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MAHARAN v. BERKSHIRE LIFE INS. CO.

December 18, 1996

DONALD T. MAHARAN and PATRICIA A. MAHARAN, Plaintiffs, -vs- BERKSHIRE LIFE INSURANCE COMPANY, Defendant.


The opinion of the court was delivered by: CURTIN

 CURTIN, District Judge

 Judgment has been entered against defendant Berkshire Life Insurance Company in the amount of $ 445,095.92, inclusive of prejudgment interests and costs. On November 8, 1996, defendant filed a motion for a stay of execution of the judgment pursuant to Rule 62 of the Federal Rules of Civil Procedure. Plaintiff does not object to the stay, as long as a supersedeas bond is posted in accordance with Rule 62(d) of the Federal Rules of Civil Procedure.

 Fed. R. Civ. P. 62(d) provides that an appellant may obtain a stay by giving a supersedeas bond. Subsection (f) of that rule provides that in any state in which a judgment is a lien on the property of the judgment debtor, the judgment debtor is entitled to such stay as would be accorded had the action been maintained in the state court.

 Defendant therefore invokes the state remedy provision of Rule 62(f) and relies on CPLR § 5519(b), which provides in relevant part:

 
If an appeal is taken from a judgment . . . entered against an insured . . . defended . . . under a policy of insurance the limit of the liability of which is less than the amount of said judgment . . ., all proceedings to enforce the judgment . . . shall be stayed pending the appeal . . . .

 Where the amount of the judgment does not exceed the value of the policy, section 5519(a)(2) applies. This section authorizes a stay pending appeal where "an undertaking [in the amount of the judgment] is given that if the judgment . . . is affirmed, . . . the appellant . . . shall pay the amount directed to be paid . . . ."

 CPLR § 5519(b) is clearly not directly applicable to the present situation. Section 5519(b) "applies when the judgment exceeds the amount of the policy. . . . An insurer invoking subdivision (b) waives any defense it might have had against its insured on the policy." David Siegel, Practice Commentaries, N.Y. C.P.L.R. § 5519 (McKinney's 1995). The reasoning behind this provision is that the "presumed solvency of insurers" doing business in New York guarantees the judgment.

 According to the defendant:

 
Although Berkshire is not, as a technical matter, entitled to an automatic stay, it is within the spirit, if not the letter, of CPLR 5519(b), incorporated by reference in Rule 62(f), Fed. R. Civ. P., that Berkshire should not be required to file a supersedeas bond in order to obtain a stay. Under the aforementioned CPLR provision, a judgment creditor is entitled to a stay without court order where the action in which the judgment on appeal was entered is defended by an insurer. In this case, the judgment debtor, Berkshire, is itself an insurer.

 Defendant's argument has some merit. It is difficult to see why an insurance company should be required to post a bond when it is being sued by an insured, when the insured would not be required to post bond if it were defended by the insurance company.

 On the other hand, section 5519(b) applies specifically to situations where the amount of the judgment is more than the liability limit of the insurance policy, and section 5519(a)(2) appears to apply to all other cases. It states:

 
(a) Stay without court order. Service upon the adverse party of a notice of appeal or an affidavit of intention to move for permission to appeal stays all proceedings to enforce the judgment or order appealed from pending the appeal or ...

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