United States District Court, E.D. New York
MEMORANDUM AND ORDER
GLASSER, SENIOR UNITED STATES DISTRICT JUDGE
United Specialty Insurance Company (“USIC”)
commenced this action seeking a declaratory judgment that it
is not required to defend or indemnify a number of named
parties in a personal injury action currently pending in New
York State Supreme Court, Kings County, Index. No.
502140/2015 (the “Berger Action”). National
General Insurance Online, Inc. (“National
General”) moved to intervene and assert counterclaims
against USIC. USIC opposes that motion, which is now before
the Court. For the reasons indicated herein, National
General's motion to intervene is GRANTED.
parties do not dispute the relevant facts, which are taken
from their motion papers. ECF 29, 34, 35. This action stems
from bodily injuries suffered by Schmuel Berger
(“Berger”) on February 17, 2015 when he was
allegedly struck by a car that was owned by Shem Rokeach
(“Rokeach”) and insured by the proposed
intervenor, National General. At the time of the accident,
the vehicle was driven by Clark McNeil
(“McNeil”), who was employed by Royal Parking
Services (“Royal”), a valet company insured by
separate lawsuits ensued. First, Berger initiated the
aforementioned Berger Action, seeking recovery for his
injuries from Rokeach, McNeil and Royal. National General (as
insurer of the vehicle) undertook to defend McNeil (the
driver) in the Berger Action as a courtesy subject to a
Reservation of Rights. ECF 35, Ex. A.
National General initiated a declaratory judgment action in
the New York State Supreme Court, New York County, Index No.
155665/15 (“National General Action”), seeking a
declaration that it had no duty to defend and indemnify
McNeil. On August 31, 2016, that court granted that judgment
against McNeil by default. ECF 29-2. Thereafter, by tender
demand dated October 5, 2016, National General requested USIC
to assume McNeil's defense in the Berger Action and
reimburse it for the costs it had incurred defending him to
date. ECF 29-3. USIC did not respond to that demand, or to a
follow-up email. ECF 29-4. The record does not indicate
whether National General has continued to defend McNeil in
the Berger Action.
USIC, the insurer of Royal, commenced this action in this
Court on March 13, 2017, seeking a declaration that it has no
duty to defend or indemnify McNeil, Rokeach or Royal in the
Berger Action. ECF 1, Complaint. National General seeks to
intervene in this action and asserts two counterclaims for
affirmative relief: (1) a declaration that USIC has a duty to
defend and indemnify McNeil in the Berger Action, and (2) a
declaration that National General is entitled to
reimbursement from USIC for its defense of McNeil in the
Berger Action. ECF 29-6. Neither McNeil nor Royal has ever
appeared in this USIC action, and on August 22, 2017, the
Clerk of the Court issued certificates of default against
them. ECF 43, 46.
24(a)(2) of the Federal Rules of Civil Procedure provides a
four part test for intervention as of right. The proposed
intervenor must (1) timely file an application to intervene,
(2) show the existence of an interest in this pending action,
(3) demonstrate that the interest may be impaired by the
disposition of the pending action, and (4) show that the
interest is not protected adequately by the parties to this
action.” Brennan v. N.Y.C. Bd. of Educ., 260
F.3d 123, 128-29 (2d Cir. 2001). The timeliness of National
General's motion is not disputed here, but the remaining
the second factor, for an interest to be cognizable, it must
be “direct, substantial, and legally
protectable.” Washington Elec. Coop., Inc. v.
Massachusetts Mun. Wholesale Elec. Co., 922 F.2d 92, 97
(2d Cir. 1990). It is clear that National General has an
interest in this action because its “coverage
obligations will necessarily be shaped” by this
Court's judgment. Certified Multi-Media Solutions,
Ltd. v. Preferred Contractors Ins. Co. Risk Retention Grp.
LLC, 14-CV-5227, 2015 WL 5676786, at *10 (E.D.N.Y. Sept.
24, 2015); see also Hartford Fire Ins. Co. v.
Mitlof, 193 F.R.D. 154, 160 (S.D.N.Y. 2000). Rokeach, as
the owner of the car, will be liable in the Berger Action
only to the extent that McNeil, the driver, is found liable.
N.Y. Veh. & Traffic L. § 388. National General, as
Rokeach's insurer, is therefore interested in absolving
McNeil from negligence: if McNeil is not liable, then Rokeach
is not either. USIC seeks to be relieved of its obligation to
insure and defend McNeil, but if that relief is granted, then
there is no real possibility of McNeil being cleared from
liability in the Berger Action. As a result, if USIC succeeds
in this action, National General will either be on the hook
for Rokeach's vicarious liability, bottomed on
McNeil's negligence, or more likely, would continue to
defend McNeil in the Berger Action, at its own cost, to
mitigate vicarious liability against Rokeach. Additionally,
National General would have no remedy for reimbursement of
intervention will not affect the scope of this case, which is
about USIC's obligation to defend and indemnify McNeil
and Royal. Wash. Elec. Coop., 922 F.2d at 97.
National General's counterclaims are squarely aligned
with that issue. Intervention here will thus serve the
primary purpose of Rule 24 “to prevent a multiplicity
of suits where common questions of law or fact are
involved.” Id. For all of those reasons, the
Court finds that National General has a sufficiently
protectable interest in this law suit to require
the third factor, disposition of this action may impair
National General's interests. As already indicated, a
declaratory judgment in USIC's favor will force National
General to bear both the cost of defending McNeil and any
judgment against Rokeach stemming from McNeil's liability
in the Berger Action. Additionally, any separate actions
contemplated by National General for indemnity or
reimbursement would be prejudiced by a determination in this
action that USIC has no obligation to McNeil or Royal.
Oneida Indian Nation of Wis. v. New York, 732 F.2d
261, 265 (2d Cir. 1984) (intervention is required if
“there is a substantial likelihood that the claims and
interests of the proposed intervenors . . . may be adversely
affected at least by principles of stare decisis,
arising out of the final judgment to be entered in this
case”); Certified Multi-Media Solutions, 2015
WL 5676786, at *12; Sackman v. Liggett Grp., 167
F.R.D. 6, 21 (E.D.N.Y. 1996).
there is “persuasive evidence that [McNeil] will not
pursue [his defense] vigorously” in this case, and thus
he will not protect National General's interests.
Wash. Elec. Coop., 922 F.2d at 98. McNeil failed to
appear in the National General Action, resulting in a default
judgment, and has failed to appear in this action as well.
The recent entry of default in this case (ECF 43) will
presumably be followed by USIC's motion for a default
judgment against McNeil. Thus, it cannot be sincerely argued
that McNeil will adequately represent National ...