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Vestal v. Pontillo

Supreme Court of New York, Third Department

February 22, 2018

ERIN P. VESTAL, Respondent-Appellant,
MICHAEL C. PONTILLO et al., Appellants-Respondents, et al., Defendant.

          Calendar Date: January 10, 2018

          Keidel, Weldon & Cunningham, LLP, White Plains (Howard S. Kronberg of counsel), for Michael C. Pontillo and another, appellants-respondents.

          Bond, Schoeneck & King, PLLC, Albany (Ryan P. Keleher of counsel), for Hudson Heritage Capital Management, Inc., appellant-respondent.

          Gleason, Dunn, Walsh & O'Shea, Albany (Thomas F. Gleason of counsel), for respondent-appellant.

          Before: McCarthy, J.P., Devine, Aarons, Rumsey and Pritzker, JJ.


          Devine, J.

         Cross appeal from an order of the Supreme Court (Platkin, J.), entered February 17, 2017 in Albany County, which, among other things, partially denied motions by defendants Michael C. Pontillo, Hudson Heritage Group, Inc. and Hudson Heritage Capital Management, Inc. to dismiss the complaint against them.

         Plaintiff's husband (hereinafter decedent) reached out to his brother-in-law and financial advisor, defendant Michael C. Pontillo, to obtain additional term life insurance coverage. Pontillo acted as the writing agent in applying for a $5 million term life insurance policy from defendant ReliaStar Life Insurance Company that would name plaintiff as beneficiary. Decedent completed a medical examination questionnaire as part of the application that contained misstatements of fact. The policy was issued in 2011 and, when decedent passed away less than two years later, plaintiff made a claim for the insurance proceeds. ReliaStar denied the claim, determining that decedent's failure to disclose on the medical questionnaire a history of substance abuse treatment and cocaine use constituted material misrepresentations warranting rescission of the policy.

         Plaintiff responded by commencing this action against Pontillo and his alleged employers, defendants Hudson Heritage Group, Inc. (hereinafter HHG) and Hudson Heritage Capital Management, Inc. (hereinafter HHCM), as well as against ReliaStar. She asserted several claims against Pontillo, HHG and/or HHCM that, while sounding in different theories of liability, all relate to Pontillo's alleged submission of a fatally inaccurate insurance application while representing to plaintiff that the policy issued upon it was valid. In lieu of serving an answer, HHCM moved to dismiss the claims against it as failing to state a cause of action (see CPLR 3211 [a] [7]) and precluded by documentary evidence (see CPLR 3211 [a] [1]). Pontillo and HHG served an answer, then moved to dismiss the complaint against them on the same grounds. Supreme Court granted the motions in part, dismissing the claim against Pontillo, HHG and HHCM for breach of contract and the claim against HHG and HHCM for their negligent hiring, supervision and retention of Pontillo. Supreme Court denied the motions insofar as they sought to dismiss plaintiff's claims for breach of fiduciary duty, negligence, negligent misrepresentation and concealment of material facts and fraud. Pontillo, HHG and HHCM appeal, and plaintiff cross-appeals.

         "On a motion to dismiss under CPLR 3211, the pleading is to be given a liberal construction, the allegations contained within it are assumed to be true and the plaintiff is to be afforded every favorable inference" (Simkin v Blank, 19 N.Y.3d 46, 52 [2012] [citation omitted]; see Graven v Children's Home R.T.F., Inc., 152 A.D.3d 1152, 1153 [2017]). Allegations contained in an affidavit submitted by the plaintiff may likewise be used to remedy any defects in the complaint that would otherwise fail to state a claim (see Leon v Martinez, 84 N.Y.2d 83, 87-88 [1994]; Muncil v Widmir Inn Rest. Corp., 155 A.D.3d 1402, 1403 [2017]). The liberal construction and favorable inferences to which a plaintiff is entitled will nevertheless fail to save claims that are conclusively refuted by documentary evidence (see CPLR 3211 [a] [1]) or based on indisputably incredible factual allegations (see CPLR 3211 [a] [7]; Simkin v Blank, 19 N.Y.3d at 52; 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 N.Y.2d 144, 152 [2002]; Graven v Children's Home R.T.F., Inc., 152 A.D.3d at 1153).

         HHCM argues that the claims against it must be dismissed inasmuch as Pontillo was not its employee, pointing to a representative agreement in which Pontillo is categorized as an independent contractor. HHCM overlooks that such a portrayal does not settle the fact-specific question of whether an employer-employee relationship exists between it and Pontillo (see Carlson v American Intl. Group, Inc., 30 N.Y.3d 288, 301 [2017]; D'Allaird v Markline Sales, Inc., 104 A.D.3d 1110, 1112 [2013]). Even without the benefit of discovery, plaintiff produced proof that Pontillo used office resources at HHCM's headquarters in contravention of the representation agreement, corresponded using a HHCM email address and had HHCM business cards and letterhead. The assertion that HHCM is liable for Pontillo's conduct as his employer is not, as a result, conclusively debunked by the representation agreement (see Carlson v American Intl. Group, Inc., 30 N.Y.3d at 301; Hernandez v Chefs Diet Delivery, LLC, 81 A.D.3d 596, 598-599 [2011]; see also Layden v Plante, 101 A.D.3d 1540, 1542-1543 [2012]).

         As for HHCM's assertion that Pontillo could not have sold term life insurance under its banner, HHCM provided its membership agreement with the Financial Industry Regulatory Authority in which the needed authorization to engage in the sale of term life insurance is absent. Plaintiff responded with a HHCM brochure proclaiming that HHCM offers "[t]erm, [w]hole, [u]niversal and [v]ariable" life insurance products, as well as another HHCM brochure referencing insurance sales through its "affiliated insurance agency" HHG. Accordingly, in light of the conflicting documentary proof and the unclear relationship between HHCM and HHG, HHCM has not demonstrated its entitlement to dismissal on the ground that it could not have had any connection to the ReliaStar policy (see Barnes v Dungan, 261 A.D.2d 797, 799 [1999]).

         Turning to the arguments advanced in the motion of Pontillo and HHG, to which HHCM joins, they assert that only decedent, as the owner of the ReliaStar policy, had standing to recover for any alleged negligence in applying for it [1]. "'[A]n obligation rooted in contract may engender a duty owed to those not in privity' but, as a general rule, privity or its equivalent remains the predicate for imposing liability for nonperformance of contractual obligations" (Henry v Guastella & Assoc., 113 A.D.2d 435, 437 [1985], lv denied 67 N.Y.2d 605');">67 N.Y.2d 605 [1986], quoting Strauss v Belle Realty Co., 65 N.Y.2d 399, 402 [1985]; see Leavitt-Berner Tanning Corp. v American Home Assur. Co., 129 A.D.2d 199, 202 [1987], lv denied 70 N.Y.2d 609');">70 N.Y.2d 609 [1987]). Accordingly, "where an insurance agent's negligence causes an insured to be without coverage, the agent cannot be held liable for damages sustained by an injured third party as a consequence thereof... [if] the third party is not in privity with the agent and is not an intended beneficiary of the insurance contract" (Pressman v Warwick Ins. Co., 213 A.D.2d 386, 387-388 [1995]; see Henry v Guastella & Assoc., 113 A.D.2d at 438-439).

         Plaintiff was the intended beneficiary of the ReliaStar policy from the moment when decedent applied for the policy. She further alleged that she was linked to Pontillo by his status as a family member and trusted financial advisor and that Pontillo knew not only that the policy was intended to ensure plaintiff's financial well-being in the event of decedent's death, but that she would rely upon his expertise in preparing a valid application for it. Accepting these allegations as true, they show "an affirmative assumption of a duty of care to a specific party, [plaintiff, ] for a specific purpose, regardless of whether there was a contractual relationship" (Credit Alliance Corp. v Arthur Andersen & Co., 65 N.Y.2d 536, 548-549 [1985]; see Ossining Union Free School Dist. v Anderson LaRocca Anderson, 73 N.Y.2d 417, 425 [1989]; Glanzer v Shepard, 233 NY 236, 238-239 [1922]; cf. Murphy v Kuhn, 90 N.Y.2d 266, 271-272 [1997]). As Supreme Court correctly determined, this alleged "reliance by... plaintiff that was 'the end and aim of the transaction'" (Ossining Union Free School Dist. v Anderson LaRocca Anderson, 73 N.Y.2d at 425, quoting Glanzer v Shepard, 233 NY at 238-239) constituted "a relationship so close as to approach that of privity" and created a duty of care ...

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