N.Y.S. Workers' Comp. Bd. v. Program Risk Mgmt., Inc.

Full title: NEW YORK STATE WORKERS' COMPENSATION BOARD, in its Capacity as the…

Court: Supreme Court, Albany County, New York.

Date published: Sep 21, 2015

26 N.Y.S.3d 214 (N.Y. Sup. Ct. 2015)

Opinion

No. 3203–13.

09-21-2015

NEW YORK STATE WORKERS' COMPENSATION BOARD, in its Capacity as the Governmental Agency Charged with Administration of the Workers' Compensation Law and Attendant Regulations, and in its Capacity as the Successor in Interest to the Community Residence Insurance Savings Plan, Plaintiff, v. PROGRAM RISK MANAGEMENT, INC.; PRM Claims Services, Inc.; Thomas Arney, Individually, as preceding CEO of Program Risk Management, Inc., as preceding CEO of PRM Claims Services, Inc., and in his capacity as insurance broker for Community Residence Insurance Savings Plan; John M. Conroy, Individually, as succeeding CEO of Program Risk Management, Inc., and as succeeding CEO of PRM Claims Services, Inc.; Edward A. Sorensen, Individually, as executive vice president of Program Risk Management, Inc., and as Program Administrator to the Community Residence Insurance Savings Plan; Mark J. Crawford, individually and as Program Manager to the Community Residence Insurance Savings Plan; PMA Management Corp.; M.P. Agency, Inc.; Total Management Corp.; Morton G. Case, Individually and as president of M.P. Agency, Inc.; Priscilla H. Hoffman, Individually, as vice president and co-principal of M.P. Agency, Inc., and as principal of Total Management Corp.; SGRISK, LLC; DeChants, Fuglein & Johnson, LLP, formerly Roth & dechants and Roth & DeChants, Fuglein & Johnson; Towers Watson & Company, formerly Towers Watson Risk Consulting, Inc. and Tillinghast–Towers Perrin, Inc.; Thomas Gosdeck, Individually, as Qualifying Officer of Program Risk Management, Inc., and as General Counsel to the Community Residence Insurance Savings Plan; The Board of Trustees of the Community Residence Insurance Savings Plan; Janice Johnson, Individually, as trustee, as financial advisor, and as attorney advisor for the Community Residence Insurance Savings Plan; Antonia Lasicki, as trustee; Thomas McKeown, as trustee; John Lessard, as trustee; Ann Hardiman, as trustee; Vincent Sirangelo, as trustee; Phillip Saperia, as trustee; Steven Greenfield, as trustee; Peter Pierri, as trustee; Fred Apers, as trustee; Peter Campanelli, as trustee; Diana Antos–Arens, as trustee; and Sidney Paul, as trustee, Defendants.

Rupp, Baase, Pfalzgraf, Cunninghan & Coppola LLC, (Daniel E. Sarzynski and Matthew C. Lenahan, of counsel), Buffalo, Attorneys for Plaintiff. Nixon Peabody LLP, (Vincent E. Polsinello and Christian D. Hancey, of counsel), Albany, Attorneys for Janice Johnson, Antonia Lasicki, Thomas McKeown, John Lessard, Ann Hardiman, Vincent Sirangelo, Phillip Saperia, Steven Greenfield, Peter Pierri, Fred Apers, Peter Campanelli and Diana Antos–Arens. Hitchcock & Cummings, LLP, (Terry Cummings and John W. Hanson, of counsel), New York, Attorneys for SGRisk, LLC, Bond, Schoeneck & King, PLLC, (Stuart F. Klein, of counsel), Albany, Attorneys for Thomas Gosdeck. Miranda Sambursky Slone, Sklarin Verveniotis LLP, (Maurizio Savoiardo and James R. Flynn, of counsel), Mineola, Attorneys for Program Risk Management, Inc., PRM Claims Services, Inc., Mark J. Crawford, Thomas B. Arney, John M. Conroy and Edward A. Sorensen. Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, (Benjamin F. Neidl and Marcy E. Spratt, of counsel), Albany, Attorneys for M.P. Agency, Inc., Morton G. Case and Priscilla Hoffman.

RICHARD M. PLATKIN, J.

Rupp, Baase, Pfalzgraf, Cunninghan & Coppola LLC, (Daniel E. Sarzynski and Matthew C. Lenahan, of counsel), Buffalo, Attorneys for Plaintiff.

Nixon Peabody LLP, (Vincent E. Polsinello and Christian D. Hancey, of counsel), Albany, Attorneys for Janice Johnson, Antonia Lasicki, Thomas McKeown, John Lessard, Ann Hardiman, Vincent Sirangelo, Phillip Saperia, Steven Greenfield, Peter Pierri, Fred Apers, Peter Campanelli and Diana Antos–Arens.

Hitchcock & Cummings, LLP, (Terry Cummings and John W. Hanson, of counsel), New York, Attorneys for SGRisk, LLC,

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

Miranda Sambursky Slone, Sklarin Verveniotis LLP, (Maurizio Savoiardo and James R. Flynn, of counsel), Mineola, Attorneys for Program Risk Management, Inc., PRM Claims Services, Inc., Mark J. Crawford, Thomas B. Arney, John M. Conroy and Edward A. Sorensen.

Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, (Benjamin F. Neidl and Marcy E. Spratt, of counsel), Albany, Attorneys for M.P. Agency, Inc., Morton G. Case and Priscilla Hoffman.

RICHARD M. PLATKIN, J.

This commercial action was commenced by the New York State Workers' Compensation Board ("WCB") in its capacities as the governmental entity charged with the administration of the Workers' Compensation Law and as successor in interest to the Community Residence Insurance Savings Plan self-insurance trust. Pending before the Court are five separate motions to dismiss plaintiff's 118–page complaint ("Complaint").

BACKGROUND

As alleged in the Complaint, the Community Residence Insurance Savings Plan is a group self-insured trust ("GSIT") formed pursuant to Workers' Compensation Law ("WCL") § 50(3–a). Members of the Community Residence Insurance Savings Plan ("Trust") were employers engaged in providing human services to children that were required to provide workers' compensation insurance to their employees.

The Trust was formed on or about October 31, 1995 through the execution of the Self–Insurance Agreement and Declaration of Trust ("Declaration of Trust"), Trust By–Laws ("By–Laws") and Trust Indemnification Agreement ("Indemnification Agreement") (collectively "Governing Documents"). The Trustees contracted with defendant Program Risk Management, Inc. ("PRM") to serve as third-party administrator of the Trust and M.P. Agency, Inc. ("MP Agency") to serve as exclusive marketing agent. The Trust was approved by the WCB as a GSIT effective December 15, 1995.

Following a number of reviews by the WCB identifying the Trust as underfunded and out of compliance with certain regulations, and the execution of several consent decrees requiring remediation of identified deficiencies, the Trust ceased providing workers' compensation coverage as of December 31, 2010.

Effective August 1, 2011, the WCB assumed the administration and final distribution of the Trust's assets and liabilities pursuant to 12 NYCRR § 317.20(c). The WCB then commissioned a forensic analysis of the Trust by the accounting firm of Bollam, Sheedy, Torani & Co., LLP ("BST"). The BST forensic audit, issued in or about February 2013, shows an accumulated deficit of approximately $60 million as of December 31, 2010. The WCB commenced this action on June 6, 2013.

LEGAL STANDARD

On a motion to dismiss made pursuant to CPLR 3211(a)(7), "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 NY3d 11, 19 [2005] ). The Court's "sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law a motion for dismissal will fail" (Polonetsky v. Better Homes Depot, Inc., 97 N.Y.2d 46, 54 [2001] [internal quotation marks omitted] ). However, the Court need not "accept as true legal conclusions or factual allegations that are either inherently incredible or flatly contradicted by documentary evidence" (1455 Washington Ave. Assoc. v. Rose & Kiernan, Inc., 260 A.D.2d 770, 771 [3d Dept 1999] [internal quotation marks and citation omitted] ).

Dismissal is warranted under CPLR 3211(a)(5) where the movant establishes that a cause of action may not be maintained due to the expiration of the statute of limitations. The movant bears the initial burden of "support [ing] the motion with an affidavit or other competent proof sufficient, if uncontroverted, to establish the [statute of limitations] defense as a matter of law" (State Higher Educ. Services Corp. v. Starr, 158 A.D.2d 771, 771 [3d Dept 1990] ; accord Romanelli v. DiSilvio, 76 AD3d 553, 554 [2d Dept 2010] ). Upon such a showing, "the burden shifts to the party opposing the motion to aver evidentiary facts" sufficient to defeat the statute of limitations defense, or at least raise factual questions concerning the defense (Hoosac Val. Farmers Exch., Inc. v. AG Assets, Inc., 168 A.D.2d 822, 823 [3d Dept 1990] ; see Doyon v. Bascom, 38 A.D.2d 645 [3d Dept 1971] ).

THE TRUSTEES

Janice Johnson, Antonia Lasicki, Thomas McKeown, John Lessard, Ann Hardiman, Vincent Sirangelo, Phillip Saperia, Steven Greenfield, Peter Pierri, Fred Apers, Peter Campanelli and Diana Antos–Arens are sued as former trustees of the Trust ("Trustees").¹ Four causes of action are alleged against all of the Trustees: breach of contract; breach of the duty of good faith and fair dealing; breach of fiduciary duty; and common-law indemnification. Trustee Johnson also is the subject of three additional causes of action: fraud; unjust enrichment; and negligent misrepresentation.

1 Sidney Paul also is named as defendant-trustee, but the Complaint makes no reference to this individual.

A.Capacity & Standing

The Trustees contend that the WCB lacks both the capacity and standing to maintain this action.

Capacity to sue is a threshold matter allied with, but conceptually distinct from, the question of standing. As a general matter, capacity concerns a litigant's power to appear and bring its grievance before the court. The issue of capacity often arises in suits brought by governmental entities. Being artificial creatures of statute, such entities have neither an inherent nor a common-law right to sue. Rather their right to sue, if it exists at all, must be derived from the relevant enabling legislation or some other concrete statutory predicate. Capacity to sue may be expressly granted in enabling legislation or it may be inferred from review of the entity's statutory functions or responsibilities.

Standing involves a determination of whether the party seeking relief has a sufficiently cognizable stake in the outcome so as to cast the dispute in a form traditionally capable of judicial resolution. The two-part standing inquiry is designed to determine whether the party who is bringing suit is a proper party to request an adjudication of the dispute, as follows: First, a plaintiff must show injury in fact, meaning that plaintiff will actually be harmed by the challenged action. As the term itself implies, the injury must be more than conjectural. Second, the injury a plaintiff asserts must fall within the zone of interests or concerns sought to be promoted or protected by the statutory provision under which the agency has acted. Without both capacity and standing, a party lacks authority to sue (Graziano v. County of Albany, 3 NY3d 475, 478–479 [2004] [internal quotation marks, citations and alternations omitted] ).

In arguing that the WCB lacks capacity to maintain this action as successor to the Trust, the Trustees observe that WCL § 142, captioned "General powers and duties of the workmen's compensation board", does not confer upon the agency an express right to sue as the successor to the Trust. And while the Trustees recognize that 12 NYCRR 317.20(c) authorizes the Chair of the WCB to "assume the administration and final distribution of [a GSIT's] assets and liabilities" in certain circumstances, they argue that nothing in the regulation authorizes the WCB or its Chair to pursue affirmative litigation.

The Court does not find these contentions to be persuasive. It seems clear that the WCB's broad regulatory authority to assume administration of the Trust and distribute its assets and liabilities necessarily carries with it the power to prosecute claims belonging to the Trust. Any right of action possessed by the Trust against defendants is an asset (see Canron Corp. v. City of New York, 89 N.Y.2d 147, 156 [1996] ), which therefore is subject to the WCB's broad powers to administer and, ultimately, distribute under 12 NYCRR 317.20(c).

Even apart from this express grant of regulatory authority, "capacity may be inferred as a necessary implication from the powers and responsibilities of a governmental entity, provided, of course, that there is no clear legislative intent negating [judicial] review' " (Matter of Town of Riverhead v. New York State Bd. of Real Prop. Servs., 5 NY3d 36, 42 [2005], quoting Community Bd. 7 of Borough of Manhattan v. Schaffer, 84 N.Y.2d 148, 156 [1994] ). The WCB is charged by regulation with winding up insolvent GSITs, and the causes of action that a GSIT possesses against its administrators, trustees, professional advisors and others may represent a substantial asset that can be realized only through the prosecution of appropriate litigation. Indeed, the failure of the WCB to act would result in waste of a potential trust asset. And there is nothing in the WCL or its implementing regulations that limits the WCB's powers in administering the assets of a GSIT, including any rights of action that it may possess. Accordingly, the Court is satisfied that the WCB may prosecute claims on behalf of the Trust as its successor.²

2 Given the unique attributes of GSITs and the special statutory and regulatory role of the WCB with respect thereto, the Court rejects the Trustees' argument that the WCB lacks standing to sue because it is neither a trustee nor beneficiary of the GSIT.

Whether the WCB possesses capacity to sue in its governmental role presents a more substantial question. There is nothing in the WCL or its implementing regulations that authorizes the agency to commence suit in its governmental capacity to recover the costs incurred in assuming the administration of insolvent GSITs. Indeed, as this Court observed in State of N.Y. Workers' Compensation Bd. v. Madden (38 Misc.3d 1229[A] [Sup Ct, Albany County 2013] ):

... [T]he WCB is responsible for paying out of its administrative fund the compensation and benefits that may be unpaid due to the insolvency of the Trust and the expenses associated with winding down the Trust (see WCL §§ 50[5] [f], 51 ). However, this alleged "loss" purely is the product of a legislative determination of New York State regarding the continuation of benefits to injured workers. And the same statutory scheme by which the State Legislature has made the WCB the payor of last resort establishes a process for infusing the necessary funds into the agency's administrative fund through assessments on the self-insurance industry (see id. ). In light of the nature and source of the WCB's obligation and the presence of a comprehensive statutory scheme that does not include a right of indemnification, the Court sees no basis in law or appellate precedent for implying separate duties running from the former trustees or professional advisors of GSITs to the WCB.

Nonetheless, the Appellate Division, Third Department, reinstated the claim of implied indemnity against the GSIT trustees in Madden, insofar as the claim was brought in the agency's governmental capacity (119 AD3d 1022, 1025 [3d Dept 2014] ), holding:

Plaintiff's statutory and regulatory role requires it to assume the administration of insolvent group self-insured trusts and to continue to pay benefits to covered employees (see 12 NYCRR 317.20 ). Plaintiff claims that, as breaches by the trustee defendants allegedly contributed to the Trust's insolvency, they should, in fairness, cover the costs that plaintiff incurred in carrying out these obligations. Viewing the complaint liberally and accepting its allegations as true, plaintiff's claim for common-law indemnification as against the trustee defendants and based upon plaintiff's governmental role should not have been dismissed.

While the issue of capacity was not directly presented to the Third Department, it follows from the reasoning of the decision and its reinstatement of the cause of action that capacity to prosecute a common-law indemnity claim may be implied from the WCB's power to administer insolvent GSITs and its duty to continue paying benefits to covered employees. Accordingly, the Court is constrained to reject the Trustees' argument that the WCB lacks capacity to prosecute this action in its governmental capacity.³

3 The same analysis compels the rejection of the capacity and standing arguments made by other moving defendants.

B.Breach of Contract

The Complaint alleges that the Trustees breached their obligations under the Governing Documents by, among other things: failing to provide for the proper capitalization of the Trust; setting improper contribution rates; improperly placing excess insurance and reinsurance coverage; allowing excessive expenses; failing to provide adequate claims administration services, loss control services, risk management services, and regulatory compliance services; failing to ensure the filing of a fidelity bond; failing to comply with the Trust's membership requirements in relation to the admission, renewal, and removal of members; failing to prevent conflicts of interest; failing to adequately manage and supervise the Trust; and accepting of improper fees. These alleged breaches are said to have caused the Trust's substantial accumulated deficit.

1.Contractual Limitation of Liability

The Trustees contend that the contract claim is precluded by the limitation-of-liability provision of the Trust Agreement. Specifically, the Trustees rely upon article VI, section 8 of the agreement, captioned "Trustees' Liabilities", which reads:

No Trustee shall be liable for any action taken pursuant to this Trust Agreement in good faith or for an omission, except gross negligence, or for any act of omission or commission by any other Trustee or by any employee of Trustee.... The Trust hereby agrees to save, hold harmless, and indemnify the Trustees from any loss, damage or expense incurred by said Trustees while acting in the capacity of Trustees excepting bad faith and gross negligence.

While recognizing the WCB's allegation that they "failed to perform, or negligently and improperly performed" their responsibilities under the Trust Agreement, the Trustees argue that the Complaint does not allege grossly negligent or bad faith conduct on their part.

"Absent a statute or public policy to the contrary, a contractual provision absolving a party from its own negligence will be enforced" (Sommer v. Federal Signal Corp., 79 N.Y.2d 540, 553 [1992] ). "Public policy, however, forbids a party's attempt to escape liability, through a contractual clause, for damages occasioned by grossly negligent conduct'. Used in this context, gross negligence' differs in kind, not only degree, from claims of ordinary negligence. It is conduct that evinces a reckless disregard for the rights of others or smacks' of intentional wrongdoing" (Colnaghi, U.S.A., Ltd. v. Jewelers Protection Servs., 81 N.Y.2d 821, 823–824 [1993] ; see Food Pageant, Inc. v. Consolidated Edison Co., Inc., 54 N.Y.2d 167, 172 [1981] ["failure to exercise even slight care"]; see also Benton v. Safe Deposit Bank, 255 N.Y. 260, 265 [1931] ; Retty Fin., Inc. v. Morgan Stanley Dean Witter & Co., 293 A.D.2d 341 [1st Dept 2002] ).

The factual allegations of the Complaint, taken as a whole and read in a light most favorable to plaintiff, do not foreclose application of the exculpatory clause's exceptions for gross negligence and bad faith conduct. The WCB's failure to expressly denominate its allegations of misconduct as amounting to gross negligence is not fatal (see Banc of Am. Sec. LLC v. Solow Bldg. Co. II, L.L.C., 47 AD3d 239, 245 [1st Dept 2007] ), and a repeated course of ordinary negligence with a foreseeably severe cumulative effect may constitute gross negligence under some circumstances (Internationale Nederlanden [U.S.] Capital Corp. v. Bankers Trust Co., 261 A.D.2d 117, 122 [1st Dept 1999] ).

Liberally construed, the Complaint alleges persistent and fundamental acts of negligence on the part of the Trustees, leading to the foreseeable insolvency of the Trust.⁴ Moreover, the Complaint alleges that the Trustees took certain actions to further their own personal benefit, potentially implicating the exceptions for bad faith or intentional misconduct. And while the BST report provides some evidence that the Trustees' actions amounted to no more than ordinary negligence, it does not conclusively defeat the cause of action at this early stage of the litigation. Accordingly, the Trustees have failed to demonstrate their entitlement to dismissal of the claim for breach of contract as barred by the exculpatory clause (Murray Bresky Consultants, Ltd. v. New York Compensation Manager's Inc., 106 AD3d 1255, 1260–1261 [3d Dept 2013] ).

4 As noted by the Trustees, the factual allegations cited by the WCB in opposition to the motion are drawn largely from the Complaint, but with the additional element of "knowing disregard" incorporated into the WCB's argument (see WCB MOL, at 72–73). At this juncture, the Court need not, and does not, rely upon these unpleaded allegations of "knowing disregard".

2.Legal Sufficiency

The Trustees next contend that the breach-of-contract claim fails because alleged violations of the Trust Agreement must be pleaded as a claim for breach of fiduciary duty. In making this argument, the Trustees rely upon authorities holding than an action brought against a trustee concerning the administration of a trust is equitable in nature, whereas a contract claim is legal in nature. On this basis, and with the support of a learned treatise, the Trustees maintain that a contract claim does not lie with respect to their administration of the Trust.

Whatever abstract legal force the Trustees' argument may have, they have not cited any cases squarely holding that a breach-of-contract claim will not lie against the trustee of a GSIT. In fact, the decisions of this Court and the Appellate Division, Third Department consistently have been to the contrary (see e.g. Madden, 119 AD3d 1022, supra, affg in pertinent part 38 Misc.3d 1229[A], supra; Murray Bresky Consultants, 106 AD3d at 1261 ; New York State Workers' Compensation Bd. v. Consolidated Risk Servs., 40 Misc.3d 1232 [A] [Sup Ct, Albany County 2013], affd in pertinent part 125 AD3d 1250 [3d Dept 2015] ). Under the circumstances, and given the unique attributes of GSITs, the Court is unpersuaded by the Trustees' reliance on authorities concerning charitable and testamentary trusts.

3.Statute of Limitations

Finally, the Trustees argue that the contract claim is time-barred, at least in part. The statute of limitations for the cause of action is six years (CPLR 213[2] ), and the claim

"accrues at the time of the breach", even where damages from the breach are not sustained until later and the "injured party [is] ignorant of the existence of the wrong or injury" (Ely–Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, 402–403 [1993] [internal quotation marks omitted]; see CPLR 203[a] ). Where, as here, "a contract provides for continuing performance over a period of time, each breach may begin the running of the statute anew such that accrual occurs continuously and plaintiffs may assert claims for damages occurring up to six years prior to filing of the suit" (Airco Alloys Div. v. Niagara Mohawk Power Corp., 76 A.D.2d 68, 80 [4th Dept 1980] ). However, "so much of the causes of action asserted by [plaintiff] as accrued more than six years prior to the commencement of the instant action must be dismissed as time-barred" (Westchester County Correction Officers Benevolent Assn., Inc. v. County of Westchester, 65 AD3d 1226 [2d Dept 2009] ).

Applying these principles, the Court concludes that the WCB may pursue recovery of damages for any breaches of contract on and after June 6, 2007, six years prior to the commencement of this action, and the cause of action must be dismissed insofar as it seeks contractual recovery for breaches prior to such date.

In this connection, the Court rejects the WCB's invocation of the doctrine of equitable estoppel. "[A] defendant may be estopped to plead the Statute of Limitations where plaintiff was induced by fraud, misrepresentations or deception to refrain from filing a timely action" (Simcuski v. Saeli, 44 N.Y.2d 442, 448–49 [1978] ; accord Ross v. Louise Wise Servs., Inc., 8 NY3d 478, 491 [2007] ). However, "a plaintiff may not rely on the same act that forms the basis for the claim—the later fraudulent misrepresentation must be for the purpose of concealing the former tort" (Ross, 8 NY3d at 491 ; see Corsello v. Verizon NY, Inc., 18 NY3d 777, 789 [2012] ). "The uncommon remedy of equitable estoppel [must be] triggered by some conduct on the part of the defendant after the initial wrongdoing; mere silence or failure to disclose the wrongdoing is insufficient" (Ross, 8 NY3d at 492 [internal quotation marks and citation omitted] ). As the Complaint does not allege, and plaintiff has not identified, any subsequent misconduct on the part of the Trustees to conceal their alleged wrongdoing, the doctrine has not been shown to have applicability here.⁵

5 The WCB's invocation of the doctrine is rejected with respect to the other defendants for substantially the same reasons.

C.Good Faith & Fair Dealing

The third cause of action alleges that the Trustees breached the implied covenant of good faith and fair dealing. In addition to reiterating the allegations supporting the breach-of-contract claim, this cause of action adds allegations regarding the Trustees' failures to: oversee the day-to-day operations of the Trust and its administrators; take action to address the Trust's deteriorating financial status; communicate honestly with Trust Members regarding the Trust's deficit; follow applicable laws and regulations; and reject excessive or improper payments to others and themselves (Complaint ¶ 396).

The Court agrees with the Trustees that this claim should be dismissed as redundant. It arises from the same operative facts as the claim for breach of contract, and it demands the same measure of damages. Accordingly, the cause of action is dismissed as redundant, and the allegations pleaded therein shall be deemed incorporated into the cause of action for breach of contract (see Mill Fin., LLC v. Gillett, 122 AD3d 98, 104–105 [1st Dept 2014] ; Amcan Holdings, Inc. v. Canadian Imperial Bank of Commerce, 70 AD3d 423, 426 [1st Dept 2010], lv denied 15 NY3d 704 [2010] ; Logan Advisors, LLC v. Patriarch Partners, LLC, 63 AD3d 440, 443 [1st Dept 2009] ).

D.Breach of Fiduciary Duty

The Complaint alleges that the Trustees breached their fiduciary duties to the Trust by failing to perform, or negligently and improperly performing, their responsibilities. The Trustees seek dismissal of the claim as redundant of the contractual claim.⁶ The Court agrees. The allegations supporting this cause of action "are either expressly raised in [the Trust's] breach of contract claim or encompassed within the contractual relationship by the requirement implicit in all contracts of fair dealings and good faith" (Brooks v. Key Trust Co. N.A., 26 AD3d 628, 630 [3d Dept 2006], lv dismissed 6 NY3d 891 [2006] ). Indeed, the factual allegations supporting the claims are almost identical, and the damages sought in the breach of duty claim are a subset of the damages claimed in the contractual causes of action (Complaint ¶¶ 385–386, 397–398, 415–416) (see id.; see also Canzona v. Atanasio, 118 AD3d 841 [2d Dept 2014] ; Chowaiki & Co. Fine Art Ltd. v. Lacher, 115 AD3d 600 [1st Dept 2014] ). Accordingly, the fifth cause of action is dismissed.

6 The Trustees also contend that the cause of action is barred by the limitation-of-liability clause of the Trust Agreement. For the reasons stated above, the Trustees have failed to establish that exculpatory clause bars the claim as a matter of law.

E.Unjust Enrichment

Johnson contends that the ninth cause of action, seeking recovery against her for unjust enrichment, is barred by the existence of the Trust Agreement, otherwise fails to state a cause of action and, in any event, is partially time-barred. This cause of action is premised upon allegations that Johnson "diverted the assets of the Trust in the form of payments and salary for personal and non-personal service and voluntary service upon a group self-insurance task force in violation of the [law] ... for [her] personal use and was unjustly enriched as the result" (Complaint ¶ 454). Plaintiff alleges that in so doing, Johnson operated outside the boundaries of the powers granted to her by the Governing Documents and, in fact, received payments in violation thereof (Complaint ¶ 299).

While the Trust Agreement represents a binding and enforceable contract between the Trust and Johnson, the present record fails to conclusively demonstrate that the subject matter of this dispute is governed entirely by the agreement. In particular, plaintiff alleges that Johnson was unjustly enriched by the receipt of compensation pertaining to extra-contractual services. However, the Court agrees with Johnson that the claim is barred insofar as it pertains to compensation payments made pursuant to the parties' written agreements (see Kosowsky v. Willard Mtn., Inc., 90 AD3d 1127, 1131 [3d Dept 2011] ).⁷

7 Such allegations shall be deemed incorporated into the claim for express breach of contract.

"A cause of action for unjust enrichment accrues upon the occurrence of the wrongful act giving rise to the duty of restitution" ' (Elliott v. Qwest Communications, Corp., 25 AD3d 897, 898 [3d Dept 2006], quoting Congregation Yetev Lev D'Satmar v. 26 Adar N.B. Corp., 192 A.D.2d 501, 503 [2d Dept 1993] ). It is governed by a six-year statute of limitations (CPLR 213[1] ; Elliott, 25 AD3d at 898 ). As a result, plaintiff may pursue recovery for unjust enrichment with respect to wrongful acts on and after June 6, 2007.

F.Fraud and Negligent Misrepresentation

Johnson seeks dismissal of the negligent misrepresentation and fraud claims for failure to allege the necessary legal elements and as redundant of the contract claim. The Complaint alleges Johnson (and others) fraudulently misrepresented to the Trust (and others) the level of risk associated with becoming a member of the Trust, the qualifications of PRM, and the manner in which PRM would administer and manage the Trust. The Complaint also alleges that Johnson and others purposely withheld information, or provided erroneous and misleading information, regarding the true financial condition of the Trust, the Trust's legal compliance, and the potential liability that would be incurred by members. The tenth cause of action, alleging negligent misrepresentation, claims that Johnson falsely represented that she was honestly, diligently, and carefully monitoring the affairs of the Trust and that she would diligently take all actions necessary to ensure that the Trust was operated and administered in a legally compliant manner.

A cause of action for fraud requires plaintiff to "allege a misrepresentation or concealment of a material fact, falsity, scienter by the wrongdoer, justifiable reliance on the deception, and resulting injury' " (Lusins v. Cohen, 49 AD3d 1015, 1017 [3d Dept 2008], quoting Zanett Lombardier, Ltd. v. Maslow, 29 AD3d 495, 495 [1st Dept 2006] ). The circumstances constituting the fraud must be stated in detail (CPLR 3016[b] ). "A claim for negligent misrepresentation requires the plaintiff to demonstrate (1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information" (J.A.O. Acquisition Corp. v. Stavitsky, 8 NY3d 144, 148 [2007], rearg. denied 8 NY3d 939 [2007] ; see Mandarin Trading Ltd. v. Wildenstein, 16 NY3d 173, 180 [2011] ).

Even assuming that the causes of action for fraud are properly pleaded, the Court concludes that they are redundant of the claim for breach of contract. To establish a fraud claim arising in connection with a contractual relationship, "the plaintiff must allege a breach of duty which is collateral or extraneous to the contract between the parties" (Krantz v. Chateau Stores of Canada, 256 A.D.2d 186, 187 [1st Dept 1998] [internal quotation marks and citation omitted]; see Cole, Schotz, Meisel, Forman & Leonard, P.A. v. Brown, 109 AD3d 764 [1st Dept 2013] ). In other words, the alleged fraud must be "sufficiently discrete from that underlying the breach of contract claim [in order to] state a separate cause of action" (Kosowsky, 90 AD3d at 1129 ).

Here, the claim of fraud against Johnson relies upon allegations of misconduct that are encompassed in the WCB's contractual claim, and both claims demand an identical measure of damages. In fact, Johnson's alleged fraud pertains directly to her duties under the Trust Agreement, rather than collateral matters. Under the circumstances, the fraud claim must be dismissed as duplicative (see New York State Workers' Compensation Bd. v. SGRisk, LLC, 116 AD3d 1148, 1154 [3d Dept 2014] ). Similar considerations compel the dismissal of the negligent misrepresentation claim (see RKB Enters. v. Ernst & Young, 182 A.D.2d 971, 972 [1st Dept 1992] ).

G.Claims Against Johnson in Other Capacities

Finally, Johnson moves for dismissal of the complaint against her insofar as the claims are brought against her as "financial advisor" and/or "attorney advisor" to the Trust. While the Complaint does refer to Johnson serving as "legal counsel to the Trust" and "financial advisor to the Trust", it does not include any factual allegations of an evidentiary nature establishing any independent claims to relief based upon Johnson's service in such capacities. Accordingly, the claims against Johnson are dismissed to the limited extent that they are alleged in her capacity as "financial advisor" and/or "attorney advisor" to the Trust, but such dismissal does not affect claims brought against her as trustee or in her individual capacity.

H.Implied Indemnity

The implied indemnity claims against all defendants are discussed below.

SGRISK

Pursuant to 12 NYCRR 317.19, GSITs are required to submit to the WCB an annual actuarial report setting forth an estimate of future claims liabilities. These reports allow for the retrospective assessment of the adequacy of prior member assessments and for the setting of appropriate contribution rates going forward.

SGRisk served as the Trust's actuary through the end of 2006. The Complaint alleges that SGRisk failed to properly perform its actuarial duties by, among other things: failing to properly evaluate the reasonableness of the data and statements provided by PRM and PRM Claims to develop actuarial estimates; failing to adhere to relevant actuarial standards; intentionally underestimating the true claims liability of the Trust by utilizing artificially low loss ratios and improper loss development factors; and colluding with PRM to make the Trust more economically attractive by purposely underestimating the claims liability of the Trust. The Complaint alleges three causes of action against SGRisk: fraud; breach of contract; and common-law indemnification.

SGRisk first contends that the contract and fraud claims are barred by the statute of limitations, arguing that it did not provide any actuarial services to the Trust on or after June 6, 2007, six years prior to the commencement of this action. SGRisk further observes that the WCB's Summons with Notice ("Summons") admits that SGRisk ceased providing actuarial services to the Trust in December 2006. Additionally, the Complaint does not articulate any breaches of contract or fraud committed by SGRisk on or after June 6, 2007. SGRisk further argues that the two-year discovery rule does not apply to the fraud claim because the WCB was aware of issues concerning the Trust's finances and PRM's performance by June 2004.

The WCB acknowledges that SGRisk ceased providing services to the Trust in December 2006, and it does not dispute that the six-year statute of limitations applicable to the contract claim expired prior to the commencement of this action. In an effort to save its otherwise untimely claim, the WCB invokes the doctrine of equitable estoppel. However, this argument is rejected for substantially the reasons stated above with respect to the Trustees. The breach of contract claim therefore is dismissed.

The fraud claim similarly is time-barred under the six-year limitations period. However, CPLR 213(8) also provides that an action may be commenced within "two years from the time [plaintiff] discovered the fraud, or could with reasonable diligence have discovered it". The test is an objective one that requires consideration of "whether the plaintiff was possessed of knowledge of facts from which the fraud could be reasonably inferred. Generally, knowledge of the fraudulent act is required and mere suspicion will not constitute a sufficient substitute" (Sargiss v.. Magarelli, 12 NY3d 527, 532 [2009] [internal quotation marks and citations omitted] ).

In its opposition papers and at oral argument, the WCB maintains that it could not have learned of the alleged fraud until it assumed administration of the Trust and engaged a forensic accountant to undertake a comprehensive investigation. However, the BST report, which was delivered to the WCB in or about February 2013, did not identify any fraudulent acts on the part of the SGRisk. Rather, the BST report found that SGRisk's estimates generally comported with relevant and accepted actuarial standards. Further, even recognizing the complex nature of allegations of fraud pertaining to actuarial estimates, the record shows that the Trust replaced SGRisk with another actuary in 2007, thereby providing the Trust with annual opportunities to discover any fraudulent actuarial estimates previously provided by SGRisk.⁸ Under the circumstances, the Court concludes that "plaintiff failed to meet [its] burden of establishing that [it] was entitled to the benefit of the discovery exception" (Grasso v. Grasso, 45 AD3d 1022, 1023 [3d Dept 2007], citing Lefkowitz v. Appelbaum, 258 A.D.2d 563 [2d Dept 1999] ). Accordingly, the fraud claim must be dismissed as untimely.

8 In this connection, counsel to the WCB expressly disclaimed any contention that the successor actuary acted improperly.

THOMAS GOSDECK

Thomas Gosdeck is sued "Individually, as Qualifying Officer of Program Risk Management, Inc., and as General Counsel to the Community Residence Insurance Savings Plan". According to the Complaint, Gosdeck was involved in establishing the Trust, and he served as legal counsel to the Trust from its formation through the WCB takeover. Gosdeck also is alleged to have served as "qualifying officer" of PRM Claims from November 1998 through April 2010. Five causes of action are alleged against Gosdeck: breach of the fiduciary duties he owed to the Trust in his capacity as counsel; unjust enrichment; negligent misrepresentation; legal malpractice; and common-law indemnity.

A.Personal Jurisdiction

Gosdeck contends that the Complaint must be dismissed for lack of personal jurisdiction on two independent grounds. Gosdeck first asserts that he was not properly served with Amended Summons with Notice ("Amended Summons"). He claims that the Amended Summons was served upon him only by ordinary mail sent to his home address and that he is unaware of anyone having being served on his behalf or the Amended Summons having been affixed to the door of his residence or office.

In opposition, the WCB submits the affidavit of a process server who avers that three attempts were made to personally deliver the Amended Summons to Gosdeck or a person of suitable age and discretion at his residence. After the third attempt, the process server affixed the Amended Summons to the door of Gosdeck's residence and mailed a copy.

The process server's duly executed affidavit constitutes prima facie evidence of proper service (see Citimortgage, Inc. v. Bustamante, 107 AD3d 752, 753 [3d Dept 2013] ), and Gosdeck's claimed lack of awareness of the Amended Summons having been affixed to the door of his residence is insufficient to contradict the process server's affidavit and raise a question of fact requiring a traverse hearing (see Kurlander v. Willie, 45 AD3d 1006, 1007 [3d Dept 2007] ). Accordingly, Gosdeck's claim of improper service is rejected.

Gosdeck further contends that, insofar as he is sued in three separate and distinct capacities, plaintiff was obliged to serve him with three copies of the Amended Summons. The Court disagrees. "While the CPLR is silent as to the number of copies of a summons and complaint that must be served on a person conceivably acting in more than one representative capacity, the guiding principle must be one of notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections" ' (Raschel v. Rish, 69 N.Y.2d 694, 696–697 [1986], quoting Mullane v. Central Hanover Trust Co., 339 U.S. 306, 314 [1950] ).

Here, Gosdeck was not served in a representative capacity; he was served as a natural person who is alleged to be individually and personally liable under contractual and tort theories for claims arising out of his rendition of professional services to the Trust and his receipt of compensation from the Trust.⁹ In any event, considering all relevant facts and circumstances, the Court is satisfied that service of a single copy of the Amended Summons reasonably was calculated to apprise Gosdeck of the pendency of the action and to accord him an opportunity to present his objections and defenses. Accordingly, Gosdeck's claim that he should have been served with multiple copies of the Amended Summons is rejected.

9 While the Complaint also alleges that Gosdeck's service as qualifying officer for PRM Claims conflicted with the duties he owed to the Trust, the WCB cannot sue for wrongs committed against PRM Claims. Thus, plaintiff's claim necessarily is limited to challenging the services rendered by Gosdeck as counsel to the Trust.

B.Statute of Limitations

Gosdeck next contends that the claims alleged again him, other than the cause of action for implied indemnity, are barred by the applicable three-year statute of limitations in whole or in part.

1.Tort Claims

Regardless of the manner of pleading, a claim arising out of the attorney-client relationship alleging negligence or lack of due care by an attorney in rendering legal services is subject to the three-year limitations period of CPLR 214(6) (Matter of R.M. Kliment & Frances Halsband, Architects [McKinsey & Co., Inc. ], 3 NY3d 538, 541–542 [2004] ; Kinberg v. Garr, 60 AD3d 597, 597 [1st Dept 2009] ). Accordingly, claims against an attorney that arise out of the attorney-client relationship ordinarily are treated as one for malpractice only (Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 6 [1st Dept 2008] ).

It is apparent that the cause of action for breach of fiduciary duty arises out of the attorney-client relationship between Gosdeck and the Trust and challenges the legal services rendered by Gosdeck. The Complaint specifically alleges that fiduciary duties breached by Gosdeck were owed "with respect to his role as counsel to the Trust" (Complaint ¶ 418), and the WCB does not allege facts of an evidentiary nature showing that Gosdeck owed fiduciary duties to the Trust in any other capacity. Further, the alleged breaches of fiduciary duty concern Gosdeck's failure to properly monitor the legal affairs of the Trust, operate free from conflicts of interest and otherwise act in the Trust's best interests as its legal counsel (Complaint ¶¶ 419–421; ¶¶ 345–356)—all of which sound in professional negligence.

Contrary to the WCB's contention, the fact that some of the alleged breaches are premised upon alleged conflicts of interests does not transform a legal malpractice claim into one for breach of fiduciary duty. An attorney's conflict of interest during representation is not actionable unless the divided loyalty results in malpractice (Ulico, 56 AD3d at 8 ). Further, this is not a case where the alleged breaches of fiduciary duty arise from facts separate and distinct from the malpractice claim (cf. id. [sustaining breach of duty claim arising from attorney's assistance in transferring plaintiff's business to a competitor] ).

Likewise, the alleged negligent misrepresentations, which concern the legal and financial status of the Trust, arise directly out of Gosdeck's role as legal counsel to the Trust. Again, the Complaint admits as much, citing Gosdeck's role in "monitoring the affairs of the Trust" and "tak[ing] all actions necessary to ensure that the Trust was operated and administered in a legally sufficient manner and in compliance with the WCL and the WCB regulations" (¶ 459).¹⁰

10 Insofar as the negligent misrepresentation claim is premised upon Gosdeck's service as qualifying officer of PRM Claims, the Complaint fails to identify any misrepresentations made by him in that capacity. The only references to Gosdeck's role as qualifying officer appear in connection with the claim that such service was in conflict with his duties as counsel to the Trust. Moreover, the Complaint does not allege "the existence of a special or privity-like relationship imposing a duty on [Gosdeck] to impart correct information to" the Trust as qualifying officer of PRM Claims that is separate and distinct from the duties that Gosdeck owed the Trust as its counsel (see J.A.O. Acquisition Corp. v. Stavitsky, 8 NY3d 144, 148 [2007], supra ).

Accordingly, the Court concludes that the tort claims alleged against Gosdeck are governed by the three-year limitations period of CPLR 214(6). The issue then becomes one of accrual:

A legal malpractice claim accrues when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court. In most cases, this accrual time is measured from the day an actionable injury occurs, even if the aggrieved party is then ignorant of the wrong or injury. What is important is when the malpractice was committed, not when the client discovered it (McCoy v. Feinman, 99 N.Y.2d 295, 301 [2002] [internal citations and quotation marks omitted] ).

As this action was commenced on June 6, 2013, Gosdeck has established, prima facie, that allegations of misconduct prior to June 6, 2010 are barred by the expiration of the statute of limitations. The burden then shifts to plaintiff.

In opposition, the WCB seeks to invoke the doctrine of continuous representation to toll the statute of limitations during the period in which Gosdeck served as the Trust's counsel. The continuous representation doctrine "recognizes that a person seeking professional assistance has a right to repose confidence in the professional's ability and good faith, and realistically cannot be expected to question and assess the techniques employed or the manner in which the services are rendered" (Shumsky v. Eisenstein, 96 N.Y.2d 164, 167 [2001], quoting Greene v. Greene, 56 N.Y.2d 86, 94 [1982] ; accord Williamson v. PricewaterhouseCoopers LLP, 9 NY3d 1, 9 [2007] ). Thus, the statute of limitations is tolled in cases of professional malpractice "where there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim" (McCoy, 99 N.Y.2d at 306 ; see Williamson, 9 NY3d at 10–11 ; Greene, 56 N.Y.2d at 95 ).

The Complaint alleges that Gosdeck continuously represented the Trust from its inception until the WCB takeover for the purpose of providing legal services and advice concerning the Trust's management, operations and administration. If these allegations are credited, Gosdeck's various activities on the Trust's "behalf can be seen as part of a course of continuous representation concerning the same or a related problem" (Greene, 56 N.Y.2d at 95 ). Given the potential applicability of the continuous representation doctrine, Gosdeck has failed to demonstrate his entitlement to dismissal of the pre-June 6, 2010 allegations.¹¹

11 Even if the breach of duty claim were not governed by CPLR 214(6), an analogous tolling would be available to plaintiff under the "open repudiation" rule (see New York State Workers' Compensation Bd. v. Consolidated Risk Servs., 125 AD3d 1250, supra ).

2.Unjust Enrichment

The claim of unjust enrichment is premised upon allegations that Gosdeck (and Johnson) diverted the assets of the Trust in the form of unauthorized and/or illegal payments, and it seeks disgorgement and restitution of such sums (Complaint ¶¶ 454–455). As the cause of action does not take issue with the quality of legal services provided but, rather, liberally construed, alleges that Gosdeck was compensated for services that he did not render to the Trust, it has not been shown to be governed by CPLR 214(6). Finally, the WCB may pursue recovery for unjust enrichment with respect to wrongful acts on and after June 6, 2007, six years prior to commencement of this action.

C.Non–Malpractice Claims

For substantially the reasons stated above, the Court agrees with Gosdeck that the causes of action for negligent misrepresentation and breach of fiduciary duty are redundant of the claim for legal malpractice. All three causes of action arise out of the attorney-client relationship between Gosdeck and the Trust, rely upon essentially the same factual allegations, and demand the same measure of damages. Accordingly, the claims for negligent misrepresentation and breach of fiduciary duty are dismissed, and the factual allegations raised therein shall deemed incorporated into the malpractice cause of action. Finally, and also for the reasons stated above, the Court concludes that the unjust enrichment claim is not duplicative of the malpractice claim.

D.Malpractice

"In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession' and that the attorney's breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages" (Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007], quoting McCoy, 99 N.Y.2d at 301–302 ). To establish causation in a legal counseling context, "a plaintiff must show that [it] ... would not have incurred any damages, but for the lawyer's negligence" (Rudoph, 8 NY3d at 442 ). In moving for dismissal of the claim, Gosdeck argues that the WCB cannot establish that his alleged negligence is the but-for cause of the damages for which recovery is sought.

The causation argument put forward by Gosdeck appears to be an issue of first impression in the GSIT cases. While it is not without some force, the Court concludes that it nevertheless falls short of compelling the dismissal of the malpractice claim at this early stage of the litigation. "When applied in a case involving negligent legal advice ..., it would appear that the but for' formulation is merely a recognition of the factual complexities that may attend proving proximate cause when the legal advice was merely one of a myriad of factors that contributed to the plaintiff-client's ultimate decision or course of action" (Barnett v. Schwartz, 47 AD3d 197, 205 [2d Dept 2007] ; see Utica Cutlery Co. v. Hiscock & Barclay, LLP, 109 AD3d 1161, 1162 [4th Dept 2013] ; see also Borges v. Placeres, 123 AD3d 611 [1st Dept 2014] [citing Barnett with approval] ).

Such complexity is apparent here, where the WCB accuses each of the named defendants of causing the Trust's entire accumulated deficit of more than $60 million. But fairly construed and with the benefit of all reasonable inferences, the Complaint may be understood as alleging that Gosdeck's negligence was the but-for cause of at least some portion of the claimed damages. Accordingly, Gosdeck has failed to demonstrate his entitlement to dismissal of the malpractice claim.¹²

12 The Court further concludes that the documentary evidence adduced by Gosdeck, including the BST report, does not conclusively refute the WCB's allegations of malpractice.

PRM DEFENDANTS

PRM was retained as the Trust's group administrator on or about October 31, 1995 pursuant to the Community Residence Insurance Savings Plan Agreement for Services of Program Administration ("Service Agreement"). PRM served as the Trust's group administrator until the WCB takeover. Pursuant to an Agreement for Services of Claims Administration dated May 1, 2001 ("Claims Agreement"), PRM Claims was substituted as claims administrator for the Trust. The complaint also names four individuals associated with PRM and PRM Claims (collectively "PRM Individuals). Thomas Arney, John M. Conroy and Edward A. Sorensen are alleged to have been owners and/or officers of PRM and/or PRM Claims, and Mark J. Crawford was an assistant vice president.

The Complaint alleges eight causes of action against PRM, PRM Claims and the PRM Individuals (collectively "PRM Defendants"): breach of contract; breach of the implied covenant of good faith and fair dealing; negligent misrepresentation; fraud; fraud in the inducement; contractual indemnity; common-law indemnity; and a request for a declaration that the PRM Defendants are alter-egos of one another. Additionally, the Complaint asserts a claim for breach of fiduciary duty against PRM and the PRM Individuals, and it demands an accounting from PRM and PRM Claims.

A.Statute of Limitations, Waiver, Laches and/or Estoppel

The PRM Defendants argue that all of the WCB's claims are barred by the statute of limitations, as well as by the doctrines of waiver, laches and estoppel. In support of their blanket invocation of the statute of limitations, the PRM Defendants argue that the Trust and the WCB were aware of the Trust's capitalization issues no later than July 2004, when the WCB conducted its first Level I review of the Trust's finances, but it failed to pursue litigation for about nine years. Similarly, the PRM Defendants contend that the claims against them are barred by waiver, laches and/or estoppel because the WCB allowed the Trust to continue operating despite publishing six Level I reviews advising of deficits and regulatory violations and the execution of two consent decrees memorializing identified deficiencies and imposing remedial obligations.

The Court rejects the PRM Defendants' simplistic contention, made in Point II of their opening brief, that all of the causes of action alleged against them accrued no later than July 2004, when the first Level I report was completed. This argument disregards the differing accrual rules governing the various causes of action alleged against them. With the possible exception of the two-year discovery rule applicable to certain fraud-based claims, knowledge of Trust's poor financial condition in 2004 is irrelevant to the statute of limitations analysis.¹³

13 Insofar as the PRM Defendants also make specific arguments regarding the statute of limitations, the Court will address these arguments below in the context of the specific claims in which they are made.

Nor have PRM Defendants established that plaintiff's claims should be dismissed under the doctrines of waiver, laches or estoppel. Waiver is the intentional relinquishment of a known right, and the PRM Defendants have not shown that the Trust or the WCB was aware of the legal claims purportedly waived or identified conduct that reasonably could be construed as manifesting a waiver. Knowledge of the Trust's deficit is not tantamount to knowledge of the claimed wrongdoing, including the PRM Defendants' alleged scheme to defraud. Further, by entering into a consent decree in 2004 to restore itself to fully-funded status, the Trust did not waive its right to pursue monetary recovery from the entities and individuals whose misconduct allegedly caused or contributed to the deficit.

To the extent that the doctrine of laches has any relevance to this action at law, its invocation has not been shown to be warranted. The Complaint alleges that the PRM Defendants engaged in intentional misconduct towards the Trust and that the Trust lacked knowledge of such wrongdoing at pertinent times. Moreover, there was no substantial delay on the part of the WCB in commencing this action after assuming administration of the Trust and becoming aware of the legal claims possessed by the Trust. Accordingly, any belief on the part of the PRM Defendants that the 2004 consent decree immunized them from financial responsibility for any past or future wrongdoing is unreasonable. For similar reasons, PRM Defendants have failed to establish the applicability of the estoppel doctrine due to a lack of reasonable, detrimental reliance.

B.Non–Joinder

The PRM Defendants argue that the Complaint must be dismissed due to the failure to join the former employer-members of the Trust, who remain jointly and severally liable for the deficit. CPLR 1001(a) provides that "[p]ersons who ought to be parties if complete relief is to be accorded between the persons who are parties to the action or who might be inequitably affected by a judgment in the action shall be made plaintiffs or defendants".

The Court is not persuaded that the former Trust members are necessary to accord the complete relief sought by the WCB in this action: a money judgment against the named defendants. Nor has there been any showing that the former Trust members will be inequitably or adversely affected such a judgment. In fact, any recovery obtained herein will have the effect of reducing the Trust's deficit, thereby reducing the non-parties' liability to the WCB. And to the extent that the PRM Defendants may possess claims against these non-parties, no effort at impleader has been shown.

C.Contractual Causes of Action

The causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing are governed by a six-year limitations period that accrued at the time of the breach. Accordingly, the WCB's claim is timely with respect to alleged breaches of the Service Agreement and Claims Agreement on and after June 6, 2007.

With respect to the substance of the contract claim, the PRM Defendants first argue that the Complaint fails to adequately plead non-performance on their part. Specifically, the PRM Defendants contend that the Complaint fails to identify any particular provisions of the relevant agreements that were breached, and they argue that the breaches alleged in the Complaint fall outside the scope of their contractual duties to the Trust. The PRM Defendants further argue that the allegations amount, at best, to a claim of negligent performance of a contract—a cause of action that is not recognized under New York law. Finally, they contend that plaintiff's claims of non-performance are utterly refuted by documentary evidence, including the BST forensic audit and the claim audit prepared by KBM Management, Inc.

The PRM Defendants' objections to the legal sufficiency of the contractual causes of action are without merit. The Complaint alleges that PRM assumed broad contractual duties under the Service Agreement with respect to the management and administration of the Trust and that PRM Claims assumed broad responsibility for the day-to-day administration of claims under the Claims Agreement. The Complaint further delineates the PRM Defendants' alleged breaches of these contractual obligations, the Trust's own performance and resulting damages. No more is required (see Clearmont Prop., LLC v. Eisner, 58 AD3d 1052, 1055 [3d Dept 2009] ; see also CPLR 3013 ).¹⁴

14 Given that plaintiff has stated a legally sufficient contract claim arising under the Service Agreement and the Claims Agreement, the Court is unpersuaded by the PRM Defendants' argument that the Complaint impermissibly seeks to convert contractual obligations into tort duties and claims.

Nor have the PRM Defendants conclusively established that the alleged breaches fall outside the scope of their broad contractual obligations to the Trust, including the duty of good faith and fair dealing implicit therein.¹⁵ Disputes concerning the scope of defendants' express and implied contractual duties, the nature and extent of any non-performance and the extent to which any proven breaches caused the Trust to sustain damages are not questions that can not be resolved as a matter of law on the present record. Further, while the obligations imposed by the 2004 consent decree ultimately may defeat certain of the contractual claims, including the allegations of improper contribution rates and excessive discounting, such allegations are only one aspect of a larger claim that has not been proven to be entirely defeated.

15 The Court agrees with the PRM Defendants that the cause of action alleging breach of the implied covenant of good faith and fair dealing is redundant of the express contractual claim. Accordingly, the second cause of action is dismissed, and the allegations appearing thereunder shall be deemed incorporated into the first cause of action for breach of contract.

D.Breach of Fiduciary Duty

1.Statute of Limitations

A breach of fiduciary duty claim seeking monetary relief generally is subject to a three-year limitations period. However, a six-year limitations period is available where the claim is grounded upon essential allegations of actual fraud (see Kaufman v. Cohen, 307 A.D.2d 113, 119 [1st Dept 2003] ).

Upon review of the Complaint, as amplified by the WCB's submissions in opposition to the motions, the Court concludes that a portion of the breach of duty claim rests on allegations that the PRM Defendants fraudulently concealed or misrepresented the financial condition of the Trust, the danger of operating deficits and issues associated with underwriting deficiencies. As to these allegations, the claim sounds in actual fraud and, therefore, is governed by a six-year statute of limitations. However, the remaining alleged breaches of duty—including claims of failing to provide for the proper capitalization of the Trust, setting improper contribution rates, improperly placing excess insurance and re-insurance coverage, allowing excessive and duplicative expenses and failing to provide adequate claims administration, loss control, risk management and regulatory compliance services—are merely incidental, and not essential, to the allegations of fraud. Accordingly, a three-year limitations period applies (see Carbon Capital Mgt., LLC v. American Express Co., 88 AD3d 933, 939 [2d Dept 2011] ).

With respect to accrual, the Complaint alleges that the PRM Defendants' breaches of duty continued throughout the entire period in which they rendered services to the Trust and that the entire accumulated deficit of the Trust is attributable to the alleged breaches of duty. Under these circumstances, the Trust sustained actual damages from the breaches on an ongoing basis, and the claim should be deemed to have accrued continuously. Contrary to the WCB's contention, the fact that the Trust may not have been aware of the damages caused by the alleged breaches of duty does not prevent the cause of action from accruing; the requirement that actual damages be sustained before a tort claim accrues is not tantamount to a discovery rule (cf. CPLR 213[8] ). However, the WCB correctly argues that accrual of this cause of action was tolled during the period in which the PRM Defendants continued to serve as fiduciaries to the Trust (see Consolidated Risk Servs., 125 AD3d at 1253 ).

Based on the foregoing, the Court concludes that the WCB may pursue fraud-based claims of breaches of duty with respect to breaches on and after August 1, 2005 and other alleged breaches of duty committed on and after August 1, 2008. In other respects, the claim for breach of fiduciary duty is time-barred.

2.Legal Sufficiency

With respect to the merits of the claim, the PRM Defendants argue that dismissal is warranted due to the existence of a contract that covers precisely the same subject matter. The WCB responds that its breach of fiduciary duty claim rests upon allegations distinct from the contractual claim. In particular, the WCB alleges that the PRM Defendants undertook advisory roles that were independent of their contractual obligations. In this connection, plaintiff emphasizes that the PRM Defendants' relationship to the Trust started before the Trust's existence and before the Service Agreement was drafted, observing that Arney has been described as the Trust's "architect". The WCB further alleges that the PRM Defendants performed services outside the scope of the contractual relationship, including certain brokering services.

The Court concludes that Complaint fails to allege the existence of fiduciary duties separate and distinct from the contractual relationship between the Trust and the PRM Defendants. The Trust may have reposed trust and confidence in the PRM Defendants based upon their claimed expertise and experience with GSIT administration, but the Complaint is devoid of factual allegations of an evidentiary nature tending to establish that the PRM Defendants assumed duties distinct from broad and comprehensive responsibilities attendant to serving as the Trust's group administrator.¹⁶ And even if the WCB's allegations of extra-contractual services were adequately pleaded, there is nothing in the nature of loss control services or insurance brokerage services that would give rise to fiduciary duties owing to the Trust. Finally, the remaining alleged breaches of duty "are either expressly raised in [the WCB's] breach of contract claim or encompassed within the contractual relationship by the requirement implicit in all contracts of fair dealings and good faith" (Brooks v. Key Trust Co. N.A., 26 AD3d 628, 630, supra ). Accordingly, the cause of action for breach of fiduciary duty is dismissed.

16 The WCB's reliance on pre-formation activities that occurred almost two decades ago similarly is unavailing.

E.Fraud/Fraud in the Inducement

1.Sufficiency

The PRM Defendants first seek dismissal of the fraud claims on the ground that they have not been pleaded with the requisite particularity. The Complaint alleges that the PRM Defendants continually and knowingly concealed the Trust's true financial condition and its compliance with the WCL and attendant regulations. PRM and the PRM Individuals also are alleged to have misrepresented the level of risk associated with becoming a member of the Trust and the experience and capability of PRM to properly administer and manage the Trust. PRM Claims is said to have made similar misrepresentations with respect to its experience and capabilities. The Trust and its members allegedly relied upon these fraudulent misrepresentations and concealments to their detriment. The fraudulent misrepresentation claim alleges that the Trust was induced to contract with PRM and PRM Claims as a result of the foregoing misrepresentations.

The WCB's allegations of a long-term, overarching scheme to defraud "are specific enough to satisfy the pleading requirement of CPLR 3016(b), which is intended to inform a defendant with respect to the incidents complained of' " (New York State Workers' Compensation Bd. v. SGRisk, LLC, 116 AD3d 1148, 1154, supra , quoting Pludeman v. Northern Leasing Sys., Inc., 10 NY3d 486, 491 [2008] ). Further, the allegations of the Complaint, taken in a light most favorable to plaintiff, suffice to permit an inference of fraud, at least at this stage of the litigation (see Pludeman, 10 NY3d at 492 ).

The PRM Defendants also contend that the fraud claims are duplicative of the contract cause of action. To establish a fraud claim arising in connection with a contractual relationship, "the plaintiff must allege a breach of duty which is collateral or extraneous to the contract between the parties" (Krantz v. Chateau Stores of Canada, 256 A.D.2d 186, 187, supra [internal quotation marks and citations omitted]; see Cole, Schotz, Meisel, Forman & Leonard, P.A. v. Brown, 109 AD3d 764, supra ). In other words, the alleged fraud must be "sufficiently discrete from that underlying the breach of contract claim [in order] to state a separate cause of action" (Kosowsky v. Willard Mtn., Inc., 90 AD3d 1127, 1129, supra ).

The WCB's allegation that the Trust fraudulently was induced to contract with the PRM and PRM Claims is sufficiently collateral from the alleged breaches of contract as to state a separate cause of action, as is plaintiff's over-arching claim of a scheme to defraud by denying the Trust access to accurate information concerning its finances and regulatory compliance. However, the remaining non-inducement allegations of fraud rely upon essentially the same allegations of wrongdoing as the breach of contract claim and, therefore, are not sufficiently collateral as to support a separate claim.

Finally, the claim of fraud must be dismissed for lack of standing insofar as it is predicated upon fraud allegedly committed against members of the Trust (New York State Workers' Compensation Bd. v. Marsh U.S.A., Inc., 126 AD3d 1085, 1087 [3d Dept 2015] ).

2.Statute of Limitations

The PRM Defendants also contend that the fraud claim is barred by the statute of limitations, at least in part. Claims of fraud generally are subject to a six-year statute of limitations, but may be commenced within "two years from the time the [plaintiff] ... discovered the fraud, or could with reasonable diligence have discovered it" (CPLR 213[8] ). Accordingly, the WCB may pursue claims of fraud with respect to acts or omissions on and after June 6, 2007 under the six-year limitations period.

Further, the WCB's invocation of the two-year discovery rule is not foreclosed by the record. There has been no conclusive demonstration as to when the Trust (or the WCB, as its successor) "was possessed of knowledge of facts from which the fraud could be reasonably inferred" (Sargiss v. Magarelli, 12 NY3d 527, 532, supra ). Although the Trust and the WCB knew of the Trust's financial difficulties and certain regulatory violations over the years, awareness of an accumulated deficit and discrete operational deficiencies is not necessarily tantamount to knowledge from which the alleged scheme to defraud could be inferred—particularly given the nature of the scheme, which is said to involve ongoing concealment of the Trust's true financial condition. Accordingly, the PRM Defendants have failed to prove that the fraud claim could have been discovered prior to receipt of the BST forensic report on February 1, 2013.

Even assuming, however, that the PRM Defendants' alleged misrepresentations regarding their skill, qualifications and ability to undertake the significant task of GSIT administration constitute actionable statements of fact, rather than mere opinions or commercial puffery, the WCB has failed to establish its entitlement to the two-year discovery exception as to such allegations. By June 6, 2011, PRM had administered the Trust for about sixteen years and PRM Claims had administered workers' compensatin claims for more than ten years. Considering all the relevant circumstances, including the Trust's poor financial performance over much of this lengthy period, any misrepresentations or concealments by PRM and PRM Claims regarding their capabilities to properly manage the Trust were readily ascertainable well before June 6, 2011. As the contracts with the Trust allegedly induced by the PRM Defendants' fraudulent misrepresentations were executed more than six years prior to the commencement of this action, the claim of fraudulent inducement is dismissed as time-barred.

F.Negligent Misrepresentation

Plaintiff alleges that the PRM Defendants negligently imparted to the Trust and its members inaccurate and incomplete information concerning the financial status of the Trust, the risks associated with becoming a member of the Trust, the ongoing risk associated with remaining a member of the Trust and the competency of PRM and PRM Claims in acting as the administrator and claims administrator of the Trust. The PRM Defendants move for dismissal of the claim as, among other things, redundant of the contractual cause of action.

Insofar as plaintiff alleges that the PRM Defendants negligently imparted information to the Trust,¹⁷ the Court concludes that the parties' contractual relationship is controlling and plaintiff's allegations are either expressly raised in the breach of contract claim or encompassed within the contractual relationship by the requirement implicit in all contracts of fair dealings and good faith. Accordingly, the cause of action is dismissed (see Torok v. Moore's Flatwork & Founds., LLC, 106 AD3d 1421, 1422 [3d Dept 2013] ).

17 As stated above, the WCB does not have standing to vindicate the legal rights of the Trust's employer-members.

G.Alter Ego

The WCB seeks a declaration that "PRM, PRM Claims, and the PRM Individual[s] are each the alter ego of the other as they perform similar functions, share profits and both are or were managed by Conroy or Arney." The PRM Defendants challenge the legal sufficiency of this claim.

In general, members, directors and officers of a business corporation are not liable for the contractual obligations or torts of the entity, but an individual may be held liable for his own, independently tortious conduct (Meyer v. Martin, 16 AD3d 632, 634 [2d Dept 2005] ). "A plaintiff seeking to pierce the corporate veil must demonstrate that a court in equity should intervene because the owners of the corporation exercised complete domination over it in the transaction at issue and, in doing so, abused the privilege of doing business in the corporate form, thereby perpetrating a wrong that resulted in injury to the plaintiff" (East Hampton Union Free School Dist. v. Sandpebble Bldrs., Inc., 66 AD3d 122, 126 [2d Dept 2009] [citations omitted], affd 16 NY3d 775 [2011] ). Corporate separateness may also be disregarded "when a corporation has been so dominated by an individual or another corporation and its separate entity so ignored that it primarily transacts the dominator's business instead of its own and can be called the other's alter ego" (Matter of Island Seafood Co. v. Golub Corp., 303 A.D.2d 892, 893–894 [3d Dept 2003] ).

This cause of action must be dismissed insofar as plaintiff seeks a declaration that PRM and PRM Claims are alter egos of one another. Conclusory assertions aside, the Complaint fails to allege evidentiary facts that, if credited, would establish a basis for disregarding corporate separateness (see Ferro Fabricators, Inc. v. 1807–1811 Park Ave. Dev. Corp., 127 AD3d 479, 481 [1st Dept 2015] ; Andejo Corp. v. South St. Seaport Ltd. Partnership, 40 AD3d 407, 407 [1st Dept 2007] ). The fact that the two corporations may perform similar functions, share profits and share common officers, directors or managers is not a basis for alter ego liability (see Pebble Cove Homeowners' Assn. v. Fidelity N.Y. FSB, 153 A.D.2d 843, 843 [2d Dept 1989] ; see also 14 N.Y. Jur Business Relationships § 41).

However, the Complaint, as amplified by plaintiff's submissions in opposition to the motion and construed liberally, may be understood to allege that the PRM Individuals, particularly Arney, dominated the PRM entities, used them for their own personal benefit and employed them as instrumentalities to commit wrongs against the Trust. While these allegations are sparse and not well articulated, plaintiff should be given the opportunity for disclosure.

H.Accounting

To state a cause of action for an accounting, plaintiff must allege a confidential relationship that induced it to entrust defendants with money or property and that no adequate legal remedy exists (Kastle v. Steibel, 120 A.D.2d 868, 869 [3d Dept 1986] ). Even assuming the first two elements have been adequately alleged, it is apparent that plaintiff has an adequate remedy at law in the form of this action. Accordingly, the cause of action for an accounting is dismissed.

I.Contractual Indemnification

The PRM Defendants seek dismissal of the causes of action for contractual indemnity. These claims are predicated upon provisions in the Service Agreement and Claims Agreement obliging PRM and PRM Claims to contractually indemnify and hold harmless the Trust, the Trustees and members from any and all claims and losses arising out of or attributable to the services required to be performed under their respective contracts. The indemnity obligations are mutual, and the Trust therefore is required to indemnify PRM and PRM Claims for losses arising out of or attributable to the actions of the Trustees, employees and members.

In moving for dismissal, the PRM Defendants emphasize the mutual nature of the indemnity obligations, as well as the joint and several liability of the Trust members for any deficit. The Court concludes, however, that these factors do not, either individually or collectively, negate the PRM Defendants' potential indemnification obligation or plaintiff's causes of action seeking to enforce those obligations. There is nothing in the relevant contracts that nullifies or limits the indemnity obligations on account of the member-employers' joint and several obligation to fund the Trust under the WCL, applicable regulations and the relevant indemnity agreements between the members and the Trust. Indeed, this joint and several liability was present when PRM and PRM Claims entered into the agreements containing the indemnification clauses. And to the extent that the PRM Defendants claim an entitlement to indemnification or assert a breach of Trust's obligation under the mutual-indemnity obligation, such a claim or assertion merely is an affirmative defense or potential counterclaim.

THE MP AGENCY DEFENDANTS

On or about October 31, 1995, the Trust and PRM entered into an agreement appointing MPAgency as the exclusive marketing agent to the Trust. In that role, MPAgency marketed the services of the Trust to prospective members in exchange for a 6.25% commission on all premiums paid. MPAgency served as exclusive marketing agent until October 31, 2009. The Complaint alleges six causes of action against MPAgency and its principals, Morton G. Case and Priscilla H. Hoffman (collectively "MPAgency Defendants"): fraud; fraud in the inducement; negligent misrepresentation; declaratory judgment; accounting; and common-law indemnity.

A. Misrepresentation Claims

The alleged misrepresentations supporting the causes of action for fraud, fraud in the inducement and negligent misrepresentation ("Misrepresentation Claims") fall into three categories: (a) misrepresentations to prospective members about the advantages of Trust membership; (b) misrepresentations to the Trust that PRM was an experienced self-insured trust administrator capable of undertaking the significant task of properly administering and managing a GSIT; and (c) misrepresentations to and concealments from the Trust regarding its true financial condition, the Trust's legal compliance and the potential liability of members. In addition, the Complaint alleges that "MPAgency falsified member application documents" to understate member payroll amounts (¶ 174).

1.Advantages of Trust Membership

The WCB first claims that the MPAgency Defendants misrepresented the advantages of Trust membership to potential members and the general public. According to the Complaint, MPAgency represented to prospective members that the Trust was an alternative to insurance that "contain[ed] administrative costs and drastically reduced expenses" by using the "same techniques as large companies", including maintaining "strict criteria for participation". MPAgency further advertised that the Trust would assist member employers in maintaining lower experience-modification factors ("EMFs") and keep premiums significantly below the levels of commercial insurers and the State Insurance Fund. In addition, MPAgency allegedly represented to that the Trust provided "free safety engineering and loss control".

Even assuming that these marketing representations concerning the advantages of Trust membership are actionable and properly pleaded, the Court concludes that the WCB lacks standing to vindicate such a claim. As alleged in the Complaint, these alleged misrepresentations were directed at potential Trust members and members of the general public, not the Trust. In its capacity as successor, the WCB stands in the shoes of the Trust, but it acquires no greater rights than its predecessor. As plaintiff has articulated no injury-in-fact to the Trust caused by the alleged misrepresentations,¹⁸ the WCB cannot pursue these claims in its capacity as successor (New York State Workers' Compensation Bd. v. Marsh U.S.A., Inc., 126 AD3d 1085, 1087, supra ). Nor does the WCB allege an injury-in-fact in its governmental capacity. Accordingly, this branch of the Misrepresentation Claims must be dismissed.

18 Notably, there is no claim that the MPAgency possessed the authority to admit new members to the Trust, and the documentary evidence before the Court confirms the absence of such authority.

2.Quality of Services

The second category of alleged misrepresentations concerns the quality of the services provided by PRM. The Complaint alleges that MPAgency represented to the Trust that PRM was an experienced GSIT administrator capable of undertaking the significant task of properly administering and managing the Trust and that PRM would hire those professionals they deemed necessary (at PRM's expense) to assist it in administering and managing the Trust.

Even liberally construed, these alleged misrepresentations are in the nature of opinions regarding the experience, skill and capabilities of a service provider and subjective expectations and predictions regarding future events. As such, they are not actionable in tort (Nigro v. Lee, 63 AD3d 1490, 1491 [3d Dept 2009] ; Serbalik v. General Motors Corp., 246 A.D.2d 724, 725 [3d Dept 1998] ; Landes v. Sullivan, 235 A.D.2d 657, 659 [3d Dept 1997] ). Further, given the nature of the alleged misrepresentations, any claim of justifiable reliance by the Trust must fail as a matter of law. The Trust could not reasonably have relied upon the representations of its marketing agent in selecting or retaining its group administrator, even assuming that it actually did so rely, an allegation that is pleaded in a highly conclusory and non-particularized manner. Accordingly, this branch of the Misrepresentation Claims must also be dismissed.

3.The Trust's Financial Condition

The final category of misrepresentations allegedly made by MPAgency relate to the Trust's financial condition. In this regard, the Complaint principally alleges that MPAgency and other defendants misrepresented or concealed information from the Trust regarding its true financial condition, the Trust's compliance with the WCL and attendant regulations, and the potential liability that would be incurred through the admission of new members. Somewhat relatedly, the Complaint alleges, solely upon information and belief, that MPAgency falsified member application documents by understating "member payroll amounts to the Trustees in order to hold down member contributions and thereby induce new members to join the Trust."

The Trust could not, as a matter of law, have justifiably relied upon its marketing agent for information regarding its financial and legal affairs. MPAgency owed no responsibilities to the Trust in the areas, as the documentary evidence confirms that the marketing agent's role was limited to marketing the Trust to potential members. Further, the Complaint does not allege any special financial knowledge on the part of MPAgency or any special duty arising from the parties' relationship that would render any such reliance by the Trust justifiable.

To the extent that the Complaint alleges that MPAgency provided false application documents to the Trust, defendants have not demonstrated their entitlement to dismissal of the claim. While the claim is sparsely pleaded, it suffices to put defendants on notice of the incidents complained of and is not conclusively defeated by the documentary evidence adduced by MPAgency.¹⁹ Finally, as so limited, defendants have not shown the Misrepresentations Claims are entirely time-barred.

19 Given the nature of these alleged misrepresentations, defendants have not conclusively demonstrated the absence of a special duty or privity-like relationship, so as to defeat the claim for negligent misrepresentation premised thereupon.

Accordingly, the branch of the MPAgency Defendants' motion seeking dismissal of the third category of Misrepresentation Claims is granted in part and denied in part.

B.Alter Ego

The WCB seeks a declaration that MPAgency and its principals are the alter egos of one another. Applying the legal principles stated above, the Court concludes that this cause of action must be dismissed. The Complaint is devoid of evidentiary facts that, if credited, would establish a basis for disregarding the corporate form. Even liberally construed, there are no factual allegations regarding abuse of the corporate form by its principals, domination of the corporation or the like. As the claim rests solely upon conclusory and unsupported assertions, it must be dismissed.

C.Accounting

To state a cause of action for an accounting, plaintiff must allege a confidential relationship that induced it to entrust defendants with money or property and that no adequate legal remedy exists (Kastle, 120 A.D.2d at 869 ). The Complaint does not allege that MPAgency was entrusted with the Trust's money or property. Further, it is apparent that plaintiff has an adequate remedy at law. Accordingly, the cause of action for an accounting is dismissed.

IMPLIED INDEMNITY

Plaintiff's eighteenth cause of action is for implied indemnity against all defendants. The Complaint alleges that the WCB, through no fault of its own, was required by the WCL to assume administration of the Trust as a result of defendants' wrongful conduct. The Complaint further alleges that the Trust, through no fault of its own, has sustained damages from the same misconduct, in the form of increased administration expenses attributable to the WCB takeover. Thus, the claim is brought both in the WCB's capacity as successor to the Trust and in its governmental capacity.

The following legal principles govern a claim for implied indemnity:

Implied indemnity is a restitution concept which permits shifting the loss because to fail to do so would result in the unjust enrichment of one party at the expense of the other. Generally, it is available in favor of one who is held responsible solely by operation of law because of his relation to the actual wrongdoer, but authorities have noted that the principle is not ... limited to those who are personally free from fault....

The purpose of all contribution and indemnity rules is the equitable distribution of the loss occasioned by multiple defendants. In furtherance of that purpose the courts have granted relief in a variety of cases in favor of the party who, in fairness, ought not bear the loss, allowing it to recover from the party actually at fault. They have found indemnity appropriate because of a separate duty owed the indemnitee by the indemnitor (thus the indemnitee may recover for the wrong to it), because there is a great difference in the gravity of the fault of the two tort-feasors, or because the duties owed to the injured plaintiffs and causing injury are disproportionate (Mas v. Two Bridges Assoc., 75 N.Y.2d 680, 690–691 [1990] [internal quotation marks and citations omitted] ).

In other words, "[t]he underpinning of indemnity actions is the prevention of unjust enrichment. In cases where such unfairness would arise from the assumption by a third party of another's debt or obligation, a contract to reimburse or indemnify is implied by law' " (State of New York v. Stewart's Ice Cream Co., 64 N.Y.2d 83, 88 [1984], quoting Brown v. Rosenbaum, 287 N.Y. 510, 519 [1942] ). "[T]he key element ... is not a duty running from the indemnitor to the injured party, but rather is a separate duty owed the indemnitee by the indemnitor.' The duty that forms the basis for the liability arises from the principle that every one is responsible for the consequences of his own negligence, and if another person has been compelled to pay the damages which ought to have been paid by the wrongdoer, they may be recovered from him" (Raquet v. Braun, 90 N.Y.2d 177, 183 [1997] [internal citation omitted] ).

As an initial matter, the claim for implied indemnity must be dismissed insofar as it is brought by plaintiff in its capacity as successor to the Trust. "As the successor, plaintiff stands in the shoes of the Trust, but, like an assignee, does not obtain any greater rights than those originally possessed; accordingly, plaintiff is only entitled to indemnification on this basis if the Trust would have had such a claim. Here, the complaint does not allege that the Trust and defendants had common duties to third parties that were discharged by the Trust, but should have been discharged by defendants" (State of N.Y. Workers' Compensation Bd. v. Madden, 119 AD3d 1022, 1024, supra ). Accordingly, plaintiff must pursue direct claims in its capacity as successor to the Trust to press its allegations that defendants' misconduct has caused the Trust to sustain damages in the form of increased administrative expenses, the payment of unnecessary claims or otherwise.

A claim of implied indemnity is, however, available to plaintiff in its governmental capacity where the allegations of the Complaint establish that the WCB and defendants owed a common duty to some other party that ought to be discharged by defendants. In Madden, the Third Department held that the trustees of a GSIT shared with the WCB "a common duty to the covered employees to ensure that the [GSIT] maintained adequate reserves such that its assets would cover its liabilities" (id. at 1125). To similar effect is Murray Bresky (106 AD3d 1255, supra ), in which a former trust member's claim for implied indemnity against the trustees was upheld "given their common duty to plaintiff's covered employees and to the Workers' Compensation Board to maintain adequate reserves in the trust so that it was adequately funded and its assets would cover its liabilities" (id. at 1258–1259 ).

On the other hand, the Madden Court sustained the dismissal of a claim for implied indemnity against professionals who rendered legal, accounting and auditing services to a GSIT. "Relative to the professional defendants, plaintiff does not claim that they had any duty in common with plaintiff's statutory obligation to maintain the Trust's solvency; instead, the complaint alleges that the professional defendants owed duties to the Trust to provide professional auditing, accounting and legal services. Accordingly, plaintiff failed to state a cause of action in common-law indemnification against these defendants" (119 AD3d at 1125).

Given the binding force of Madden, the Trustees' motion to dismiss the implied indemnity claim must be denied. The Trustees have failed to distinguish the Complaint filed in this action from the Madden complaint.

Further, this Court previously held in NYAHSA Servs., Inc. Self Ins. Trust v. People Care Inc. (45 Misc.3d 1225[A] [December 5, 2014] ), that an employer-member of a GSIT possesses an implied indemnity claim against the GSIT's group administrator. Specifically, the Court held that the third-party complaint in People Care sufficiently alleged that the group administrator shared common duties with the employer-member under the WCL, implementing regulations and relevant contracts, including a common duty to ensure the fiscal soundness of the Trust. In particular, 12 NYCRR part 317 ("Part 317") imposes upon the group administrator of a GSIT responsibility to ensure compliance with applicable laws and regulations, including the duty of GSITs "to maintain at all times sufficient trust assets within the trust fund to exceed claims and all other liabilities"% (see 12 NYCRR 317.2 [g], 317.9[a] ). Thus, the branch of the PRM's motion seeking dismissal of the common-law indemnification claim is denied.

As to the remaining moving defendants, the Court concludes that the Complaint fails to state a claim for common-law indemnification. The WCB has failed to allege that SGRisk, Gosdeck, PRM Claims or MPAgency owed duties in common with the WCB's "statutory obligation to maintain the Trust's solvency" (Madden, 119 AD3d at 1125). Rather, it is apparent from the Complaint that the duties that these individuals and entities owed to the Trust were to provide actuarial, legal, claims administration and marketing services, respectively.

In this connection, the Court rejects the WCB's reliance on 12 NYCRR § 317.8 as a source of an alleged common duty. The cited regulation, entitled "Integrity of the group self-insurer's trust funds", begins as follows:

Every effort shall be made by the group self-insurer, its trustees, its group administrator or other agent(s) to preserve the integrity, strength and liquidity of the group's funds so as to permit the timely and complete payment of all group claims and other liabilities. With the exception of groups consisting of municipal corporations, unless otherwise authorized by the chair, group self-insurers shall be subject to the following requirements with respect to trust funds.

The regulation goes on to prescribe the manner in which a GSIT's trust funds may be used and to impose certain restrictions on the borrowing, commingling and investment of trust funds and the distribution of dividends or excess earnings (12 NYCRR 317.8 [a-e] ).

Read as a whole, it is clear that the regulation is directed solely at protecting the funds held in trust by a GSIT. The second sentence of the regulation makes compliance with the provisions of subdivisions (a) through (e) mandatory, and those subdivisions are limited to restricting the use, borrowing, commingling, investment and distribution of trust funds. There is no reference to assessments or other means by which a GSIT may raise sufficient revenues to maintain solvency. Nor does the regulation speak to the expenditure of trust funds, except to prohibit trust funds from being spent for non-trust purposes.

Against this backdrop, the opening sentence's use of the term "the group's funds" can only be understood as referring to the funds held in trust by the GSIT, a reading that fully comports with the purpose expressed in the title of the regulation: ensuring the "[i]ntegrity of the group self-insurer's trust funds". Accordingly, 12 NYCRR 317.8 is not the source of an independent duty on the part of a GSIT's agents to maintain the fiscal solvency of the trust, and the regulation does not give rise to a common duty that would support an claim for implied indemnification.

Nor is there anything else in Part 317 that would give rise to such a duty on the part of those who render actuarial, legal, claims administration and marketing services to a GSIT. With respect to actuaries, 12 NYCRR 317.19(a)(3) imposes a duty on GSITs to file annually "an actuarial report certified by an independent qualified actuary verifying claims ..., and the method of calculating such claims, based upon accepted actuarial standards of practice". Similarly, a GSIT is required to retain a claims administrator, which shall "be responsible for the administration and defense of workers' compensation claims" (12 NYCRR 317.2 [d], 317.4[a][4][iv] ). Part 317 also imposes certain requirements on those who solicit new GSIT members, including insurance brokers and consultants (12 NYCRR 317.17, 317.18 ). But nothing in these regulations or other provisions of Part 317 imposes a duty upon actuaries, lawyers, claims administrators and marketing agents to maintain the solvency of a GSIT.²⁰ Nor has the WCB identified anything in the pertinent contracts imposing such a duty.

20 There does not appear to be anything in Part 317 that imposes any specific powers or duties upon one who serves as legal counsel to a GSIT.

Accordingly, the branch of the motions of SGRisk, Gosdeck, PRM Claims and MPAgency seeking dismissal of the cause of action for common-law indemnification is granted.

CONCLUSION

Accordingly,²¹ it is

21 The Court has considered the parties' remaining arguments and contentions but finds them unavailing or unnecessary to the disposition ordered herein.

ORDERED that the motion of SGRisk is granted, and the complaint is dismissed as against it; and it is further

ORDERED that the motions of the Trustees, Gosdeck, the PRM Defendants and the MPAgency Defendants are granted in part and denied in part, in accordance with the foregoing; and it is further

ORDERED that within thirty days from service of this Decision & Order upon defendants with notice of entry, the parties shall confer regarding the scheduling of a preliminary conference, and plaintiff shall contact Chambers with three proposed dates and times for the holding thereof; and finally it is

ORDERED that prior to said preliminary conference, counsel shall consult and confer in accordance with Rule 8 of the Commercial Division.

This constitutes the Decision and Order of the Court. This Decision and Order is being transmitted to plaintiff's counsel for filing and service. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220, and counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.