Court Opinion

ID: 5963347
Source: CourtListenerOpinion
Date Created: 2022-01-13 07:06:42.015668+00
Date Added: 2024-06-11T08:48:12.230729
License: Public Domain

Copertino, J.,
dissents and votes to reverse the order insofar as appealed from, on the law, to grant that branch of the plaintiff’s motion which was for summary judgment against the defendant Investors Insurance Company of America, Inc., and to deny that defendant’s motion for summary judgment, with the following memorandum: I respectfully dissent. The majority correctly recognizes the existence of an equitable lien on the policy proceeds in favor of the plaintiff (see, e.g., Nor-Shire Assocs. v Commercial Union Ins. Co., 25 AD2d 868). Nevertheless, it permits a defeat of that lien based on the absence of a duty on the part of the carrier to investigate the plaintiff’s claim. I agree that an insurance company should not be burdened with investigating and acting on claims made by nonparties to the insurance contract. However, this does not relieve a carrier from preserving the funds until competing claims can be resolved, either by agreement of the competitors or by court action. Consequently, I cannot agree with the majority’s conclusion.
Where one holds money owed to another who has assigned his rights to a third party, the holder is unaffected by the assignment and may pay his indebtedness to the assignor without incurring liability to the assignee—provided it is *779ignorant of the assignment. However, if after notice of that assignment, it pays the assignor any money which, under the assignment, belongs to the assignee, or if it does anything prejudicial to the rights of the latter, that party is liable to the assignee for the resulting damage (see, Poughkeepsie Sav. Bank v Sloane Mfg. Co., 84 AD2d 212, 216; Becker v New Penn Dev. Corp., 269 App Div 395, 397). In the present case, the carrier paid the proceeds to the named insured in the face of an attorney’s letter notifying it of an assignment. Specifically, counsel’s April 13, 1988, letter stated as follows:
"Please be advised that I represent [plaintiff], assignee of the proceeds of the * * * fire insurance policy pursuant to a Security Agreement and Financing Statement (UCC-1) that was duly filed on April 9, 1987.
"Accordingly, take notice that none of the proceeds of said policy are to be paid to the insured unless the check is also to the order of my client as loss payee”.
Although it may have been under no compulsion to investigate the bona fides of the representations contained in the letter, it was not free to ignore this facially valid notice altogether (see, Poughkeepsie Sav. Bank v Sloane Mfg. Co., supra). The correct response, and one which would have imposed no burden except prudence, was simply to withhold payment and inform the named insured of the competing claim. If the named insured had then insisted on payment or otherwise challenged the right of its competitor to the proceeds, the carrier would have been entitled to protect itself by way of an interpleader action (see, CPLR 1006; Matter of Bernstein, 156 AD2d 683, 684; Bergman v Liverpool & London & Globe Ins. Co., 269 App Div 103, 104).
McGraw-Edison Credit Corp. v Allstate Ins. Co. (62 AD2d 872), relied upon by the majority, is inapposite and does not mandate the result reached by the majority. First, the plaintiff creditor in McGraw-Edison Credit Corp. did not have an equitable lien on the policy proceeds, as opposed to a lien on the property alone. This was so because the plaintiff’s debtor had sold the subject equipment to a third party, and it was this third party which had procured fire insurance and was the sole payee. The Court noted that it could be inferred from the record that the sales agreement between the debtor and the third-party buyer insured did not contain a provision requiring the buyer to provide insurance coverage for the benefit of either the secured creditor or the selling debtor. It was the absence of such a requirement in favor of the secured *780creditor which the Court held fatal to an equitable claim. Here, of course, the insured debtor had such an obligation.
Moreover, the Court in McGraw-Edison Credit Corp. held only that an obligation to make direct payment to the secured creditor would impose an unreasonable investigatory burden on the carrier. The case does not stand for the proposition that a carrier does not have a duty to withhold payment to the policy’s named payee when a potentially valid, competing claim by the assignee under a security agreement is brought to its attention. The majority thus confuses a duty to investigate and pay a lienor on an asserted claim—which, as previously noted, I agree should not be imposed—with the simple obligation to pay no one until the competing claims are resolved. The McGraw-Edison Credit Corp. Court’s additional statement regarding the secured creditor’s superior ability to police the enforcement of its agreement with the debtor is no more than a perfectly reasonable reminder that it is the creditor’s responsibility to take those steps necessary to insure its receipt of insurance proceeds. However, this is clearly distinct from the duty of the carrier to preserve those proceeds for the benefit of the party which ultimately prevails (Poughkeepsie Sav. Bank v Sloane Mfg. Co., supra).
In accord with the foregoing I conclude that the Supreme Court erred in dismissing the plaintiff’s complaint against the carrier. Further, inasmuch as the plaintiff presented uncontroverted proof of its entitlement to the proceeds of the policy as an assignee thereof, and the carrier raised no triable issues of fact with regard to its receipt of the notice asserting such assignment and wrongful payment to the assignor, summary judgment should have been granted to the plaintiff. I therefore vote to reverse insofar as appealed from and to grant the plaintiff’s motion as against the carrier.