Oxford Health Plan v. State-Wide Ins.

Full title: DONNA L. ADAMS and VERNON ADAMS, Plaintiffs, v. SBARRO, INC., SBARRO…

Court: Supreme Court of the State of New York, New York County

Date published: Feb 28, 2008

2008 N.Y. Slip Op. 31224 (N.Y. Sup. Ct. 2008)

Opinion

0110538/2007.

February 28, 2008.

[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] DEBORAH KAPLAN, J.S.C.

1. Factual and Procedural Background

This subrogation action arises from a motor vehicle accident wherein a vehicle driven by Martha Delgado collided with another. Delgado, who claims to have suffered spinal and other injuries in the accident, received no-fault benefits from her automobile liability carrier, defendants State-Wide Insurance Company (State-Wide), for medical expenses incurred from the date of the accident, June 4, 2004, until October 5, 2004. State-Wide discontinued the benefits based upon a late notice of claim. Thereafter, Delgado's health insurance carrier, Oxford Health Plan (Oxford) paid for her medical expenses, which included a spinal surgery.

In August 2007, Oxford, as purported subrogee of Delgado, commenced this action against State-Wide to recover $30,518.97, the sum it paid for Delgado's medical expenses. Oxford asserts two causes of action, one sounding in breach of contract and one sounding in unjust enrichment or equitable subrogation. Oxford now moves, pursuant to CPLR 321 2, for summary judgment on the issue of liability.

II. Discussion

In support of its motion for summary judgment, Oxford argues that the defendant's discontinuance of Delgado's no-fault benefits based on a failure to give timely notice within 30 days was improper because the denial notice failed to provide "that late notice will be excused where the applicant can provide reasonable justification of the failure to give timely notice." Oxford argues that the improper discontinuance was a breach of State-Wide's contract with Delgado which required it to pay no-fault benefits and Oxford's consequent payment resulted in State-Wide being unjustly enriched in the sum of $30,518.97.

State-Wide's position is that Oxford has failed to state a cause of action for either breach of contract or equitable subrogation. State-Wide avers that Oxford has not submitted a copy of the insurance policy establishing its right of subrogation. Thus Oxford has no contractual right of subrogation. As to the unjust enrichment cause of action, State-Wide argues that Oxford and has failed to submit proof in admissible form that payment was demanded and/or made on behalf of Delgado.

First, Oxford does not and can not assert that it may proceed under 11 NYCRR 65-3.11 which provides, in relevant part, that "an insurer shall pay benefits for any element of loss, other than death benefits, directly to the applicant or, . . .upon assignment by the applicant . . . shall pay benefits directly to providers of health care services. . ." Oxford, as a health insurer, is clearly not a "provider of health care services." Indeed, the courts have consistently afforded the regulation a narrow construction. See e.g. Allstate Ins. Co. v Belt Parkway Imaging, Inc., 33 AD3d 407 (1^st Dept. 2006); V.S. Medical Services, P.C. v New York Central Mutual Fire Ins. Co., 14 Misc 3d 134(A) (App Term 2^nd and 11^th Jud Dist. 2006); Craig Antell, D.O., P.C, v. New York Cent. Mut, Fire Ins. Co., 11 Misc 3d 137(A) (App Term 1^st Dept. 2006); A.B. Medical Services PLLC v. Liberty Mut. Ins. Co., 9 Misc 3d 36 (App Term 2^nd and 11^th Jud Dist. 2005).

Contrary to Oxford's contention, it may not assert a breach of contract claim against State-Wide on behalf of Delgado. Oxford, of course, is not in privity of contract with State-Wide, and has not shown it was an intended third-party beneficiary of the contract. Indeed, both Oxford and State-Wide were both contractually obligated, under separate and distinct policies, to pay first-party benefits to Delgado. Thus, even assuming that Oxford established that it demanded payment and State-Wide refused to pay, Oxford may not maintain this cause of action against this defendant.

It has been held that a plaintiff insurer may not maintain an action, as purported subrogee, against its insured's broker for breach of contract with regard to the broker's failure to timely notify the insurer of a claim. In Dezer Properties II, LLC v Kaye Insurance Associates, Inc., 38 AD3d 213 (1^st Dept. 2007), the First Department explained that the insured suffered no loss as a result of the defendant broker's actions, and that plaintiff insurer was not in privity with the broker and the broker owed it no duty. Similarly, in Federal Insurance Co., v Spectrum Ins. Brokerage Services, Inc., 304 AD2d 316 (1^st Dept. 2003), the First Department held that the plaintiff insurer may not maintain an action against its insured's broker since the insured suffered no loss as result of broker's alleged negligence in failing to procure sufficient coverage for the insureds as additional insureds. The Court stated that "[i]t is clear that plaintiff as subrogee is seeking to recover for its own, and not its insureds' loss." Federal Insurance Co., v Spectrum Ins. Brokerage Services, Inc., supra at 317. The same applies to the instant case.

Nor may Oxford maintain a claim against this defendant under the principle of subrogation. "Subrogation, an equitable doctrine, allows an insurer to stand in the shoes of its insured and seek indemnification from third parties whose wrongdoing has caused the loss for which the insurer is bound to reimburse." Kaf-Kaf, Inc. v Rodless Decorations, Inc., 90 NY2d 654, 659 (1997). "This right of subrogation is based upon principles of equity and natural justice" (Allstate Ins. Co. v. Stein, 1 N.Y.3d 416, 422; quoting, Ocean Acc. Guar. Corp. v. Hooker Electrochemical Co., 240 N.Y. 37, 47) and is intended to prevent unjust enrichment. See Teichman v Community Hosp. of Western Suffolk, 87 NY2d 514 (1996); Winkelmann v. Excelsior Ins. Co., 85 N.Y.2d 577 (1995). As such, where, as here, "an insured is driving a car and is hit and injured by another driver" and files a claim with her insurer, "the insurer then has the right, under the common law of subrogation, to `stand in the shoes' of the insured and seek recompense from the third-party tortfeasor for the amount paid to the insured" so long as the insured has been made whole. ELRAC, Inc. v Ward, 96 N.Y.2d 58, 75-76 (2001) quoting North Star Reins, Corp. v Continental Ins. Co., 82 NY2d 281, 294 (1994); see Federal Ins. Co. v. Spectrum Ins. Brokerage Services, Inc., 304 A.D.2d 316, 317 (1 Dept. 2003).

Under these principles, the Court of Appeals has held that a health insurer may sue a tobacco company for injuries allegedly sustained by its insured from smoking tobacco products. In Blue Cross and Blue Shield of N.J., Inc. v. Philip Morris USA Inc., 3 NY3d 200 (2004), the Court found that while the insurer had no standing to sue under General Business Law § 349, a consumer protection statute, it was not precluded from recovering damages in an action in equitable subrogation. See also Principe v City of New York, 11 Misc 3d 879 (Sup Ct, Richmond County 2006).

Similarly, plaintiff Oxford may have a subrogation cause of action against the individual whose vehicle struck Delgado's vehicle, the "third-party tortfeasor" spoken of in the decisional authority. However, research reveals and Oxford cites to no statutory or decisional authority which would authorize it to maintain a subrogation action against State-Wide to recover the sums it was contractually obligated to pay to its insured, Delgado. To allow it to do so would create an entirely new right of action unsupported by the long settled subrogation principles.

Accordingly, Oxford's motion for summary judgment on the issue of liability is denied.

III. Conclusion

For these reasons and upon the foregoing papers, it is,

ORDERED that the plaintiff's motion for summary judgment on the issue of liability is denied.

This constitutes the Decision and Order of the Court.