| State of New York v Zurich Am. Ins. Co. |
| 2013 NY Slip Op 03367 [106 AD3d 1222] |
| May 9, 2013 |
| Appellate Division, Third Department |
| State of New York, Appellant, v Zurich AmericanInsurance Company, Respondent. |
—[*1] Clausen Miller, PC, New York City (Melinda S. Killross of counsel), forrespondent.
Garry, J. Appeal from an order of the Supreme Court (Platkin, J.), entered August 29,2011 in Albany County, which granted defendant's motion to dismiss the complaint.
Northport Land Corporation is the owner of real property located in the Town ofNorthport, Suffolk County, which was used for the purpose of operating a gasolinestation and automobile repair shop. The Department of Environmental Conservationdesignated the property to be a spill site due to the contamination of ground water andsoil caused by petroleum discharges emanating from the underground gasoline storageand dispensing system located upon the property. As of September 2009, the Departmenthad expended $124,794.54 to clean up the property with the expectation of incurringadditional costs in the future. During the relevant time period, Northport maintained apolicy of liability insurance covering the property with defendant, which includedcoverage for clean-up costs required by governmental authorities as the result ofpetroleum discharges from underground storage tank systems.
After defendant disclaimed coverage under the policy, Northport commenced adeclaratory judgment action to enforce its terms. Defendant moved for summaryjudgment dismissing the complaint and the motion was granted by Supreme Court(Pines, J.), ruling that the policy did not cover the petroleum contamination at issue. Thisdecision was upheld by the Second Department on appeal (Northport Land Corp. v Zurich N.Am. Ins., 99 AD3d 683 [2012]).[*2]
In April 2011, plaintiff commenced this actionagainst defendant under Navigation Law § 190 seeking reimbursement ofexpenses incurred in cleaning up the property. Defendant moved pursuant to CPLR 3211to dismiss the complaint as barred by the doctrine of res judicata and/or collateralestoppel. Finding the doctrine of collateral estoppel applicable, Supreme Court grantedthe motion and dismissed the complaint. Plaintiff appeals.
Collateral estoppel is an equitable doctrine that "precludes a party from relitigating ina subsequent action or proceeding an issue . . . [that was] decided againstthat party or [one] in privity" with that party in a prior action or proceeding (Buechelv Bain, 97 NY2d 295, 303 [2001], cert denied 535 US 1096 [2002]; seeD'Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659, 664 [1990]; Ryan vNew York Tel. Co., 62 NY2d 494, 500 [1984]). As the party seeking the benefit ofthe doctrine, defendant bears the initial burden of demonstrating that there is privity asbetween plaintiff and Northport, such that it applies. In rendering a determination, in theinterest of fairness, "[d]oubts should be resolved against imposing preclusion"(Buechel v Bain, 97 NY2d at 304-305).
Here, determining whether privity is established requires examining whether plaintiffand Northport had a relationship that made plaintiff's rights derivative ofNorthport's.[FN*]Northport is the entity responsible for the petroleum discharge and is strictly liable forclean-up costs (see Navigation Law § 181 [1]). Plaintiff is the entity thathas undertaken the cleanup and now seeks reimbursement for monies expended. Thus,plaintiff has a right of indemnification against Northport to recoup these costs (seeState of New York v Stewart's Ice Cream Co., 64 NY2d 83, 88 [1984]), establishingan indemnitor-indemnitee relationship. Plaintiff's right of indemnification, however, isindependent of Northport's contractual right to have its insurance carrier, defendant,cover these costs under the terms of the liability insurance policy. Moreover, NavigationLaw § 190 authorizes plaintiff to commence a direct action against defendant, andthis right is independent of plaintiff's right of indemnification against Northport. Giventhat plaintiff's rights are not conditioned upon and do not derive from Northport's, theexistence of an indemnitor-indemnitee relationship between Northport and plaintiff doesnot establish privity between these parties.
The conclusion that plaintiff is not in privity with Northport is further supported byour decision in State of New York v Travelers Indem. Co. of R.I. (120 AD2d 251[1986], appeals dismissed 69 NY2d 900 [1987], 70 NY2d 669 [1987]), which isfactually similar to the case at hand. There, we held that the doctrine of collateralestoppel did not bar plaintiff's action against an insurer under Navigation Law article 12even though the insurer had, in a prior declaratory judgment action, been held not liableunder an insurance policy issued to the owners of a gas station (id. at 253-254).Instrumental to this Court's finding was not only that the insurer was not a party to theprior declaratory judgment action, but that it was not in privity with the owners of the gasstation against whom the adverse ruling had been made (id. at 254). In view ofthe foregoing, we conclude that the doctrine of collateral estoppel does not apply, andSupreme Court erred in granting defendant's motion dismissing the complaint on thisbasis.[*3]
Mercure, J.P., Lahtinen and McCarthy, JJ.,concur. Ordered that the order is reversed, on the law, without costs, motion denied andmatter remitted to the Supreme Court to permit defendant to serve an answer within 20days of the date of this Court's decision.
Footnote *: Other potential groundsdemonstrating privity are not disputed; plaintiff did not control the Northport declaratoryjudgment action nor were its interests represented by Northport (see Buechel vBain, 97 NY2d at 317).