Opinion
Index No.: 450121/2014
02-02-2015
COMMISSIONERS OF THE STATE INSURANCE FUND, Plaintiffs, v. THUPTEN GYELTSEN, VOGEL & ROSENBERG, DONALD B. ROSENBERG, WELL-COME HOLDINGS LLC, FLINTLOCK CONSTRUCTION SERVICES LLC, and ARCH INSURANCE COMPANY, Defendants.
For Plaintiffs: Mark Slotkin, Esq. 199 Church Street New York, New York 10007 212-312-7256 For Defendant Arch Insurance: Goldberg Segalla LLP By Michael T. Glascott, Esq. 665 Main Street, Suite 400 Buffalo, New York 14203 716-566-5400
Mot.Date: Oct.15, 2014
Motion Seq.: 001
DECISION AND ORDER
For Plaintiffs:
Mark Slotkin, Esq.
199 Church Street
New York, New York 10007
212-312-7256
For Defendant Arch Insurance:
Goldberg Segalla LLP
By Michael T. Glascott, Esq.
665 Main Street, Suite 400
Buffalo, New York 14203
716-566-5400
Papers Considered in Review of Motion to Dismiss and Cross-Motion for Summary Judgment:
| Notice of Motion with Attached Exhibits | 1 |
| Notice of Cross-Motion and Affirmation in Opposition | 2 |
| Reply Affirmation in Support of Motion to Dismiss | 3 |
| Reply Affirmation is Support of Cross-Motion | 4 |
Ellen M. Coin, A.J.S.C.
Defendant Arch Specialty Insurance Company, named in this action as Arch Insurance Company, (hereinafter "Arch") brings a pre-answer motion pursuant to CPLR 3211(a)(1), (5) and (7) to dismiss the complaint. Plaintiff cross-moves pursuant to CPLR 3212 for summary judgment on its complaint.
Plaintiff filed this action to assert a statutory lien under Workers' Compensation Law §29(1) in the amount of $108,022.73 against the settlement payment defendant Thupten Gyeltsen received in the action entitled Thupten Gyeltsen v Well-Come Holdings, LLC et al., filed in New York State Supreme Court, New York County, Index No. 116102/2007. The underlying action arose from a physical injury Gyeltsen sustained in an accident at a construction site on September 30, 2005. The action was fully settled on January 17, 2011 upon payment by Arch to Gyelsten of $500,000.00. By the time of the settlement, plaintiff had allegedly paid Gyelsten worker's compensation benefits for lost wages in the amount of $83,584.00 and medical treatment in the amount of $24,438.73, arising out of the same injuries that were the subject of the action.
Workers Compensation Law §29(1) states in relevant part as follows:
If an employee entitled to compensation under this chapter be injured or killed by the negligence or wrong of another not in the same employ, such injured employee, or in case of death, his dependents, need not elect whether to take compensation and medical benefits under this chapter or to pursue his remedy against such other but may take such compensation and medical benefits and at any time either prior thereto or within six months after the awarding of compensation. . . pursue his remedy against such other subject to the provisions of this chapter . . . In such case, the state insurance fund, if compensation be payable therefrom, and otherwise the person, association, corporation or insurance carrier liable for the payment of such compensation, as the case may be, shall have a lien on the proceeds of any recovery from such other, whether by judgment, settlement or otherwise, after the deduction of the reasonable and necessary expenditures, including attorney's fees, incurred in effecting such recovery, to the extent of the total amount of compensation awarded
under or provided or estimated by this chapter for such case and the expenses for medical treatment paid or to be paid by it and to such extent such recovery shall be deemed for the benefit of such fund, person, association, corporation or carrier. . . (emphasis added)
Arch argues that the phrase "recovery from such other" implicitly limits the enforcement of the lien solely as against the negligent tortfeasor who caused the employee's injury. As a third-party liability insurer, Arch was not a party to the underlying action, hence not a tortfeasor, and was not in privity with Gyeltsen. Further, Arch argues that the indemnification clause in the unlimited release it obtained from Gyeltsen in the underlying action insulates it from any claim of lien asserted by Gyetsen's lienholders, including for paid worker's compensation benefits.
In opposition, Plaintiff argues that the phrase "recovery from such other" in no sense implies, let alone expresses, the meaning that Arch attributes to it.
"[T]he reference to a lien on a "recovery from such other' is a simple but necessary statement that the workers' compensation lien should only apply in a suit against a third-party based on the same injury for which basic compensation benefits were paid to the worker. Everyone understands that that should be so, but as an ordinary matter of statutory drafting it is still necessary to say so, and that is what these words say"(Reply Affirmation of Mark Slotkin, dated July 30, 2014, ¶9).
Analysis
On a motion to dismiss pursuant to CPLR 3211, the court must accept as true the facts as alleged in the complaint and submissions in opposition to the motion, accord plaintiff the benefit of every possible favorable inference and determine only whether the facts as alleged fit within any cognizable legal theory (Sokoloff v Harriman Estates Development Corp., 96 NY2d 409, 414 [2001]; see also Leon v Martinez, 84 NY2d 83 [1994]). "'Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss'" (Ginsburg Development Companies, LLC v Carbone, 85 AD3d 1110, 1111 [2d Dept 2011]), quoting EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]).
It is well settled that Worker's Compensation Law § 29(1) governs the rights and obligations of employees and compensation carriers with respect to actions arising from injuries caused by third-party tortfeasors (see Burns v Varriale, 9 NY3d 207, 213 [2007]). In order to prevent a double recovery by an injured employee, the statute provides that the compensation carrier has a right to assert a lien against the net proceeds of any recovery which the worker obtains from the offending tortfeasor in a third-party action (Gatto v Inservices Corp., 2010 NY Slip Op 30983(U), *4 [Sup Ct, Richmond County 2010][citation and quotation marks omitted]).
In the event of settlement, the lien attaches to the proceeds thereof at the point when the settlement becomes legally binding (See Nunes v National Union Fire Ins. Co., 272 AD2d 401, 402 [2nd Dept 2000], citing Utica Mut. Ins. Co. v Empl. Mut. Liability Ins. Co. of Wisconsin, 57 Misc 2d 764, 769 [City of Utica, City Ct. 1968] [statute of limitations on a Section 29(1) lien claim runs from the time the action is settled]). The legal enforceability of the lien does not depend upon the identity of the party having possession, custody and/or control of the proceeds of the settlement (cf. Commr. of State Ins. Fund v Schell, 23 Ad2d 556, 556 [1st Dept 1965]). This may include defendant, plaintiff's counsel and liability insurer in the underlying action (id.). Any such individual or legal entity is restrained by the lien from disposing of the proceeds unless the lien is first satisfied (Utica Mut. Ins. Co., 57 Misc2d at 766; see also Commr. of State Ins. Fund v Allstate Ins. Co., 41 Misc 2d 189, 189-90 [Civ. Ct., NY County 1963], aff'd 42 Misc 2d 141 [Sup Ct, App Term, 1st Dept 1963]). Failure to do so triggers individual liability (Id.).
Here, Arch may be required to satisfy plaintiff's lien. Arch's argument—that the phrase "recovery from such other" narrows enforceability of the lien only to the alleged tortfeasor-finds no support in the language of the statute or in case law. As plaintiff notes, the purpose of the phrase is to apply the worker's compensation lien to the proceeds of any litigation for the same injury for which the applicant has also received worker's compensation benefits. The paucity of any case law on this particular point is not testament to uncertainty; on the contrary, the clarity of the subject language does not lend itself to any alternative interpretation.
Arch's attempt to distinguish Schell is unavailing. It is a fundamental rule of statutory interpretation that "[c]ourts must harmonize the provisions of related statutes and construe them in a way that renders them internally compatible" (Yatauro v Mangano, 17 NY3d 420, 427 [2011] [internal quotation marks and citation omitted]). While Schell enforced a disability compensation lien arising under Section 227 of the Worker's Compensation Law, as opposed to Section 29(1), the relevant portions of statutory language in both sections are identical, as is the legislative intent behind them. Thus, Arch cannot avoid application of Schell to plaintiff's Section 29(1) claim.
Arch's last argument—that the indemnification clause contained in the settlement agreement insulates it from Section 29(1), or any other statutory lien or obligation for that matter -is invalid. Indemnification is the right of one party to shift the entire loss to another and is based on common law or on a contractual obligation (see Bellevue S. Assoc. v HRH Constr. Corp, 78 NY2d 282, 296 [1991]; see also Zurich Ins. Co. Lumbermen's Cas. Co., 233 AD2d 186, 187 [1st Dept 1996]). It entitles Arch to seek full compensation from Gyeltsen for any amounts it is liable to pay in this action. It does not, however, authorize the Court to deem this contractual indemnification a lien release. Therefore, Arch's motion to dismiss the complaint must be denied, as plaintiff has sufficiently stated a cause of action.
Plaintiff's cross-motion for summary judgment pursuant to CPLR 3212 must be denied as premature (City of Rochester v Chiarella, 65 NY2d 92, 101 [1985] [citations omitted]). CPLR 3212(a) permits any party to move for summary judgment after issue has been joined. Any such motion prior to joinder of issue must be denied (Id.). The court may, however, in its discretion convert a motion to dismiss brought under CPLR 3211(a)or(b) into one for summary judgment so long as the Court gives adequate notice to the parties (CPLR 3211[c]).
There are three exceptions to the notice requirement: (1) where the action in question involves no issue of fact, but only issues of law which are fully acknowledged and argued by the parties; (2) where the parties specifically request the motion be treated as one for summary judgment; and (3) where the parties deliberately lay bare their proof and make it clear that they are charting a summary judgment course (Wiesen v New York University, 304 AD2d 459, 460 [1st Dept 2003]).
Here, the Court did not at any time give the parties requisite notice. While the issues before the Court are purely legal, and at the present time the Court may dispose of the entire action, the notice requirement may not be waived, as Arch expressly opposed the cross-motion on the ground of its prematurity (See Lerner v Prince, 119 AD3d 122, 131 [1st Dept 2014]; see also Brathwaite v Frankel, 98 AD3d 444,444 [1st Dept 2012]). Plaintiff may refile its summary judgment motion once issue is joined.
The Court must also notify the parties not to file with the Court any documents containing social security numbers or any other personal identifying information. Exhibit A to the moving papers includes an unredacted version of Gyeltsen's affidavit appended to the settlement agreement. It contains his date of birth and social security number. Documents filed in the courts of New York State cannot contain the social security account number of any other person, unless such other person is a dependent child, or has consented to such filing, except as required by federal or state law or regulation, or by court rule. (General Business Law §399-ddd(6)). None of these exceptions applies here. The Court would also like to bring counsel's attention to newly amended subparagraph (e) of 22 NYCRR §202.5, which will become mandatory as to all papers filed in New York State trial courts beginning February 28, 2015. Accordingly, within 20 days of the date of this order, Arch shall withdraw Exhibit A to its motion and refile a redacted version of the same papers.
In accordance with the foregoing, it is hereby
ORDERED that the motion of defendant Arch Insurance Company to dismiss the complaint pursuant to CPLR 3211(a)(1), (5) and (7) is denied; and it is further
ORDERED that plaintiff's cross-motion for summary judgment pursuant to CPLR 3212 is denied with leave to renew at the close of discovery; and it is further
ORDERED that defendant Arch Specialty Insurance Company, named in this action as Arch Insurance Company, shall within 20 days from the date of this Order serve a copy of this Order on the County Clerk's Office, which will permit defendant to amend the record as indicated herein; and it is further
ORDERED that defendant Arch Specialty Insurance Company, named in this action as Arch Insurance Company, shall answer the complaint within 20 days of the date of this order.
This constitutes the decision and order of the Court. Date: February 2, 2015
ENTER:
/s/_________
Ellen M. Coin, A.J.S.C.