Opinion
107160/07.
Decided August 29, 2007.
In this declaratory judgment action (the "Declaratory Judgment Action"), plaintiff Landmark Insurance Company ("Landmark") seeks a Judgment declaring that defendant Virginia Surety Company (Virginia") belatedly and improperly rejected coverage in connection with lead-paint personal injury litigation commenced against its insureds One Two Four Madison Associates, L.L.C. and Stellar Management ("The Landlord Defendants") in Gray v. One Two Four Madison Ave. (Index Number 119928/03) (the "Gray Action").
In motion sequence number 01, Landmark moves by Order to Show Cause for a stay of all proceedings in the Gray Action, which is scheduled for trial on September 6, 2007 after having been adjourned numerous times.
Background
Landmark is one of three insurance companies that agreed to defend the Landlord Defendants in the Gray Action, a lead-poisoning case commenced on behalf of an infant plaintiff. The other two insurance companies are Interstate Insurance Company ("Interstate") and Virginia.
The Gray Action was commenced on or about November 17, 2003. Affirmation in Support of Landmark's Motion ("Supp."), Ex. 8, Verified Complaint in Declaratory Judgment Action ("DJ Complaint"), at ¶ 19. The infant plaintiff, by his mother and natural guardian, claims that he was exposed to lead paint between August 1, 1998 and May 4, 2002 and that as a result he suffers from mental defects. Supp., Ex. 5, Verified Complaint in Gray Action, at ¶¶ 50-79.
Shortly after the Gray Action was commenced, the Landlord Defendants forwarded copies of the summons and complaint to their respective insurance companies. The Landlord Defendants received notification from Interstate that it had agreed to participate in their defense. The same was true for both Virginia and Landmark. Supp., Ex. 8, DJ Complaint, at ¶¶ 21-22. The three insurance companies retained the law firm of Lester Schwab Katz and Dwyer to represent the Landlord Defendants in the Gray Action. Id., at ¶ 23.
The Request for Judicial Intervention in the Gray Action was filed more than three years ago — on March 31, 2004. The Note of Issue, signifying the end of disclosure and readiness for trial, was filed more than two years ago — on April 29, 2005.
New York City Health and Hospitals Corporation ("NYCHHC"), another defendant in the Gray Action, moved for summary judgment dismissal of the claims asserted against it, which sounded in medical malpractice. The Court denied the motion, and on April 17, 2006, the Appellate Division, First Department upheld the decision.
Since the filing of the Note of Issue, this Court scheduled numerous — at least a dozen — pre-trial conferences and assigned at least three trial dates in an effort to either facilitate a settlement or proceed to trial for a final resolution.
NYCHHC settled the infant's claims as against it on January 22, 2007. The action, however, continued as against the Landlord Defendants and, on April 24, 2007, the Landlord Defendants, made their latest settlement offer for a sum certain. In the proposed settlement offer, Landmark and Interstate (two out of the three insurance companies) each agreed to contribute an equal sum, 2/5ths of the total settlement. Landmark and Interstate each believed that Virginia agreed to contribute the remaining 1/5 of the total.
The following day, however, on April 25, 2007, instead of agreeing to pay 1/5th of the proposed settlement, Virginia wrote the Landlord Defendants a letter stating that it was disclaiming any coverage in the Gray Action. Supp., Ex 7. The disclaimer letter stated, in pertinent part:
"The facts as developed in the pre-trial discovery have shown that there was NO' OCCURRENCE within the [Virginia] policy term. Therefore, any and all obligations to indemnify you or any further defense obligations under the subject policy and in connection with this litigation are hereby disclaimed."
Id., at 2.
Distressed at Virginia's determination to suddenly disclaim coverage after years of litigation of the Gray Action, after a number of Court conferences, Landmark commenced this Declaratory Judgment Action in May 2007. In its verified complaint, Landmark recounts that the Landlord Defendants procured three separate commercial insurance policies to cover their buildings, including 2325 East 124th Street, the property in question in the Gray Action: the first from Landmark was effective from July 1, 1998 through January 15, 2000; the second from Interstate covered the period from January 15, 2000 through January 15, 2001 and the third from Virginia was effective from January 15, 2001 through January 15, 2003. Supp., Ex. 8, DJ Complaint, at ¶¶ 11-16.
Landmark now seeks a stay of any and all proceedings, including the trial, in the Gray Action, arguing that without such relief
"Landmark will suffer irreparable harm and prejudice. In the event of a settlement or judgment against [the Landlord Defendants, it] may be compelled to satisfy the portion of the expenses of defenses and indemnity which are rightfully attributable to [Virginia] for Gray's alleged injuries which allegedly occurred during the period of time that [the Landlord Defendants] were insured by [Virginia]."
Supp., at ¶ 30.
Landmark claims that plaintiff in the Gray Action would not be prejudiced "because the action, after the stay, will proceed just as it would in its absence." Supp., at ¶ 40. Landmark also states that once the insurance coverage is determined, the Landlord Defendants would be better able to "assess their position with regard to potential settlement." Id.
In opposition, Virginia argues that Landmark's request for a stay of the Gray Action should be denied. Virginia Surety's Affirmation in Opposition ("Virginia Opp."), at ¶¶ 13-16. Virginia asserts that Landmark is moving for a stay in the Gray Action as a means of pressuring the court for "an expedited decision in the declaratory action." Virginia Opp., at ¶ 15. Virginia states:
"The Declaratory Judgment Action is in its infancy; the time for [Virginia] to answer has not yet run, and there is much to do to properly adjudicate Landmark's claims for co-insurance. Landmark, whose policy was effective during the period when the infant plaintiff's lead levels were rising, and thus, presumably, when the infant was exposed to or ingesting lead paint (i.e. an occurrence' under Landmark's policy) should defend the action, as it had agreed to do in 2003. If, after the declaratory action is fully adjudicated, it believes itself entitled to co-insurance from [Virginia], it can seek to collect then. There is no reason or basis to stay the underlying action.
Virginia Opp., at ¶ 16.
Plaintiff in the Gray Action also opposes a stay. The Gray Action plaintiff points out that Virginia's April 25, 2007 decision to disclaim and to assert "NO' OCCURRENCE" for the first time was "extremely belated" with "what amounts to no explanation." Affirmation of John M. Daly in Opposition to Stay Underlying Action ("Plaintiff Opp."), at ¶¶ 7-8. She relies on a New York Court of Appeals case holding that a denial of coverage would not be permitted after an insurer gave absolutely no explanation or excuse for its 48-day delay in notifying its insured of its decision to deny coverage and that this time interval was, as a matter of law, unreasonable. First Financial Ins. Co. v. Jetco Contracting Corp., 1 NY3d 64, 70 (2003); see also, Hartford Ins. Co. v. County of Nassau, 46 NY2d 1028, 1030 (1979) (delay of 62 days was, as a matter of law, unreasonable); Alvarez v. Allstate Ins. Co., 5 AD3d 270 (1st Dept. 2004)(eight-month delay disclaiming coverage unreasonable as a matter of law).
The Gray Action plaintiff also urges that Landmark's motion should be denied because there has been no showing of good cause for the stay. The Gray plaintiff states that where, as here, a trial date is imminent, it would be an abuse of discretion to postpone the trial and delay justice in order to accommodate an insured in its declaratory judgment action. Plaintiff Opp., at ¶ 21.
In reply, Landmark once again emphasizes that it will suffer "irreparable harm" without a stay. It claims that any meritorious defenses in the Declaratory Judgment Action "have no bearing on the issue of whether Landmark is entitled to a stay in the underlying action." Landmark's Reply to Virginia Surety's Affirmation in Opposition ("Virginia Reply"), at ¶ 24. Landmark states, moreover, that "in the absence of a determination on the issues of insurance coverage raised in the Declaratory Judgment Action, [it] further faces irreparable harm and prejudice by potentially being forced to try the Gray Action and incurring attorney fees and expenses which may otherwise not need to be incurred." Landmark's Reply to Gray Plaintiff's Opposition to Stay Underlying Action ("Gray Reply"), at ¶ 35.
Analysis
The Court will not address the timeliness of Virginia's disclaimer because neither Landmark, the Gray Action plaintiff nor Virginia expressly moved for that relief. The only issue fully addressed by the parties here is whether a stay of the Gray Action is appropriate and that is the only issue the Court will decide at this early stage. See, Virginia Opp., at ¶¶ 17-19.
Landmark's application for a stay of the September 6, 2007 trial in the Gray Action rests squarely on the sound discretion of the court.
CPLR 2201 provides:
"Except where otherwise prescribed by law, the court in which an action is pending may grant a stay of the proceedings in a proper case, upon such terms as may be just."
"Proper" cases for a stay in civil actions include those where a change of venue is under consideration, an issue is being appealed or where related criminal proceedings are being litigated. See, Britt v. International Bus Services, Inc., 255 AD2d 143 (1st Dept. 1998) (stay of civil action in New York pending outcome of criminal action in New Jersey).
Significantly, in lead-poisoning cases courts have addressed insurance indemnity issues after resolution of the underlying action. Therefore, it cannot be an abuse of discretion to allow the lead-poisoning case to proceed and afterwards deal with insurance coverage. For example, in Serio v. Public Serv. Mut. Ins. Co., 304 AD2d 167, 168 (2nd Dept. 2003), it was only after the parties settled the underlying lead paint case that the insurers obtained a judicial determination of their proportionate contribution obligations. Likewise, in American Empire Ins. Co. v. PSM Ins. Cos., 259 AD2d 341, 342 (1st Dept. 1999), three insurance companies settled the underlying lead-paint case and subsequently adjudicated their respective obligations. See also, National Union Fire Ins. Co. v. Farmington Cas. Co., 1 Misc 3d 671 (Sup. Ct. NY Cty. 2003) (adjudication between three insurance companies of their respective obligations to pay a $2,875,000 settlement to four lead-paint injured infants).
In this case, Landmark moves for a stay in the Gray Action because it would allegedly suffer irreparable harm if compelled to satisfy that portion of the expenses of defense and indemnity that are rightfully attributable to Virginia. It claims to have met all of the requirements for a stay by "making all parties to the [Gray Action] parties to the Declaratory Judgment Action and by incorporating the underlying complaint into the Declaratory Judgment Action." Gray Reply, at ¶ 47.
A stay, however, "is appropriate only where the decision in one [action] will determine all the questions in the other, and where the judgment in one trial will dispose of the controversy in both actions: this requires the complete identity of the parties, cause of actions, and the judgment sought." Somoza v. Pechnik, 3 AD3d 394, 394 (1st Dept. 2004); see also, Middlebury Office Park Ltd. Partnership v. General Datacomm Indus., 248 AD2d 313, 314 (1st Dept. 1998) (error to stay action since only one of three causes of action involved "complete identity with the parties, claims and relief sought" in separate environmental indemnity action).
Here, the Gray Action and the Declaratory Judgment Action are not "inextricably intertwined" or inseparable from one another. Somoza v. Pechnik, 3 AD3d, at 394. In fact, they are almost entirely discrete. The Gray Action relates to whether the infant was damaged by lead paint on the Landlord Defendants' premises and the Declaratory Judgment Action, at its core, really pertains solely to insurance coverage issues. The matters can be addressed separately.
Indeed, Landmark acknowledges that the Declaratory Judgment Action will not "determine all the questions" presented in the Gray Action in emphasizing that the parties "will not be prejudiced by the imposition of a stay because the action, after the stay, will proceed just as it would have in its absence." Supp., at ¶ § 40.
In addition, courts granting a stay to address insurance coverage issues have done so on the condition that the declaratory judgment action proceeds on an expedited basis. See, Dionisio v. Auto Hire Inc., 67 AD2d 996 (2nd Dept. 1979) (declaratory-judgment action was to be adjudicated with all due dispatch); Cubero v. Schwartz, 51 AD2d 760 (2nd Dept. 1976) (either party authorized to move to vacate stay if the plenary action was not prosecuted with due diligence and expedition); Westchester Fire Ins. Co. v. Lipsky, 9 Misc 2d 390 (Sup.Ct. NY Cty. 1958) (granting motion "to the extent of staying all further proceedings in the Queens County [negligence] action until 20 days after the final determination of [the insurance-coverage] action, provided that plaintiff [insurance company] proceeds with its prosecution * * * with all reasonable expedition").
Adjudication of the Gray Action has already been delayed numerous times because of NYCHHC's appeal and repeated settlement efforts. The Gray Action plaintiff is eager to obtain resolution of this approximately four-year old action even if it means that a settlement may not be obtained. A stay of an action is "a drastic remedy." See, Siegel, Practice Commentaries, McKinney's Cons. Laws of NY, Book 7B, CPLR C2201:7. "Justice delayed is justice denied;" therefore, some "excellent reason would have to be demonstrated before a judge is asked to bring to a halt a litigant's quest for a day in court." Id. The Gray Action plaintiff has waited patiently for years for its day in court and will not be forced to wait for full resolution of the Declaratory Judgment Action (the Note of Issue is not even due until December 2007) and any ensuing motion practice or appeals. In the end, Landmark has not provided a compelling reason — much less an "excellent" one — for the imposition of a stay. Absolutely nothing prevents Landmark from being made entirely whole upon resolution of the Declaratory Judgment Action; thus, ultimately it will not be prejudiced in the least.
Accordingly, it is
ORDERED that Landmark's motion is denied; it is further
ORDERED that the parties to this Declaratory Judgment Action are to appear for a compliance conference on September 11, 2007, at 9:30 a.m.
This constitutes the Decision and Order of the Court.