Is it really the public policy of this state to adjudicate cases on their merits? Ask the Appellate Term, Second Department.

Case #1:

Viviane Etienne Med. Care, P.C. v Alea N. Am. Ins. Co., 2010 NY Slip Op 52011(U)(App. Term 2d Dept. 2010)

“The administrator finally obtained the claim file on or about August 1, 2007 and only then assigned counsel, who served plaintiff with an answer on August 15, 2007. Based on the above facts, defendant failed to proffer a reasonable excuse for its default. A party in jeopardy of defaulting for nonappearance in an action may request an extension of time to file its answer upon good cause shown (see CPLR 2004). Failure to move pursuant to CPLR 2004 for an extension of time to file an answer may eviscerate the grounds for a reasonable excuse (cf. Builders Mechanic Co. v Claiborne, 277 AD2d 193 [2000]; Weiss v Kahan, 209 AD2d 611, 612 [1994]). Here, defendant was served with the summons and complaint on January 15, 2007 and its third-party claims administrator received a copy of the summons and complaint on January 26, 2007. Thereafter, both defendant and its third-party [*2]claims administrator knowingly failed to take any action with respect to this lawsuit for approximately eight months. In the interim, plaintiff applied for a default judgment in March 2007, and a default judgment was entered on September 6, 2007″

The Appellate Division, Second Department a few years ago held in a 3-1 opinion that the concept of law office failure should be extended to insurance company delay.  I guess this panel of the Appellate Term disagrees with that assertion.  What I find interesting is that the legislature created CPLR 2005 to overturn Barasch v. Micucci, 49 NY2d 594 (1980).

Astoria Wellness Med., P.C. v State Farm Mut. Auto Ins. Co., 2010 NY Slip Op 52008(U)(App. Term 2d Dept. 2010)

“Defendant’s excuse of law office failure was not reasonable under the circumstances presented. Defendant failed to adequately explain why it did not re-file its opposition papers in the correct Civil Court part after the court clerk had notified defendant of its filing error and had provided it with instructions on [*2]how to properly re-file. Accordingly, the order of the Civil Court is affirmed.”

The dissent explains what happened in further detail:

“Contrary to the majority, I find that defendant has sufficiently established an excusable default and that there was no prejudice to plaintiff in any sense of the word. Defendant had agreed with plaintiff and the Civil Court to both serve and file a copy of its opposition papers by a certain date.

Although defendant had agreed to submit its opposition by a certain date, its opposition papers were not served and filed until after the agreed-upon date, which was nevertheless still prior to the return date of the motion. There was more than ample time for plaintiff to reply to those opposing papers prior to the return date if plaintiff so chose. Plaintiff did not.

I find that defendant’s failure to submit the opposition papers by the agreed-upon date was de minimis and without any prejudice to plaintiff. It also appears that defendant mistakenly filed the court’s copy in the same calendar part as plaintiff’s motion. I do not find this ministerial error to be grievous fault, and it should not be treated so severely.”

What is interesting about this case – besides it being mine – is that every court except Brooklyn requires the cross motion to follow the main motion.  I filed a cross-motion seeking discovery based relief for the reasons seen in Justice Golia’s opinion.  This was filed in Part 41 because the main motion was filed in that part.

The clerk apparently rejected the motion based on the Brooklyn rule.  The appearing attorney brought the cross-motion/opposition into court and sought to have it treated as opposition to Plaintiff’s motion.  The court for some reason rejected it and granted Plaintiff’s motion.  The rest, as they say, is history.

It is hard to believe that this was not excusable law office failure, but better minds believe otherwise.

Default vacated on CPLR 317 grounds

Nursing Personnel Homecare v New York Cent. Mut. Fire Ins. Co., 2010 NY Slip Op 50450(U)(App. Term 2d Dept. 2010)

“In support of defendant’s motion to vacate the default judgment, there was more than a “mere denial” of [*2]receipt of the summons and complaint (see Montefiore Med. Ctr. v Auto One Ins. Co., 57 AD3d 958, 959 [2008]). Defendant submitted an affidavit from one of its no-fault litigation examiners, who had personal knowledge regarding defendant’s practices and procedures in retrieving, opening and filing its mail and in maintaining its files on existing claims. In said affidavit, the no-fault litigation examiner stated that defendant had never received the summons, the complaint or the motion for a default judgment (cf. Westchester Med. Ctr. v Philadelphia Indem. Ins. Co., 69 AD3d 613 [2010]). Accordingly, pursuant to CPLR 317, defendant met its burden of showing that it did not receive actual notice of the summons in time to defend the action.
Furthermore, defendant established the existence of a meritorious defense to the action. Defendant submitted an affidavit from its litigation examiner in which he stated that the assignor had cancelled her insurance policy with defendant prior to the date of the accident and had not subsequently taken out another insurance policy with defendant.”

As many people know, vacating a default in the Second Department based upon the allegation of the “non-receipt” of a summons and complaint is a daunting task.  The resolution is either a traverse hearing or an ordering denying the opening of the default.

NYCM used CPLR 317, together with a well written affidavit of non receipt, to allow the court to exercise its discretion to open the default.  As us New York procedural nerds know, this is not an easy task.  So, I tip my hat to the attorney who represented NYCM on this case.

The affidavits of non-receipt just did not cut it

In Westchester Med. Ctr. v Philadelphia Indem. Ins. Co., 2010 NY Slip Op 00138 (2d Dept. 2010), the Appellate Division held that an entered clerk’s judgment should not have been vacated.  Here is the breakdown of that case – it fits a good story line.

1) Defendant failed to demonstrate the existence of a reasonable excuse for being in default.

“The affidavit of a senior claims examiner employed in the defendant’s Texas office averred that there was no record of the summons and complaint in the defendant’s computer system, but failed to demonstrate any knowledge of the office procedures employed in the handling of a summons and complaint received at the defendant’s Pennsylvania office. Thus, that affidavit was insufficient to show that the failure to timely appear and answer was due to a clerical error which caused the summons and complaint to be overlooked”

2) Defendant failed to offer a meritorious defense to the action, i.e., lack of receipt prior to commencement of the action.

“In response, the defendant offered only the same aforementioned affidavit, which also averred that there was no record of the bill in question in the defendant’s computer system. This was insufficient for a similar reason; that is, the affiant failed to show any knowledge of the office procedures employed in the handling of billing forms received at the defendant’s Pennsylvania office”

3) “[t]he order is reversed insofar as appealed from, on the law, on the facts, and in the exercise of discretion, with costs[.]”

What we see here is that in order to demonstrate lack of receipt, whether it be a summons and complaint or a bill, the insurance carrier needs to set forth a detailed procedure as to the incoming mail, which would be sufficient to raise the inference that the incoming item was not received.  This is the opposite of the usual issue, i.e., proving that outgoing mail reached the post office within the prescribed time limits.

Also, why didn’t Defendant move to vacate in accordance with CPLR 317?  I am just curious.  The result would have been the same since a meritorious defense was not found to have existed.

Claims office failure is excusable in certain instances

Urban Radiology, P.C. v American Tr. Ins. Co. 2009 NY Slip Op 51734(U)(App. Term 2d Dept. 2009)

“In the case at bar, defendant’s no-fault supervisor, who was also the claims representative who handled the instant claims, submitted an affidavit in which he stated that defendant had lost the file containing the summons and complaint and had not found out about the default until June 25, 2007. The record also indicates that defendant’s attorney initiated the instant motion to vacate the default judgment promptly in July 2007.”

It is nice to see the courts allowing the claims offices some leeway in vacating defaults. The law in the Second Department used to be that claims office failure was always fatal to the vacatur of a default. The law has steadily evolved, and now under appropriate circumstances, claims office failure may form the basis to vacate a default.

What troubled me, however, was that the default was only partially vacated. Thus, if someone brought a multisuit with many assignors, the default would be vacated only as to the causes of action where there was a meritorious defense. This makes sense in the abstract. But since the causes of action would most likely be severable had a timely answer been interposed, a defendant’s default in answering appears to give the plaintiff an inordinate advantage through promoting the joining of unrelated actions, in the first instance.