| Lue v Finkelstein & Partners, LLP |
| 2012 NY Slip Op 03259 [94 AD3d 1386] |
| April 26, 2012 |
| Appellate Division, Third Department |
| Kevin Lue, Respondent, v Finkelstein & Partners, LLP, et al.,Appellants. |
—[*1] LaFave, Wein & Frament, P.L.L.C., Guilderland (Paul H. Wein of counsel), forrespondent.
Lahtinen, J. Appeal from an order of the Supreme Court (Catena, J.), entered March 31, 2011in Montgomery County, which, among other things, granted plaintiff's motion for partialsummary judgment.
In January 2002, plaintiff, while working for O'Connell Electric, fell from a scissor lift at aconstruction work site owned by K-Mart Corporation. Defendants failed to preserve plaintiff'sLabor Law § 240 claim during K-Mart's chapter 11 bankruptcy, resulting in the claimbeing reduced to zero dollars by the Bankruptcy Court in 2004. Plaintiff, represented by newcounsel, subsequently commenced an action against various defendants, but his claim againstK-Mart was dismissed by Supreme Court (Cannizzaro, J.) based upon the Bankruptcy Court'sorder. No appeal was pursued from such dismissal.
Plaintiff eventually settled his claim against another defendant—United Rentals, Inc.,the supplier of the scissor lift—for $235,000. He then brought this legal malpracticeaction, which was previously before us regarding a discovery dispute (Lue v Finkelstein & Partners, LLP, 67AD3d 1187 [2009]), asserting that he would have had a larger recovery if his Labor Law§ 240 strict liability claim against K-Mart had been preserved by defendants. Plaintiffmoved for partial summary judgment on the [*2]issue of liability,and defendants cross-moved for summary judgment dismissing the complaint upon the groundthat plaintiff could not prove that defendants' alleged malpractice caused him any damagesbeyond what he had recovered from United Rentals. Supreme Court granted plaintiff's motionand denied defendants' cross motion. Defendants appeal, arguing that since plaintiff cannotrecover any damages other than those that he has already received, his motion for partialsummary judgment should have been denied and their cross motion for summary judgmentshould have been granted.
We find that factual issues exist in this record precluding summary judgment to either party.In a legal malpractice action, "a plaintiff must demonstrate that the attorney 'failed to exercise theordinary reasonable skill and knowledge commonly possessed by a member of the legalprofession' and that the attorney's breach of this duty proximately caused [the] plaintiff to sustainactual and ascertainable damages" (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438,442 [2007], quoting McCoy v Feinman, 99 NY2d 295, 301 [2002]). Defendants arguethat, even if they had preserved a claim against K-Mart, funds would not have been available tocollect on a favorable Labor Law § 240 cause of action because K-Mart was self-insuredand the record does not establish that K-Mart was named as an additional insured on O'ConnellElectric's policy with its insurer, Interstate Insurance Group. Plaintiff counters by contending thatO'Connell Electric had agreed in a written contract to indemnify K-Mart as well as name K-Martas an additional insured, and that an avenue to O'Connell Electric's insurer was provided byInsurance Law § 3420 and the 1978 Bankruptcy Code (see 11 USC § 524[a], [e]).
The contract between O'Connell Electric and K-Mart had an indemnificationclause[FN1]and also a clause requiring that O'Connell Electric include K-Mart as an additional insured. It isthe general rule that there is no right to indemnification if the indemnitee does not sustain anactual loss (see Lang v Hanover Ins.Co., 3 NY3d 350, 354 [2004]; Jackson v Citizens Cas. Co., 277 NY 385, 389[1938]; Bank of India v Trendi Sportswear, Inc., 2002 WL 84631, *4-5, 2002 US DistLEXIS 894, *10-14 [SD NY 2002], affd 64 Fed Appx 827 [2d Cir 2003], certdenied 540 US 1074 [2003]). This rule had the effect of protecting an insurer from having topay an injured party when its insured was insolvent or bankrupt. Thus, the Legislature long agocarved out an exception to the rule and "remedied this inequity by creating a limited statutorycause of action on behalf of injured parties directly against insurers" (Lang v Hanover Ins.Co., 3 NY3d at 354; see Coleman v New Amsterdam Cas. Co., 247 NY 271, 275[1928]). This exception is authorized by the Bankruptcy Code (see 11 USC § 524[a], [e]), and a personal injury plaintiff may pursue an action against a bankrupt defendant for thepurpose of obtaining a judgment to be enforced against that defendant's insurer (see Lang vHanover Ins. Co., 3 NY3d at 354-355; Green v Welsh, 956 F2d 30, 35 [2d Cir 1992];Collier on Bankruptcy ¶ 524.05 [16th ed]). Since it is well settled that an additionalinsured has the same protection as a named insured (see Kassis v Ohio Cas. Ins. Co., 12 NY3d 595, 599-600 [2009];Pecker Iron Works of N.Y. v Traveler's Ins. Co., 99 NY2d 391, 393 [2003]), it followsthat an Insurance Law § 3420 cause of action could be brought against the insurer of anadditional insured.[*3]
Here, the contract required O'Connell Electric to nameK-Mart as an additional insured. However, as defendants point out, there is no proof in the recordthat this was actually done. Establishing that a party is an additional insured is not generallydifficult (see Kassis v Ohio Cas. Ins. Co., 12 NY3d at 599-600). But, the policy is not inthe record and there is not even a sworn statement from a person with actual knowledgeindicating such coverage was in place.[FN2]Under such circumstances, plaintiff has failed to establish as a matter of law that a potentialclaim existed under Insurance Law § 3420 against Interstate Insurance Group.
Nor does this record support the conclusion that the contractual indemnification claim wasestablished as a matter of law as a way that plaintiff could have reached the funds of InterstateInsurance Group. Without addressing potential legal hurdles of such a reach (see generallyLang v Hanover Ins. Co., 3 NY3d at 353; Watson v Newell Indus., Inc., 67 AD3d 780, 781 [2009];Matter of Lee v Maltais, 250 AD2d 951, 952-953 [1998], lv denied 92 NY2d 809[1998]), we need only note that a contractual indemnification clause is not enforceable wherethere is active negligence by the indemnitee (see McKeighan v Vassar Coll., 53 AD3d 831, 833-834 [2008]).The record does not establish as a matter of law the role (if any) of K-Mart (the indemnitee) atthe construction site or whether K-Mart was free from negligence.
Finally, we find unpersuasive defendants' assertion that plaintiff's strict liability claim underLabor Law § 240 would not have had potential additional value in the underlyinglitigation. Further, plaintiff submitted evidence which, when viewed most favorable to him,indicated that his injuries potentially had value beyond the amount for which he settled.
Mercure, J.P., Spain, McCarthy and Garry, JJ., concur. Ordered that the order is modified, onthe law, without costs, by reversing so much thereof as granted plaintiff's motion for partialsummary judgment on the issue of liability; said motion denied; and, as so modified, affirmed.
Footnote 1: Plaintiff did not suffer a graveinjury and, thus, common-law indemnification would not have been available to K-Mart againstO'Connell Electric, plaintiff's employer (see Workers' Compensation Law § 11; Flores v Lower E. Side Serv. Ctr., Inc.,4 NY3d 363, 367 [2005]).
Footnote 2: It is not unheard of forcontractors to fail to obtain such coverage despite agreeing to do so (see e.g. Kinney v LiskCo., 76 NY2d 215 [1990]).