against an insurer for reimbursement of an amount for which the insured has already been found
liable. See Roldan v. Allstate Insurance Co., 149 A.D. 2d 20, 29, 544 N.Y.S. 2d 359, 368-69
(N.Y. App. 1989), citing Williams Paving Co. v. United States Fid. & Guar. Co., 67 A.D. 2d
827, 413 N.Y.S. 2d 73 (N.Y. App. 1979); DiLallo v. Fidelity & Cas. Co., 355 F. Supp. 519, 521-
524 (S.D.N.Y, 1973); Oppel v. Empire Mut. Ins. Co., 517 F. Supp. 1305, 1306 (S.D.N.Y. 1981)
Schlosser relies heavily on Roldan, claiming that it supports allowing the type of assignment
action he attempts to bring here. Roldan involved a plaintiff who had obtained a $253,045
default judgment against Thorpe, the insured, in a personal injury case. The judgment had yet to
be satisfied after nearly ten years. Thorpe’s insurer, Allstate, had refused to honor its contractual
duty to defend and indemnify Thorpe in the personal injury action. Thorpe assigned his rights
against Allstate to the plaintiff, who then brought five claims against the insurer. Four of the
claims were brought by plaintiff as assignee of Thorpe, and the fifth was brought by the plaintiff
in his individual capacity. First, the plaintiff sought to recover the amount of the unpaid
judgment against Thorpe. The plaintiff's second claim was that Allstate acted wrongfully in
terminating Thorpe’s insurance policy and refusing to comply with an arbitration award. Third,
the plaintiff claimed that Allstate wrongfully refused to settle the underlying personal injury
action within the limits of the policy. The fourth claim was based on allegations of fraud and
contained a demand for punitive damages. Finally, the fifth cause of action, brought in the
plaintiff's individual capacity, was a § 3420 claim against the insurer alleging that the plaintiff's
injuries were due to Thorpe’s negligence. The court found that, under these circumstances, the
plaintiff could sue the insurer as an assignee as well as under § 3420.

Roldan does not support the type of claim made by the plaintiffs in this case, namely one



issued to plaintiff's counsel on February 13, 2004 is discharged. The status hearing set for April

30, 2004 is vacated.

MATTHEW F. ENNELY
United States District Ju
Date: April 29, 2004



St. Paul contends that because Schlosser has brought a declaratory judgment suit against
them based on an insurance policy that St. Paul issued to eHome, Schlosser’s ability to sue
depends on the statutory rights granted to third parties under New York Insurance Law § 3420.
St. Paul contends that an unsatisfied judgment is a condition precedent to any action against the
insurer, and because plaintiffs have no such judgment, their claims must be dismissed. Schlosser
contends that § 3420 is inapplicable because he is proceeding as the assignee of the rights of
eHome.

There appears to be little dispute between the parties that under New York common law,
a judgment against the insured is a condition precedent to the filing of a direct action by the
injured third party against an insurer. See, e.g., Tillman v. Fireman’s Fund Ins. Co., 590 F. Supp.
246, 249 (S.D.N.Y. 1984) (applying New York law). The New York Legislature, in adopting §
3420, created a limited exception to the general rule. Section 3420(a)(2) sets forth four
prerequisites for a direct third-party action against an insurer: (1) a judgment against the insured;
(2) a thirty-day period during which the judgment remains unsatisfied; (3) an action against the
insurer brought by the person who obtained the judgment; and (4) the amount of the judgment
cannot exceed the applicable limit of coverage under the insurance policy. The condition of an
unsatisfied judgment is not waivable; this and the other conditions in the statute are “integral
predicates” for stating and sustaining a direct action under the statute. See NAP, Inc. v.
Schuttletex, Inc., 112 F. Supp. 2d 369, 373 (S.D.N.Y. 2000) (applying New York law).

As indicated earlier, Schlosser contends that § 3420 does not govern this case, because
the plaintiffs are proceeding not as third parties bringing a direct action, but rather as assignees of

eHome’s rights under the policy. New York law permits an insured to assign a cause of action



that is made before the insured’s liability has been established. Indeed, the court in Roldan
specifically recognized that Thorpe’s (and therefore plaintiffs) causes of action did not accrue
until Thorpe’s liability had been established. Roldan, 149 A.D. 2d at 27, 544. N.Y.S. 2d at 363.
In other words, had the plaintiff in Roldan not obtained a judgment against Thorpe, he would not
have been able to bring his claims against the insurance company as the insured’s assignee.

In this case, eHome’s liability in the underlying case has not been established, other than
with respect to the $20,000 that eHome agreed to pay the plaintiffs under the settlement
agreement. No judgment has been entered, and there has been no action setting the amount that
eHome is obligated to pay. Rather, eHome has simply assigned its rights under the policy,
whatever they are, but the amount has not been reduced to a judgment. Roldan does not support
allowing an assignee to sue an insurer under these circumstances.

Schlosser argues that when an insurer wrongfully refuses to defend its insured, the
insured may make a reasonable settlement and then sue the insurer. Jsadore Rosen & Sons, Inc.
v. Security Mutual Ins. Co,, 31 N.Y. 2d 342, 347, 339 N.Y.S. 2d 97, 291 N.E. 2d 380 (1972);
Texaco A/D (Denmark) y. Commercial Ins. Co., 160 F. 3d 124, 128 (2d Cir. 1998). According to
Schlosser, that is the type of suit it is pursuing as eHome’s assignee. But it has cited no New
York case that allows such an action in advance of judgment or other determination of liability,
to require coverage in an indeterminate amount. In addition, there is no indication that under
New York law, the rule allowing an insured to settle on its own if the insurer wrongfully refuses
to defend was meant to undermine the requirement that the liability of the insured be established
before a third-party can sue the insurer. A fortiori, plaintiffs cannot bring such a claim as

eHome’s assignee. Septembertide Publishing, B.V. v. Stein and Day, Inc. 884 F. 2d 675 (2d Cir.



Minute Quder Form (06/97)

a

United States District Court, Northern District of Nhinois

Name of Assigned Judge
or Magistrate Judge

Matthew F. Kennelly

Sitting Judge If Other
than Assigned Judge

CASE NUMBER

03 C 8627

DATE

4/29/2004

CASE Schlosser vs. St. Paul Fire and Marine Ins.
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
() a Filed motion of [ use listing in “Motion” box above.]
(2) Oo Brief in support of motion due
(3) Oo Answer brief to motion due . Reply to answer brief due,
(4) 0 Ruling/Hearing on _ set for _at
(5) oO Status hearing[held/continued to] [set for/re-set for] on set for at
(6) oO Pretrial conference[held/continued to] [set for/re-set for] on set for at .
(7) im} Trial[set for/re-set for] on at
(8) Qo [Bench/Jury trial] [Hearing] held/continued to at
(9) o This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) OLocalRule 41.1 OFRCP4i(a\(1) OFRCP41(a)(2).
(0) +f [Other docket entry] For the reasons set forth on the attached Memorandum Opinion and Order,
the Court grants defendant’s motion to dismiss. The Clerk is directed to enter judgment in favor of St.
Paul dismissing this action. All remaining motions are terminated. Based on the matters previously
discussed in open court, the rule to show cause issued to plaintiff’s counsel on 2/13/04 is discharged. The
status hearing of 4/30/04 is vacated.
(i) ff (For further detail see order attached to the original minute order.)

No notices required, advised in open court.

No notices required.
‘ number of notices

Document
Number

Notices mailed by judge’s staff.

APR 3.0 2004!

Notified counsel by telephone. dane docketed

vu | Docketing to mail notices.

Mail AO 450 form. te iktials

Copy to judge/magistrate judge.

date mailed notice
courtroom

OR deputy’s
initials

Date/time received in

central Clerk’s Office, mailing deputy initials

Ub



1989) citing International Ribbon Mills, Ltd. v. Arjan Ribbons, Inc., 36 N.Y. 2d 121, 126, 325
N.E.2d 137, 139, 365 N.Y.S. 2d 808, 811 (1975) (‘It is elementary ancient law that an assignee
never stands in any better position than his assignor.”) Schlosser points out that at least one of
the claims Roldan brought as an assignee sought damages beyond the amount of the insurance
policy. But the fact remains that the insured’s liability in that case had been fixed by way ofa
judgment, which is not the case here.

One might conclude from the previous discussion that Schlosser nonetheless should be
able to sue St. Paul as eHome’s assignee to recover the $20,000 that eHome paid. But the Court
does not believe that Schlosser can currently pursue even that aspect of his claim. The $20,000
payment was not made in a vacuum; rather it was just one term in a more comprehensive
agreement. The Court sees no basis-- and indeed neither side has requested-- to carve out this
one portion of the deal and permit the plaintiffs to recover it. Moreover, the $20,000 payment,
like the other aspects of the settlement referenced earlier, has not been made part of a judgment,
and it is conceivable that under the settlement’s terms it may ultimately be returned to eHome. In
short, there is no basis to permit Schlosser to sue St. Paul in this case to recover the $20,000.

Conclusion

For the reasons stated above, the Court grants defendant’s motion to dismiss. The Clerk

is directed to enter judgment in favor of St. Paul dismissing this action. All remaining motions

are terminated. Based on the matters previously discussed in open court, the rule to show cause



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

ST. PAUL FIRE AND MARINE APR 3.0 2004

INSURANCE COMPANY,

EASTERN DIVISION
BERNARD A. SCHLOSSER, ATTORNEY ) DoCKETEA
AT LAW, P.C., on behalf of itself and all ) AP
others similarly situated, and as assignee of ) Rg 0 2004
EHOME CREDIT CORP., )
)
Plaintiffs, )
)
vs. ) Case No. 03 C 8627
)
)
)
)
)

Defendant.
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:

Bernard Schlosser, an attorney, has brought this action against St. Paul Fire and Marine
Insurance Company pursuant to a settlement agreement between Schlosser and eHome Credit
Corp., which holds an insurance policy with St. Paul. The agreement between Schlosser and
eHome stems from a suit filed by Schlosser on behalf of a putative class in which eHome
allegedly sent unsolicited advertisements to numerous facsimile machines, including Schlosser’s,
in violation of the federal Telephone Consumer Protection Act of 1991, 47 U.S.C. § 227, the
Illinois Consumer Fraud Act, 815 ILCS 505/2, and the Illinois common law of conversion. The
settlement agreement between Schlosser and eHome provided for an assignment to the putative
class of eHome’s rights under any applicable insurance policies. The agreement also provided
that eHome would pay $20,000 to the plaintiffs; if the plaintiffs recover from St. Paul, eHome
will stipulate to certification of the settlement class, and the $20,000 will be returned. If

Schlosser does not recover from St. Paul, then Schlosser will keep eHome’s $20,000 in return for

Ub


a full release of all claims.

Schlosser sued St. Paul to recover the amount allegedly due to eHome under the policy
(St. Paul had previously denied eHome’s request for coverage). St. Paul removed the case to
federal court based on diversity of citizenship. Schlosser moved for summary judgment relying
mainly on Illinois law. The Court held, however, that New York law applies to Schlosser’s
claims. We denied Schlosser’s summary judgment motion because he had not addressed how the
case should be decided under New York law. St. Paul then filed the current motion to dismiss,
arguing that an action like the one Schlosser seeks to bring against St. Paul is barred by New
York Insurance Law § 3420. Schlosser contends that because he is proceeding as assignee of
eHome’s claims against St. Paul, § 3420 is inapplicable. For the foregoing reasons, the Court
grants St. Paul’s motion to dismiss.

Discussion

As a preliminary matter, the Court must consider the proper procedural basis for St.
Paul’s motion. Since St. Paul answered the complaint before filing the present motion, it is
considered a Rule 12(c) motion for judgment on the pleadings, rather and a Rule 12(b)(6)
motion. The standard, however, under Rule 12(c) is the same as the standard under Rule
12(b)(6). Navarte v. Chase Manhattan Bank, N.A., 969 F. Supp. 10, 11 (S.D.N.Y. 1997). The
Court accepts the non-moving party’s allegations as true and views the facts in the light most
favorable to that party; we grant judgment on the pleadings only if the moving party “is entitled
to judgment as a matter of law.” Burns Int'l Sec. Servs., Inc. v. International Union, 47 F. 3d 14,
16 (2d Cir. 1994); see also 5A C. Wright & A. Miller, Federal Practice and Procedure (Civil) §

1368 at 518 (1990).