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RICHARDS v. SELECT INS. CO.

March 11, 1999

ARTHUR RICHARDS AND CHARLOTTE RICHARDS, PLAINTIFFS,
v.
SELECT INSURANCE COMPANY, INC., BARCO AUTO LEASING CORP., CARLOS E. ORTIZ AND NAOMI TANAKA, DEFENDANTS.



The opinion of the court was delivered by: Mukasey, District Judge.

OPINION AND ORDER

Plaintiffs Arthur Richards and Charlotte Richards bring this action for declaratory relief pursuant to 28 U.S.C. § 2201 (1984). Plaintiffs allege that defendant, Select Insurance Company, Inc. ("Select") breached an insurance contract by refusing to defend and indemnify its insured, Barco Auto Leasing, Inc. ("Barco") for plaintiffs' personal injury claims resulting from an accident with a vehicle leased by Barco. Select moves to dismiss on the ground that plaintiffs, as the injured parties and not the named insured, have no standing to seek a declaratory judgment. In the alternative, Select moves for abstention in favor of an existing state court action brought by Barco seeking, inter alia, indemnification in plaintiffs' personal injury action. For the reasons set forth below, Select's motion to dismiss is granted.

I.

This action arises out of a personal injury suit filed in this court on February 21, 1997, by plaintiffs against Barco, Carlos Ortiz and Naomi Tanaka. See Richards v. Ortiz, No. 97 Civ. 1233 (S.D.N.Y. filed Feb. 21, 1997). In that diversity action, plaintiffs sued defendants for damages resulting from an alleged accident where Arthur Richards was hit by a motor vehicle leased by Barco. (Compl. ¶ 12)*fn1 Upon receiving the summons and complaint from plaintiffs, Barco notified Select of the accident and the pending action. (Barco Compl. ¶ 72) Select declined to indemnify or represent Barco, claiming that Barco failed to notify Select of the Richards' claim in the manner required by the terms of Barco's insurance policy (the "Barco Policy"). (Id. ¶ 74) In response, Barco filed an action in Supreme Court, Nassau County, on or about September 2, 1997, against Select and the previous owners of the Barco Policy. See Barco Auto Leasing Inc. v. Gulf Ins. Co., No. 97-25466 (Sup.Ct. Nassau County filed Sept. 2, 1997). In that action, Barco sought a declaration of its rights and Select's liabilities in regard, inter alia, to plaintiffs' tort action. (Barco Compl. ¶¶ 18-76)

Unaware of the pending state court action, plaintiffs filed this complaint seeking a declaration that Select has a duty to defend and indemnify Barco in the current tort action. (Compl. ¶ 28) Select now moves to dismiss this action on the ground that plaintiffs lack standing.

II.

As a threshold matter, it is useful at least to consider the proper procedural basis for Select's motion. It is unclear whether Select filed its answer to plaintiffs' complaint before or after filing a motion to dismiss on the pleadings. If this motion was filed before the answer, it would be properly construed as a motion for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c). If it was filed after, it would be a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6). The difference, however, is largely academic because the standard under Rule 12(c) is the same as the standard under Rule 12(b)(6): Accepting the non-moving party's allegations as true and viewing the facts in the light most favorable to that party, judgment on the pleadings or dismissal for failure to state a claim should be granted if the moving party "is entitled to judgment as a matter of law." Burns Int'l Sec. Servs., Inc. v. International Union, 47 F.3d 14, 16 (2d Cir. 1995) (per curiam): see Narvarte v. Chase Manhattan Bank, N.A., 969 F. Supp. 10, 11 (S.D.N.Y. 1997) (stating that the standard for a Rule 12(c) motion is the same as for a Rule 12(b)(6) motion, and citing cases).

III.

Select claims that because plaintiffs sue on a contract to which they are not parties, their standing depends on the statutory rights granted third parties under New York Insurance Law § 3420, N.Y.Ins. Law § 3420 (McKinney 1985 & Supp. 1998), which permits a judgment creditor to sue an insurer directly on an unpaid judgment. Select contends that an unpaid judgment is a condition precedent to any action, and because plaintiffs have no such judgment, plaintiffs' complaint must be dismissed.

Plaintiffs counter that Insurance Law § 3420 is procedural and, therefore, inapplicable in a federal court which is guided by federal procedural rules; or, alternatively, plaintiffs argue that although § 3420 bars an injured party from bringing a direct action for money damages, it does not bar that party from bringing a declaratory judgement action.

There is no dispute that plaintiffs have no common law or contractual rights in the Barco Policy. Therefore, plaintiffs' right to maintain the present cause of action against Select rests exclusively on the statutory rights created by Insurance Law § 3420. That law provides, in relevant part:

  (a) No policy or contract against liability for
  injury to person . . . shall be issued or delivered
  in this state, unless it contains in substance the
  following provisions or provisions which are equally
  or more favorable to the insured and to judgment
  creditors so far as such provisions relate to
  judgment creditors:
    (2) A provision that in case judgment against the
  insured . . . shall remain unsatisfied at the
  expiration of thirty days from the serving of notice
  of entry of judgment . . . upon the insurer, then an
  action may . . . be maintained against the insurer
  under the terms of the policy or contract for the
  amount of such judgment not exceeding the amount of
  the applicable limit of coverage under such policy or
  contract.
  (b) . . . [A]n action may be maintained by the
  following persons against the insurer . . . to
  recover the amount of a ...

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