the amount of the required “deposit” contribution and “basic” contribution.1 In addition, the Contribution Agreement established a process for periodic adjustments to reflect the employer's actual loss experience. Specifically, the Contribution Agreement provided for the calculation of a “containment contribution” using all incurred losses for PeopleCare's covered employees valued 13 months from the expiration date of the period of coverage and thereafter at annual intervals.2 If actual losses attributable to PeopleCare's workforce exceeded its prior contributions, PeopleCare was obliged to pay the excess amount to the Trust within a specified period. Ultimately, PeopleCare terminated its membership in the Trust effective on June 15, 2008.

During PeopleCare's eight years of membership, it paid the required contributions and adjustments without dispute. However, because PeopleCare remained responsible for claims incurred during its period of coverage, the Trust continued to issue adjustments to PeopleCare after the termination of its active membership. On July 14, 2008, the Trust issued a combined adjustment of $813,297 relative to claims accrued during PeopleCare's first seven years of Trust membership. PeopleCare objected to this assessment and refused to pay it.

After several additional adjustments were issued to PeopleCare without payment, the Trust commenced Action No. 1 on or about July 15, 2010, seeking to recover $2,129,235 in adjustments (plus late fees, attorney's fees and other ancillary relief) under contractual and quasi-contractual theories. On September 17, 2010, PeopleCare filed an answer to the complaint that alleged nine counterclaims. The Trust moved to dismiss the counterclaims in lieu of replying. In November 2011, the Trust filed an amended complaint (hereinafter “Complaint”) that increased its claim for damages to $3,332,427, and PeopleCare interposed an amended answer with counterclaims (“Answer”).

C. Recco

Recco became a member of the Trust effective January 14, 1997. It entered into Contribution Agreements covering annual policy periods from March 3, 1997 through March 3, 2009. Recco's last payment to the Trust was made in or about March 2009.

On March 5, 2010, the Trust issued a combined adjustment of $595,816 relative to claims incurred during Recco's membership in the Trust. Included with the bill was a finance agreement that allowed Recco to pay this adjustment over time. On March 16, 2010, Recco submitted the executed finance agreement along with a check for $55,286.75 as a down payment. However, Recco caused a stop-payment order to be issued on the check, and it has not since paid any of the adjustment. Another adjustment was issued on or about March 30, 2011, in the amount of $90,574, that also remains unpaid.

The Trust commenced Action No. 2 on or about July 16, 2010. An amended complaint was filed on or about August 12, 2011.

D. Subsequent Proceedings

Following unsuccessful efforts to resolve this case through mediation, PeopleCare and Recco commenced a third-party action against Cool Insuring, Cool Risk, LeadingAge Services and LeadingAge on July 26, 2013. The third-party defendants moved to dismiss these claims pursuant to CPLR 3211. At the request of the parties, a settlement conference was convened by the Court, but no agreement was reached.

Given the closely related nature of the two actions, the Court informally consolidated them for briefing, argument and disposition. Oral argument was held on August 27, 2014, supplemental briefing requested by the Court at oral argument was received on or about September 19, 2014, and this consolidated Decision & Order follows.

LEGAL STANDARD

Under CPLR 3211(a)(1), dismissal is warranted if documentary evidence conclusively establishes a defense as a matter of law (Haire v. Bonelli, 57 A.D.3d 1354, 1356, 870 N.Y.S.2d 591 [3d Dept 2008], citing Beal Sav. Bank v. Sommer, 8 N.Y.3d 318, 324 [2007] ; see Goshen v. Mutual Life Ins. Co. of NY, 98 N.Y.2d 314, 326 [2002] ; Angelino v. Michael Freedus, D.D.S., P.C., 69 A.D.3d 1203, 893 N.Y.S.2d 668 [3d Dept 2010] ). On such a motion, “affidavits submitted by a defendant do not constitute documentary evidence upon which a proponent of dismissal can rely” (Crepin v. Fogarty, 59 A.D.3d 837, 838, 874 N.Y.S.2d 278 [3d Dept 2009] ).

On a motion pursuant to CPLR 3211(a)(7) to dismiss for failure to state a claim, “the Court must afford the pleadings a liberal construction, take the allegations of the complaint as true and provide plaintiff the benefit of every possible inference” (EBC 1, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 19 [2005] ). The Court's “sole criterion is whether the pleading states a cause of action” (Polonetsky v. Better Homes Depot, 97 N.Y.2d 46, 54 [2001] [internal quotations...

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