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General Motors Acceptance Corp. v. New York Central Mutual Fire Insurance Co.

Supreme Court, New York County

August 14, 2013

GENERAL MOTORS ACCEPTANCE CORPORATION and AMERICAN AUTOMOBILE INSURANCE COMPANY, Plaintiffs,
v.
NEW YORK CENTRAL MUTUAL FIRE INSURANCE COMPANY, Defendant. Index No. 109668/2006

Unpublished Opinion

DECISION & ORDER

Joan M. Kenney, Judge.

Defendant New York Central Mutual Fire Insurance Company (NYCM) moves for an order restoring its prior summary judgment motion and, upon restoration, for an order, pursuant to CPLR 3212, granting summary judgment in its favor, and dismissing the complaint with prejudice. Plaintiffs General Motors Acceptance Corporation (GMAC) and American Automobile Insurance Company (AAIC) cross-move for an order granting summary judgment on the complaint in their favor.

NYCM originally moved for summary judgment by motion submitted on October 29, 2010. This court initially held the motion in abeyance, and, later, by order dated September 27, 2012, dismissed the motion without prejudice to restore upon a final determination of the appeal of this court's conditional preclusion order entered July 14, 2011 (2011 preclusion order). In the 2011 preclusion order, the court, among other things, granted plaintiffs' motion for a conditional order of preclusion. By order dated March 19, 2013, the Appellate Division, First Department unanimously modified the 2011 preclusion order by limiting preclusion to the documents identified in the order as either missing or not disclosed, and otherwise affirmed the order. The condition precedent to restoration having occurred, that branch of this motion to restore NYCM's prior summary judgment motion is granted.

In this action for bad-faith failure to settle within the primary insurance policy limits, GMAC and AAIC, a unit of Fireman's Fund Insurance Company and the excess insurance carrier, seek to recover monies that they paid toward settlement of the underlying action, Julia Sette v Lesly J. Appleby, Jaime Stevenson, Mariann Clayton, & GMAC Financial Services (Sup Ct, NY County, index No. 124072/1994) (the Sette action). The Sette action plaintiff (Sette) alleged that she sustained serious personal injuries on April 24, 1994, as the result of a two-car collision. Sette alleged that the accident occurred while she was a passenger in a 1989 Honda operated by Lesly J. Appleby and leased by Sette's father, Edward J. Sette, from GMAC.

The Honda in which Sette was riding was covered by a personal automobile policy having limits of $300, 000 per occurrence issued by NYCM to Edward Sette, and an excess liability policy issued by AAIC to GMAC having a deductible of $ 1 million per occurrence for each of the leased vehicles in its fleet. The second motor vehicle involved in the accident, a 1990 Dodge, was driven by Jaime Stevenson, owned by Mariann Clayton, and insured by a GEICO policy having limits of $10, 000 per person and $20, 000 per occurrence.

Sette was taken by ambulance from the scene of the accident to Westchester County Medical Center, where she complained of pain to her neck, left shoulder, left arm, and ribs, and denied any loss of consciousness, dizziness, tinnitus, or vomiting. Sette was treated for soft tissue injuries, and released in stable condition, with instructions to take Motrin or Tylenol, as needed. In the eight years following the accident, Sette consulted with a variety of medical specialists, including an orthopedist, a neurologist, a neuropsychiatrist, an opthalmologist, and a psychologist. She also underwent a variety of objective tests, including magnetic resonance imaging (MRI), electroencephalogram (EEG), brain stem auditory evoked response (BAER), and visual evoked response (VER). In the bill of particulars, Sette alleges that she sustained a severed olfactory nerve, severed brain stem dysfunction causing cognitive impairment, bilateral carpal tunnel syndrome, cerebral concussion, and lumbar strain. Sette, who had been employed as an administrative assistant prior to the accident, did not return to any employment after the accident and prior to resolution of the Sette action.

The Sette action trial was bifurcated, and the liability issue was tried to verdict before the Honorable Harold Tompkins. On December 6, 2000, after trial, the jury returned a verdict, finding each of the Sette action defendants liable. The jury apportioned the percentage of fault equally between the defendants associated with each of the two vehicles involved in the accident, finding Appleby and GMAC 50% liable and Stevenson and Clayton 50% liable (see Sette v. Appleby, Sup Ct, NY County, index No. 124072/1994, Dec. 6, 2000 verdict sheet).

Judge Tompkins then remanded the trial on damages to Civil Court, pursuant to CPLR 325 (d), finding that "there is, in the opinion of this Court, a serious question as to whether the plaintiff can meet the threshold of a serious injury. In light of this, the Court feels that the amount of potential damages would not exceed the jurisdiction of the Civil Court" (see Sette v. Appleby, Sup Ct, NY County, index No. 124072/1994, Dec. 6, 2000 verdict proceedings tr at 9 [14-23]).

On April 9, 2003, after trial on damages before the Honorable Eileen A. Rakower, the jury returned a verdict, finding that Sette had satisfied the No-Fault Law serious injury threshold in both the 90/180-day impairment and the partial loss of use of a body organ or system categories (see Ins. Law § 5102 [d]), and that she was entitled to a total of $1.5 million, plus future lost earnings to be awarded over a period of eight years (see Sette v. Appleby, Civ Ct, NY County, index No. 000146TSN2001, Apr. 9, 2003 verdict sheet). Subsequently, Sette agreed to accept $1.5 million in full settlement of her claims. To fund the settlement, NYCM paid over the $300, 000 primary policy limits, and AAIC paid the remaining $1.2 million. Subsequently, AAIC recovered $1 million from GMAC.

Plaintiffs then commenced this action by service and filing of a summons and complaint. In this action, plaintiffs allege that NYCM acted in bad faith during discovery and during the bifurcated trial of the Sette action by significantly undervaluing the Sette action claims, and by refusing to enter into settlement negotiations with Sette, although Sette's attorneys attempted to settle the action, prior to the jury verdict on damages. Plaintiffs further allege that NYCM's conduct constitutes a gross disregard of their interests, and a deliberate failure to place plaintiffs' interests on an equal footing with NYCM's own interests. On these allegations, plaintiffs seek to recover $1.75 million, together with interest, and costs and disbursements incurred in this action.

In the answer, NYCM denies all allegations of wrongdoing, and asserts 11 affirmative defenses, including one arising out of allegations that NYCM failed to settle the Sette action, even though GMAC and AAIC had agreed to contribute to such settlement. NYCM also asserts two counterclaims against plaintiffs for breach of the duties of good faith and fair dealing they owed to NYCM.

NYCM now seeks summary judgment in its favor on the complaint, contending that the undisputed record demonstrates that its belief that Sette had not sustained a causally-related serious injury sufficient to meet the No-Fault Law threshold was reasonable, given Sette's medical history, and that, at no point during the pendency of the Sette action, did a real opportunity to settle exist, given Sette's refusal to settle for a reasonable amount.

In opposition, plaintiffs contend that NYCM improperly: failed to acknowledge that Sette met the No-Fault Law serious injury threshold prior to the damages trial; failed to properly investigate and evaluate Sette's claim; failed to authorize any offer of settlement; repeatedly ignored plaintiffs' demands to settle the Sette action; and failed to recognize the potential magnitude of damages and financial exposure to the defendant-insureds in the Sette action. Plaintiffs also contend that, among other things, triable issues exist regarding whether NYCM acted within its discretion in not offering to pay the $300, 000 policy limits prior to the damages trial verdict, and whether ...


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