The opinion of the court was delivered by: Trager, J.
This is an action by a New York insurance company, Merchants Insurance Group ("plaintiff" or "Merchants"), to obtain contribution and indemnity from defendants Mitsubishi Motor Credit Association and Mitsubishi Motor Credit of America, Inc. (collectively "defendants" or "MMCA"), California corporations. Merchants' claim arises from an automobile accident and a subsequent personal injury lawsuit, in which Merchants was obligated to pay the entire sum of a jury verdict rendered against the parties it had insured, despite the fact that such parties were only found to be 30% at fault. Accordingly, Merchants is seeking to recover the amount it overpaid from MMCA, the lessor of the other vehicle involved in the automobile accident. In an earlier opinion, it was held that this suit was barred by 49 U.S.C. § 30106(a), commonly referred to as the "Graves Amendment." However, the Second Circuit reversed this determination and remanded for consideration of the parties' remaining contentions. Thus, it must now be determined whether, as Merchants contends, it can collect from MMCA as a vehicle "owner" under New York law, or whether, as MMCA contents, this lawsuit is barred because MMCA's insurer -- which otherwise would be responsible for satisfying this claim by Merchants against MMCA -- has become insolvent.
For the reasons explained below, it is held that Merchants cannot maintain this suit against MMCA, the insured of an insolvent insurer. Accordingly, Merchants' motion for summary judgment is denied, and MMCA's motion for summary judgment is granted.
On January 31, 1996, non-party Jocelyn DeJean ("Jocelyn"), a New York resident, entered into a long term lease/purchase option agreement ("the agreement") with MMCA, a multinational corporation domiciled in California, for a Mitsubishi Galant ("the DeJean vehicle"). July 12, 2006 Aff. of William S. Matlin in Support of Pl.'s Mot. for Summ. J. ("July 2006 Pl. Aff.") ¶ 9; July 12, 2006 Aff. of Howard F. Strongin in Support of Def.'s Mot. for Summ. J. ("July 2006 Def. Aff.") ¶ 8; August 9, 2006 Aff. of William S. Matlin in Opp'n to Mot. for Summ. J. by MMCA ("Aug. 2006 Pl. Aff.") ¶ 7. According to its terms, New York law applied to the lease. August 7, 2006 Aff. of Howard F. Strongin in Opp'n ("August 2006 Def. Aff."), Ex. A ("Agreement") ¶ 16(h). Jocelyn insured the vehicle through Allstate Insurance Company for $100,000, pursuant to the terms of the agreement. July 2006 Pl. Aff. ¶ 14; Agreement ¶¶ 21-22. Furthermore, MMCA maintained a contingent liability and excess liability policy on the DeJean vehicle through Reliance Insurance Company ("Reliance"), an insurance company domiciled in Pennsylvania, for $5,000,000. Defendants' 56.1 Statement ("Defs.' 56.1 St.") ¶ 4; Plaintiffs' 56.1 Statement ("Pl.'s. 56.1 St.") ¶ 4; July 2010 Def. Response Letter, Ex. A.
On November 27, 1997, Jocelyn was a passenger in the DeJean vehicle when it collided with a van owned by DeeJay Carpet Co., Inc. ("DeeJay"), driven by Daniel Hess ("Hess") and insured by Merchants. July 2006 Def. Aff. ¶¶ 3, 6; Defs.' 56.1 St. ¶¶ 6-8; July 2006 Pl. Aff. ¶ 16; Pl.'s 56.1 Statement ¶¶ 6-8. At the time of the accident, Jocelyn's son, Jerry DeJean, was driving the DeJean vehicle with her permission. Defs.' 56.1 St. ¶ 7; Pl.'s 56.1 St. ¶ 7.
Sometime in 1998, Jocelyn commenced a lawsuit ("the DeJean action") in New York State Supreme Court, Queens County, against DeeJay, Hess, and Jerry and Patrick DeJean to recover damages for personal injuries.*fn1 July 2006 Pl. Aff. ¶ 5. On March 26, 2003, a jury returned a verdict for $700,000 in Jocelyn's favor, apportioning 70% of the fault to Jerry DeJean, and 30% of the fault to DeeJay and Hess. July 2006 Pl. Aff. ¶ 6. Two years later, on August 26, 2005, a judgment of $855,376.64 was finally entered in the DeJean action.*fn2 July 2006 Pl. Aff. ¶ 8; July 2006 Def. Aff. ¶ 7. Although the jury only apportioned 30% of the fault to DeeJay and Hess, all of the defendants were held jointly and severally liable. July 2006 Matlin Aff. ¶ 16; Pl.'s Am. V. Compl. ¶¶ 35-36. Therefore, Merchants, as DeeJay's insurer, was ultimately obligated to pay the entire verdict, which Merchants satisfied on or about December 12, 2005, at a reduced amount of $600,000. July 2006 Def. Aff. ¶ 7.
In October 2003 -- after the jury verdict in the DeJean action -- Merchants filed the present lawsuit in New York State Supreme Court, Queens County, against MMCA, seeking contribution and indemnity for the amount that Merchants had to pay Jocelyn in excess of its proportionate liability. See Merchants Ins. Group v. Mitsubishi Motor Credit Ass'n, 525 F. Supp. 2d 309, 311 (E.D.N.Y. 2007) ("Merchants I"). On or about November 26, 2003, the case was removed to federal court. Id.
Ordinarily, Merchant's claim against MMCA for contribution and indemnity would have been covered by MMCA's excess insurance policy with Reliance. However, prior to the jury verdict and entry of judgment in the DeJean action, MMCA's insurer Reliance was declared insolvent under Pennsylvania law. July 2006 Def. Aff. ¶ 5; Defs.' 56.1 St. ¶ 4; Defs.' 56.1 St., Ex. B ("Order of Liquidation") ¶ 2; Pl.'s 56.1 St. ¶ 4. The Order of Liquidation appointed the Insurance Commissioner for Pennsylvania, and her successors, as liquidator of Reliance. Order of Liquidation ¶ 3. Furthermore, because Reliance was a multistate insurer, New York appointed an ancillary receiver for Reliance, in accordance with New York Insurance Law Article 74. Montemarano v. Serio, No. 120239/02, 2003 WL 1870233 (Sup. Ct. New York County March 27, 2003).
Accordingly, on December 30, 2003, after learning of Merchants' lawsuit against it -- and, for the first time, learning of the underlying motor vehicle accident -- MMCA filed a Proof of Claim with the Pennsylvania liquidator. July 2010 Def. Response Letter. As a California domiciliary, MMCA also sought to have the claim against it covered by the California Insurance Guarantee Association ("CIGA").*fn3 Id. However, on April 13, 2010, CIGA withdrew its defense of MMCA on the ground that CIGA does not make any payments to solvent insurers.*fn4 Id. MMCA did not file a claim under New York insurance law. Id.
Although Merchants' claim for contribution and indemnity was initially dismissed without prejudice, due to the fact that judgment had not yet been entered in the DeJean action, the case was re-opened in June 2006. Merchants I, 525 F. Supp. 2d at 311. At that point, Merchants and MMCA both moved for summary judgment. Merchants I, 525 F. Supp. 2d at 310. Merchants argued that, under New York Vehicle and Traffic Law Section 388, MMCA qualified as an "owner" of the DeJean vehicle, and thus could be found vicariously liable for the underlying injuries caused by Jerry DeJean's negligence. July 2006 Pl. Aff. ¶¶ 13, 19-20. Therefore, Merchants sought contribution and indemnity for MMCA's proportionate share of the verdict rendered in the DeJean action. Merchants I, 525 F. Supp. 2d at 311.
Defendants argued, to the contrary, that the Graves Amendment preempted application of New York Vehicle and Traffic Law Section 388, and precluded lawsuits against lessors such as defendants.*fn5 Sept. 2006 Def. Aff. ¶ 4. Furthermore, defendants argued that because MMCA's insurer, Reliance, had become insolvent, California's insurance law should be applied to preclude Merchants' lawsuit. Sept. 2006 Def. Aff. ¶ 4. Finally, defendants submitted that, even if New York insurance law applied to the present dispute, Merchants' lawsuit should still be precluded. Aug. 2006 Def. Aff. ¶ 4.
Defendants' motion was ultimately granted, on the theory that the Graves Amendment precluded Merchants' claim. Merchants I, 525 F. Supp. 2d at 314. However, as noted, the Second Circuit Court of Appeals disagreed, and remanded the case for further consideration of the parties' remaining arguments. Merchants Ins. Group v. Mitsubishi Motor Credit Ass'n, 356 Fed. App'x 548, 552-53 (2d Cir. 2009) ("Merchants II"). For the reasons that follow, it is determined that, whether one applies New York or California insurance law, plaintiff's lawsuit should be dismissed, as neither state permits recovery by an insurer ...