United States District Court, S.D. New York
December 27, 2005.
TOKIO MARINE AND FIRE INSURANCE CO., LTD., as Subrogee, and TOYOTA MOTOR CREDIT CORPORATION, as Subrogor Plaintiffs
JOSEPH SORTINO and CHRISTINE SORTINO Defendants.
The opinion of the court was delivered by: ROBERT CARTER, Senior District Judge
The following facts are not disputed. On or about March 14,
1999, Joseph Sortino and Christine Sortino (the "Sortinos" or
"defendants") entered into a lease agreement with Potamkin Toyota
(the "lease") for a 1998 Toyota Corolla (the "vehicle").
Potamkin, as lessor, immediately assigned all their rights under
the lease to Toyota Motor Credit Corporation ("TMCC"). On October
30, 1999, while operating the vehicle, Christine Sortino struck
Vincent Poccia ("Poccia"), a pedestrian, causing serious and
permanent injuries to Poccia. Poccia commenced a personal injury
action against the Sortinos and later commenced a separate action
against TMCC on a theory of vicarious liability. Both of Poccia's
actions were settled in March of 2002 for a total of $450,000.
TMCC's insurer, Tokio Marine and Fire Insurance Co., Ltd. ("Tokio
Marine" and together with TMCC the "plaintiffs"), contributed
$150,000 toward the settlement on behalf of TMCC. The Sortinos'
insurer, Allstate Insurance Company ("Allstate"), contributed the
remaining $300,000 on behalf of the Sortinos. Plaintiffs also
expended $33,544.59 in attorney's fees and disbursements in
defense of Poccia's personal injury actions. On September 10, 2002, Tokio Marine, as TMCC's subrogee,
initiated this action seeking indemnification under the
lease*fn1 from the Sortinos for the $150,000 it had paid to
Poccia and for the $33,544.59 in attorney's fees and
disbursements it had incurred while defending TMCC in the Poccia
In the instant matter, plaintiffs move for summary judgment on
their indemnification claim and for dismissal of defendants'
counterclaims. Defendants cross-move to dismiss plaintiffs'
complaint and for fees and expenses incurred in defending this
Defendants claim that although TMCC's policy with Tokio Marine
specifically excludes lessees, like the Sortinos from
coverage,*fn2 Tokio Marine is required to insure lessees as
"permissive users," under N.Y. Veh. & Traf. Law §§ 345 & 388.
Defendants argue that as a violation of public policy, the
exclusion of lessees from coverage is unenforceable and this
provision should be struck from the policy. With the exclusion struck from the policy, the Sortinos
would be insureds of Tokio Marine. As insureds, Tokio Marine's
claims against them would be barred by New York's
anti-subrogation rule, which prohibits an insurer from recovering
from its insured for claims arising from the risk for which the
insured was covered. See Penn. Gen. Ins. Co. v. Austin Powder
Co., 68 N.Y.2d 465, 510 N.Y.S.2d 67 (1986).
Defendants' argument that they are "permissive users" is
factually misguided and legally inaccurate. The permissive user
concept was designed to protect an injured third party (in this
case, Poccia) from insurers who deny coverage due to use of the
vehicle by someone other than the owner.*fn3 The Tokio
Marine policy does not attempt to deny coverage to Poccia; to the
contrary, Poccia has received a settlement. Furthermore, there is
no logic and no caselaw that would support an extension of the
scope of the permissive user concept to lessees, especially when
they are merely seeking to escape their contractual obligations.
The endorsement to the lease that excludes lessees from coverage
is valid under New York law. The defendants were not insureds of Tokio Marine and, consequently, the
anti-subrogation rule is inapplicable.*fn4
In deciding a motion for summary judgment, the court's role is
not to determine the truth of the matter, but to determine
whether there is a genuine issue for trial. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 249 (1986). Defendants can present no
genuine issue of fact regarding the substance of the plaintiffs
claim. Lacking compelling facts, they resort to baseless
allegations regarding the fairness of the settlement and
counsel's fees. The lease clearly provides that TMCC is to be
reimbursed for damages and legal fees. Lease § 37. The
implication that plaintiffs have artificially inflated the fees
and the settlement so that they could recover in subrogation is
not supported by competent facts. See Tokio Marine v. Pagan,
No. 02 Civ 42112003, *4, 2003 WL 1858147 (S.D.N.Y. April 9, 2003)
(Rakoff, J.). In light of the serious and permanent injuries
Poccia received, there is no reason to believe that the Poccia
settlement was unreasonable. Similarly, Defendants' counterclaims
for deceptive business practices, fraudulent inducement and "bad faith" lack any grounding in law
Plaintiffs' motions for summary judgment and to dismiss
defendants' counterclaims are hereby GRANTED. Defendants are
jointly and severally liable to plaintiffs in the amount of
$183,544.59. Accordingly, defendants' motions for summary
judgment and dismissal of the complaint are DENIED. Clerk to
IT IS SO ORDERED.
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