Case Name: Reena Kumar et al., as Assignees of Jeffrey A. Tisack, Respondents, v. American Transit Insurance Company, Defendant and Third-Party Plaintiff-Appellant. Robert E. Gallagher, Jr., et al., Third-Party Defendants-Respondents. Jeffrey A. Tisack, Nonparty Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 2008-03-21
Citations: 49 A.D.3d 1353
Docket Number: 
Parties: Reena Kumar et al., as Assignees of Jeffrey A. Tisack, Respondents, v American Transit Insurance Company, Defen dant and Third-Party Plaintiff-Appellant. Robert E. Gallagher, Jr., et al., Third-Party Defendants-Respondents. Jeffrey A. Tisack, Nonparty Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 49
Pages: 1353–1358

Head Matter:
Reena Kumar et al., as Assignees of Jeffrey A. Tisack, Respondents, v American Transit Insurance Company, Defen dant and Third-Party Plaintiff-Appellant. Robert E. Gallagher, Jr., et al., Third-Party Defendants-Respondents. Jeffrey A. Tisack, Nonparty Respondent.
[854 NYS2d 274]

Opinion:
Memorandum: Plaintiffs commenced this action to recover damages incurred as the result of alleged acts of bad faith by defendant and third-party plaintiff, American Transit Insurance Company (American), as the insurer of plaintiffs' assignor. American then commenced a third-party action alleging that the damages plaintiffs sought to recover from American were caused by the negligence of third-party defendants (collectively, Hiscock attorneys). We agree with American that Supreme Court erred in granting the motion of the Hiscock attorneys to dismiss the third-party complaint for failure to state a cause of action and based on documentary evidence (see CPLR 3211 [a] [13, [7]).
"When assessing the adequacy of a complaint in light of a CPLR 3211 (a) (7) motion to dismiss, the court must afford the pleadings a liberal construction, accept the allegations of the complaint as true and provide plaintiff (here third-party plaintiff) 'the benefit of every possible favorable inference' " (AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 591 [2005], quoting Leon v Martinez, 84 NY2d 83, 87 [1994]). Furthermore, "[i]n order to prevail on a CPLR 3211 (a) (1) motion, the moving party must show that the documentary evidence conclusively refutes plaintiff's (here third-party plaintiff's) allegations" (AG Capital Funding Partners, L.P., 5 NY3d at 590-591). The Hiscock attorneys are correct that American was not in privity with them and that, in general, "New York courts impose a strict privity requirement to claims of legal malpractice[, i.e.,] an attorney is not liable to a third party for negligence in performing services on behalf of his [or her] client" (Lavanant v General Ace. Ins. Co. of Am., 164 AD2d 73, 81 [1990], affd 79 NY2d 623 [1992]; see Federal Ins. Co. v North Am. Specialty Ins. Co., 47 AD3d 52 [2007]). We agree with American, however, that the third-party complaint survives the motion to dismiss based on the principle of equitable subrogation.
"Subrogation is the principle by which an insurer, having paid losses of its insured, is placed in the position of its insured so that it may recover from the third party legally responsible for the loss" (Winkelmann v Excelsior Ins. Co., 85 NY2d 577, 581 [1995]; see Teichman v Community Hosp. of W. Suffolk, 87 NY2d 514, 521 [1996]; Humbach v Goldstein, 229 AD2d 64, 66-67 [1997], lv dismissed 91 NY2d 921 [1998]). We agree with American that, " '[a]t this stage of the litigation, where there has been no disclosure held, the parties should not be foreclosed, particularly where, as here, the pleadings raise serious issues involving ethical considerations' " (Great Atl. Ins. Co. v Weinstein, 125 AD2d 214, 216 [1986]; see Allianz Underwriters Ins. Co. v Landmark Ins. Co., 13 AD3d 172, 174-175 [2004]). We reject the contention of the Hiscock attorneys that the principle of equitable subrogation does not apply because American has not yet paid the loss of its insured (see Allianz Underwriters Ins. Co. v Landmark Ins. Co., 13 AD3d 172, 175 [2004]; see also Krause v American Guar. & Liab. Ins. Co., 22 NY2d 147, 152-153 [1968]). Furthermore, unlike the complaint in Federal Ins. Co., the third-party complaint alleges that the loss sustained by American's insured resulted from the malpractice of the Hiscock attorneys, specifically their failure to appear and defend the insured. Viewing the complaint in the light most favorable to American and according American the benefit of every favorable inference, we therefore conclude that the complaint alleges sufficient facts to withstand the motion to dismiss, inasmuch as we deem it to state a cause of action for equitable subrogation (see generally Great Atl. Ins. Co., 125 AD2d at 215; cf. Federal Ins. Co., 47 AD3d at 62). Contrary to the dissent's conclusion, we need only determine that American has a cause of action, not whether it has stated one (see Leon, 84 NY2d at 88; Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]).
In light of our determination, we need not address American's remaining contention. We have considered the alternate grounds for affirmance set forth by the Hiscock attorneys and plaintiffs and conclude that they are without merit.
All concur except Peradotto, J., who dissents and votes to affirm in the following memorandum: