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 ). 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 ). 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.
Default Judgment seeking a declaration of non-coverage is denied based upon the failure to adduce any non-hearsay evidence
This is a most interesting case. I will discuss my thoughts in some detail because this case seems to possibly support the inference that a default judgment in a declaratory judgment involving a staged or non-loss may never be viable. I do not think that is the case at all. I also am not sure this case is consistent with the cases to which it cited.
The above being said – I was taught an early age that if you can do something to avoid a trip to the Appellate Division, despite what the correct view of the law is, then you should do what is necessary to avoid appellate intervention.
Consequently, how come Plaintiff never procured the affidavit of the adverse driver? This would have allowed a default to be entered. It also would have made complete sense since the investigator had contact with the adverse driver! This seems like a bout of doing the least to get the most – and getting burnt.
On to the case:
New S. Ins. Co. v Dobbins, 2010 NY Slip Op 01773 (2d Dept. 2010)
“The Supreme Court properly, upon renewal and reargument, adhered to so much of its original determination as denied the plaintiff leave to enter judgment against the defendants James Dobbins, Jr., and Felita Dobbins, upon their default in answering the complaint. In support of its motion, the plaintiff offered the complaint, which was verified by plaintiff’s counsel, and an affidavit of the plaintiff’s investigator, neither of whom possessed personal knowledge of the facts constituting the claim (see CPLR 3215; Woodson v Mendon Leasing Corp., 100 NY2d 62, 70-71; Hosten v Oladapo, 44 AD3d 1006; Finnegan v Sheahan, 269 AD2d 491). The statements from the driver of the other vehicle that the plaintiff’s investigator relied upon in his affidavit constituted inadmissible hearsay (see CPLR 4518[a]; Hochhauser v Electric Ins. Co., 46 AD3d 174, 179-183; Metropolitan Cas. Ins. Co. v Shaid, 23 Misc 3d 1140[A]).”
The issue of “personal knowledge” as set forth in 3215(f) has confused me for years. What is sufficient personal knowledge? In a breach of contract for goods sold and delivered, this would be satisfied through the affidavit or verification of the plaintiff who is the victim of the breach. In a negligence case, this would be the plaintiff’s affidavit or verification stating that he was in a motor vehicle accident. The conclusion of negligence would flow from the act of the accident. For no-fault benefits (in the second department as of now), this would be the affidavit or verification of a billing manager or the president of the corporation.
So what is necessary in a staged accident or “not in the car” case to satisfy the 3215(f) threshold? It would seem that some affidavit, which presupposes an inference that the event is intentional or did not exist, would be what is required. The Court of Appeals matter the Appellate Division cited to (Woodson v Mendon Leasing Corp., 100 NY2d 62) is interesting, because it does not really support the Dobbins court’s reasoning, as seen below:
“Having concluded that Supreme Court abused its discretion in vacating the default judgment, we also reject ATIC’s argument that, as an initial matter, plaintiff’s submissions in support of her motion for a default judgment were insufficient. CPLR 3215 (f) requires that an applicant for a default judgment file “proof by affidavit made by the party of the facts constituting the claim.” A verified complaint may be submitted instead of the affidavit when the complaint has been properly served (see CPLR 3215 [f]). Given that in default proceedings the defendant has failed to appear and the plaintiff does not have the benefit of discovery, the affidavit or verified complaint need only allege enough facts to enable a court to determine that a viable cause of action exists (see 7 Weinstein-Korn-Miller, NY Civ Prac ¶ 3215.24, at 32-326). Indeed, defaulters are deemed to have admitted all factual allegations contained in the complaint and all reasonable inferences that flow from them.”
To me, I believe that Plaintiff’s presenting conflicting certified EUO transcripts in its motion for leave to enter a default should be enough to raise an issue of fact as to whether a viable cause of action exists.
And in light of the default, the defaulter would be”deemed to have admitted all factual allegations contained in the complaint and all reasonable inferences that flow from them.” Id.
So, the Appellate Division may very well have been incorrect, in my opinion, for not reversing Supreme Court.
One last thing, and I say this because I was upset when I read this case, and am really annoyed that the Appellate Division cites to it. The Appellate Division cites for support of its “hearsay” arguments, besides its Hochhauser case “Metropolitan Cas. Ins. Co. v Shaid, 23 Misc 3d 1140[A]”.
Read Shaid carefully. I would just note that in Shaid, the declaratory judgment action was against the insured and the vehicle operator, both individually, as aiders abettors and as co-conspirators. The statements that were made to the investigator in that case should have come in as admissions, admissions in furtherance of a conspiracy or declarations against penal interest.
In Dobbins, the statements was of a completely non-interested witness to an investigator. This could only be admitted through the business record rule, which is now foreclosed because of Hochhauser.
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.
In Chechen v Spencer, 2009 NY Slip Op 09177 (2d Dept. 2009), law office failure (again) was discussed:
“After the plaintiff failed to appear at a scheduled status conference on November 7, 2007, the court scheduled another status conference to be held on December 11, 2007. The action was dismissed when the plaintiff failed to appear at the December 11, 2007, status conference (see 22 NYCRR 202.27[b]). To be relieved of the default in appearing at that conference, the plaintiff was required to show both a reasonable excuse for the default and the existence of a meritorious cause of action (see CPLR 5015[a]; Barnave v United Ambulette, Inc., 66 AD3d 620; Brownfield v Ferris, 49 AD3d 790, 791; Zeltser v Sacerdote, 24 AD3d 541, 542). The plaintiff’s counsel’s excuse of law office failure was vague and unsubstantiated and, thus, did not constitute a reasonable excuse for the default.”
Compare this to the First Department’s view on what is sufficient to demonstrate law office failure in order to show a reasonable excuse to open a default. See, Lamar v City of New York, 2009 NY Slip Op 08974 (1st Dept. 2009)
The Appellate Division, First Department, in Lamar v City of New York, 2009 NY Slip Op 08974 (1st Dept. 2009), said this in a four sentence opinion:
“While the City’s generalized assertion of law office failure as the excuse for its delay is not particularly compelling, it constitutes “good cause” for the delay (see Spira v New York City Tr. Auth., 49 AD3d 478 ).”
What do you think would be the outcome of this case if this were adjudicated in the Second Department?
There is no need to grant an adjournment should the opposing party not have answering papers on the second motion return date.
The Fourth Department, in Counsel Fin. Servs., LLC v David Mcquade Leibowitz, P.C., 2009 NY Slip Op 08663 (4th Dept. 2009), observed the following:
“We note at the outset that the contentions of defendants are properly before us despite the fact that the order and judgment was entered upon their default. Although defendants did not move to vacate the order and judgment, they appeared in court on the adjourned return date of the motion and contested the entry of a default judgment (see Spano v Kline, 50 AD3d 1499, lv denied 11 NY3d 702, 12 NY3d 704; Jann v Cassidy, 265 AD2d 873, 874; Spatz v Bajramoski, 214 AD2d 436). Nevertheless, we conclude that the court properly granted the motion.”
“The record establishes that only plaintiff’s counsel appeared in court on the initial return date of the motion but that the court thereafter granted defendants additional time in which to submit papers in opposition to the motion and adjourned the matter to a date subsequent thereto. The court stated that, in the event that defendant failed to appear on the adjourned return date, “the matter will be deemed submitted.” Defendants failed to submit any opposing papers by the date specified by the court and, although defendant appeared in court on the adjourned return date, he requested a second adjournment at that time, in which to prepare opposing papers. The court determined that defendants already were in default at that time, inasmuch as they had failed to submit opposing papers.”
A few things are noteworthy here. First, it seems that Defendant should have probably moved on notice to vacate the default as opposed to attempting to vacate the default through appealing the order that resulted from the hearing. Second, it seems that the Fourth Department really has taken, at least in this case, a really tough line on parties who are not ready on motion return dates.
When vacating a default in the Second Department based upon law office failure, the proponent of the motion must produce admissible evidence explaining the nature and extent of the law office failure. What is important to appreciate is that if a procedure is in place to assure that a default will not occur, then it must be explained why the procedure was not followed. This is what the Appellate Term stated in A.B. Med. Servs., PLLC v GLI Corporate Risk Solutions, Inc., 2009 NY Slip Op 52322(U)(App. Term 2d Dept. 2009):
“Plaintiffs’ allegation of law office failure is factually insufficient (see Robinson v New York City Tr. Auth., 203 AD2d 351 ), in that they failed to explain whether the normal two-part procedure for assigning a per diem attorney to cover a court appearance, as outlined in their submission to the court, was followed in its entirety. Accordingly, plaintiffs’ motion to vacate the prior order was properly denied. in a particular case.”
The one thing that we can all say about Second Department practice, whether it be at the Appellate Term or the Appellate Division, is that the decision/orders of these courts never elucidate upon the facts of a given matter. This is not necessarily a bad thing, especially when you are on the losing side of a case. But when a case has lived an interesting life, it would be nice to know what happened.
While the Appellate Division’s decision tells a different story, a review of the record of appeal in Mercury Cas. Co. v. Surgical Center at Milburn, LLC, 2009 N.Y. Slip Op. 06516 (2d Dept. 2009), shows us that this is not your every day run of the mill “default” case.
This case started as a $12,000 no-fault AAA arbitration, where the Defendant sought to recover for surgery services performed on its Assignor. Plaintiff denied the claim on the basis that the surgery was not causally related to the motor vehicle accident. In support of this defense, Plaintiff presented the report of a radiologist who, upon a review of the applicable MRI films, found that the injuries were pre-existing, degenerative and not related to the underlying motor vehicle accident.
The lower arbitrator, upon a review of the record, did not find the Plaintiff’s proof convincing and awarded Defendant the principle sum of $12,000, along with interest, costs and attorney fees. It is not uncommon these days for an insurance carrier to lose in arbitration.
Plaintiff, as would be expected, filed a master arbitral demand and perfected its master arbitral brief. Similarly, Defendant proceeded to perfect his master arbitral brief. Following due deliberation, the master arbitrator upheld the award of the lower arbitrator, finding that the award was not defective as a matter of law. This decision was probably correct.
Since the amount in controversy, however, exceeded $5,000, Plaintiff sought a trial de–novo. In this regard, a summons and complaint, fashioned as an action seeking a declaration that the surgery was not related to the motor vehicle accident, was filed with the Supreme Court and served upon Defendant. The action seeking a declaratory judgment spelled out the procedural history and the nature of the defense to the underlying no-fault claim.
Defendant failed to timely answer or move, and Plaintiff moved for leave to enter a default judgment against Defendant. Defendant opposed the motion, but failed to set forth a reasonable excuse or any evidence to support a potentially meritorious defense. All Defendant attached to his answering papers were the proofs he presented at the lower arbitration. In order to raise a potentially meritorious defense, Defendant would have had to obtain a radiology review that contradicted, point by point, Plaintiff’s own film review. As to the proof necessary to defeat a causation defense predicated upon a radiology review, please see my prior posts.
The Supreme Court denied Plaintiff’s motion. A notice of appeal was promptly filed. At the Appellate Division, Plaintiff moved to stay the Supreme Court case, pending the outcome and determination of the appeal. This motion was granted. The appeal was then perfected. Following due deliberation, the order of the Supreme Court was reversed and Plaintiff’s motion was granted. Consequently, the matter was remitted to the Supreme Court for the purpose of entering a judgment, declaring that the surgery was not causally related to the motor vehicle accident.
Here are a few thoughts. First, it would appear that the collateral estoppel consequences of this type of a decision are huge, as I have opined in previous posts. The second thing, and one of a practical matter, is that a demand for a trial de–novo, in this type of proceeding, should be commenced as a declaratory judgment type of action. There are other ways to commence a trial de-novo, but these methods are not as effective or efficient as commencing it through a declaratory judgment action.
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.
This is similar to the cases where a peer doctor fails to review sufficient documentation before arriving at an opinion.
“Lack of Foundation to form an expert opinion”
Luu v Paskowski
2008 NY Slip Op 10135 (2d Dept. 2008)
The pertinent portion of this case is as follows:
“[Plaintiff’s expert] Zola did not refer to any part of the hospital records, and did not state when the blood loss occurred or how it caused the small bowel obstruction and hematoma. Zola made no reference to any of the hospital records in his affidavit, and did not state that he had reviewed the pleadings and depositions. Zola’s affidavit was conclusory and lacked a foundation (see Thompson v Orner, 36 AD3d at 792; Furey v Kraft, 27 AD3d at 418).
Procedural – default viz a vi failure to obtain an adjournment on the record
Diamond v Diamante
2008 NY Slip Op 10117 (2d Dept. 2008)
“plaintiffs and their attorney, nonparty James D. Reddy, appeal from a judgmentwhich, inter alia, upon the denial of the plaintiffs’ application for an adjournment, is in favor of the defendants and against the plaintiff, dismissing the complaint, and against the nonparty James D. Reddy awarding costs and imposing sanctions.”
“Where, as here, the order appealed from was made upon the plaintiffs’ default, “review is limited to matters which were the subject of contest below” (Matter of Constance P. v Avraam G., 27 AD3d 754, 755 [internal quotations marks omitted]; see James v Powell, 19 NY2d 249, 256 n 3; Wexler v Wexler, 34 AD3d 458, 459; Brown v Data Communications, 236 AD2d 499). [*2]Accordingly, in this case, review is limited to the denial of the plaintiffs’ request for an adjournment, on the appeal by the plaintiffs, and the award of costs and imposition of sanctions against nonparty James D. Reddy, on the appeal by the nonparty (see Matter of Paulino v Camacho, 36 AD3d 821, 822; Tun v Aw, 10 AD3d 651, 652).
Turning to the merits, “[t]he granting of an adjournment for any purpose is a matter resting within the sound discretion of the trial court” (Matter of Anthony M., 63 NY2d 270, 283; see Matter of Steven B., 6 NY3d 888, 889; Matter of Sicurella v Embro, 31 AD3d 651, lv denied 7 NY3d 717), and its determination will not be disturbed absent an improvident exercise of that discretion (see Davidson v Davidson, 54 AD3d 988). “In making such a determination, the court must undertake a balanced consideration of all relevant factors” (Matter of Sicurella v Embro, 31 AD3d at 651), including “the merit or lack of merit of the action, extent of the delay,” the number of adjournments granted, the “lack of intent to deliberately default or abandon the action” and the length of the pendency of the proceeding (Belsky v Lowell, 117 AD2d 575, 576; see Matter of Claburn v Claburn, 128 AD2d 937, 938).”