Court Opinion

ID: 9874613
Source: CourtListenerOpinion
Date Created: 2023-09-26 22:12:14.811374+00
Date Added: 2024-06-11T07:46:50.950603
License: Public Domain

Friedman, J.P.,
dissents in part in a memorandum as follows: Under the clear weight of authority in this Court, a *609party’s default is excusable under CPLR 5015 (a) (1) upon a substantiated showing that the party promptly forwarded all of the legal papers it received to its insurance broker or carrier, in reliance on the broker or carrier to take appropriate action, and that the default resulted from error on the part of the broker or carrier. Supreme Court, adhering to these precedents, exercised its discretion to grant defendants’ motion to vacate the default judgment against them, based upon the affidavits of defendants’ principal (Viktor Gjonaj) and of defendants’ insurance broker (David Anthony Sarasky of ARM-Capacity of New York, LLC [ARM]), attesting that Gjonaj had forwarded to Sarasky at ARM all papers served in this action and had received assurances from Sarasky that the papers had been sent to the appropriate carrier, which was handling the matter. Unfortunately, however, ARM’s claims department, unbeknownst to Gjonaj or Sarasky, had forwarded the papers to the wrong insurance company, resulting in the default from which Supreme Court relieved defendants in the order under review. As Sarasky candidly admits in his affidavit in support of the motion to vacate the default, “[I]t is not because of defendants’ actions or inactions but it was due to the negligence of ARM and its Claims Department that defendants have defaulted in this action.”
In his affidavit, Gjonaj identifies each paper defendants received in this action (the summons and complaint, a motion for default judgment, a second motion for default judgment, a letter from the court, and the decision awarding plaintiff damages) and the approximate date on which each document was received. Gjonaj further avers that, in the case of each such paper, he “immediately forwarded a copy” of the document to Sarasky, his insurance broker at ARM. Upon receiving the court’s decision in October 2014, Gjonaj became “alarmed” when he “noticed that the Decision contained a reference to a $900,000 judgment against my companies.” At that point, he sought legal counsel on his own. Gjonaj offers the following detailed explanation of his reliance on ARM (paragraph numbers omitted):
“I have a long term business relationship — over nine (9) years — with [ARM], who [sic] has procured, advised and handled all my insurance coverage needs for this and for other real estate properties owned/managed by myself and/or the corporate entities I own and/or manage.
“I own — through different corporate entities — over fifteen (15) multiple-dwelling properties and for the last nine years, it is ARM who [sic] has procured insurance coverage for numer*610ous properties I control/manage and has acted as the liaison between myself and the respective insurance companies. All my insurance needs and all my insurance matters have been handled by ARM. During the last nine years, whenever I needed insurance coverage for a property, I would reach out to ARM which would in turn shop around and choose an insurance company that would offer [the] best quote. I would simply proceed to pay the premium as per the [sic] ARM’s instructions without even knowing which insurance company was providing insurance coverage for which property.
“During the almost-one-decade long business relationship with ARM, I have always forwarded any and all paperwork I have received regarding personal injury claims and/or any other claims and related notices and legal documents to ARM, which in turn has forwarded them to the insurance company with coverage for the respective location.
“During the almost-one-decade long relationship with ARM, I have always relied on the latter to forward any and all notices of claim, letters and legal papers I have received to the appropriate insurance company with coverage for the respective location.”
Sarasky, defendant’s insurance broker at ARM, submitted an affidavit corroborating Gjonaj’s account in every respect. Sarasky avers (paragraph numbers omitted):
“I confirm that from January 21, 2011 through February 12, 2014, I have received numerous legal documents, from Victor Gjonaj, regarding [the] above-captioned matter — including but not limited to Summons and Complaint and Default Summary Judgment Motions.
“I also confirm that I forwarded these documents to our Claims Department to be sent to the insurance carrier for the defendants in this matter.
“I also confirm that each time I received the documents on this matter from Mr. Gjonaj, I forwarded them to our Claims Department and I assured Mr. Gjonaj that all was being taken care of.
“However, I figured out later that the documents were mistakenly being sent to the incorrect insurance company by one of our employees.
“During the last 8-9 years, we at ARM have purchased insurance coverage and handled the insurance claims paperwork for Mr. Gjonaj and for the numerous properties he controls. We have always forwarded the legal documents we received from Mr. Gjonaj to the proper insurance company, however, unfortu*611nately, in this case our Claims Department dropped the ball and they inadvertently kept sending everything to the wrong insurance company. I was under the impression that our Claims Department was doing what they always did in the past, i.e., that they were sending the paperwork to the proper insurance carrier, so I kept assuring Mr. Gjonaj that everything in this matter was under control and that the claim was being handled by the proper insurance company. Therefore, no Counsel was appointed to interpose an answer and defend the defendants in this action.”
Now, in spite of our precedents establishing that a default such as defendants’ is excusable (as more fully discussed below), the majority, disregarding Supreme Court’s broad discretion in this matter, modifies to reinstate the default judgment against defendants as to liability. In so doing, the majority unsuccessfully attempts to distinguish the case law cited by Supreme Court, while relying on two readily distinguishable decisions, neither of which was issued by this Court. I believe that we should adhere to our applicable precedents and defer to Supreme Court’s provident exercise of its broad discretion in determining that, under those precedents, the subject default was excusable (see Harcztark v Drive Variety, Inc., 21 AD3d 876, 876-877 [2d Dept 2005] [“Whether there is a reasonable excuse for a default is a discretionary, sui generis determination to be made by the court based on all relevant factors”]; accord Rickert v Chestara, 56 AD3d 941, 942 [3d Dept 2008]; see also Woodson v Mendon Leasing Corp., 100 NY2d 62, 68 [2003] [CPLR 5015 (a) codifies courts’ “inherent discretionary power” to vacate default judgments (internal quotation marks omitted)]). Accordingly, I would affirm the order vacating the default judgment in its entirety, and respectfully dissent from the majority’s modification to reinstate the default judgment as to liability.
Strangely, the majority quotes the statement from Harcztark that whether to excuse a default is “a discretionary, sui generis determination” (21 AD3d at 876) in support of its reversal, as a matter of law, of Supreme Court’s making of precisely such “a discretionary, sui generis determination.” Contrary to the majority’s upside-down view of the law, the discretionary and sui generis nature of the inquiry indicates that an appellate court should not disturb Supreme Court’s exercise of its discretion in cases where reasonable minds may differ on whether the default is excusable. The majority itself abuses this Court’s discretion, and thus errs as a matter of law, in reversing Supreme Court’s manifestly reasonable exercise of its discre*612tion merely to require plaintiff to prove his case, as contemplated in the ordinary course of litigation.
I am, of course, fully cognizant of this Court’s power to substitute its own discretion for that of Supreme Court. However, to the extent the majority purports to exercise this Court’s power to substitute its own discretion for that of Supreme Court, that power should be sparingly exercised, and I see no grounds for doing so here. In this regard, it seems to me that, in this case, it is the majority, and not Supreme Court, that has not (to quote the majority) “correctly considered all the ‘relevant factors’ ” (quoting Harcztark, 21 AD3d at 876-877).
In the most recent case upon which Supreme Court relied, we stated, in affirming an order vacating a default judgment, that “[t]he unexplained delay of defendant’s insurance broker in forwarding the summons and complaint to defendant’s insurance carrier constituted a reasonable excuse for defendant’s failure to appear” (Romero v Alezeb Deli Grocery Inc., 115 AD3d 496, 496 [1st Dept 2014]). In another decision cited by Supreme Court, we affirmed the vacatur of a default judgment where it was the defendant’s insurer that failed to act in response to timely notice by the defendant. In that case, we held that “it was reasonable for defendant to believe that its insurer would take the appropriate action to appear and defend the action” where the defendant, upon its admitted receipt of the pleadings, had “immediately forwarded the correspondence and pleadings to its insurer” (Rodgers v 66 E. Tremont Hgts. Hous. Dev. Fund Corp., 69 AD3d 510, 511 [1st Dept 2010]). Supreme Court also cited Price v Boston Rd. Dev. Corp. (56 AD3d 336, 336 [1st Dept 2008]), in which we held that “[the defendant’s] insurance carrier’s failure to act timely does not preclude defendant from vacating an unintentional default” (id.).
The three cases cited by Supreme Court are not alone among this Court’s precedents in holding excusable a default due to the error or inaction of the defaulting party’s insurance broker or carrier, as occurred here (see Heskel’s W. 38th St. Corp. v Gotham Constr. Co. LLC, 14 AD3d 306, 307 [1st Dept 2005] [“Excusable delay is sufficiently established since the failure to forward the complaint to counsel prior to December 1, 2003 was concededly due to the inadvertence of the insurer”]; Mendoza v Bi-County Paving, 227 AD2d 302, 302 [1st Dept 1996] [“Defendant offered a reasonable excuse for its default, namely, that its broker misdirected the complaint to the wrong insurer, (and) that its insurer then misplaced it”]; Price v Polisner, 172 AD2d 422, 423 [1st Dept 1991] [affirming vacatur of default *613“where the insured defendant . . . acted promptly to protect himself,” but the insurer failed to act]; Lirit Corp. v Laufer Vision World, 84 AD2d 704, 704 [1st Dept 1981] [the defendant’s default was excusable where “the employee (of the defendant) who received the summons mailed it to the insurance broker and it somehow was never heard of again”]; Wehringer v Kessler, 56 AD2d 547, 548 [1st Dept 1977] [the defendant’s default was excusable because “(i)t was caused by the clerical oversight and inadvertence of his broker and/or his insurer”]).
In Fire Is. Pines v Colonial Dormer Corp. (109 AD2d 815 [2d Dept 1985]), the Second Department found a default excusable on facts very similar to those presented here. The Fire Island defendant, upon being served with the summons and complaint on November 30, 1982, “immediately forwarded [them] to [its] insurance broker, who forwarded them to defendant’s insurance carrier, while assuring defendant the carrier would retain counsel to defend the action. All subsequent papers in the action were similarly forwarded, with similar assurances passing from the broker to defendant. No answer was ever served on behalf of defendant. On October 6, 1983, plaintiff entered a default judgment against defendant, and defendant passed a copy of that judgment, with restraining notice, on to its broker, receiving assurances that defendant was covered for such loss. Not until October 25, 1983, did the carrier or broker indicate to defendant the existence of any question as to whether defendant’s policy covered the loss in question” (id. at 816). On the defendant’s appeal from the denial of its motion to vacate the default judgment, the Second Department reversed, explaining: “On this record, it cannot be said that defendant’s reliance on its broker’s assurances and its carrier’s silence was not reasonable; therefore the default was excusable” (id.).1
The majority seizes upon various factual distinctions between the foregoing cases and this one, but does not come to grips with the fundamental principle they establish: that when a party receiving legal papers does not simply ignore them, but forwards them to an insurance broker or carrier, in reliance on the broker or carrier to take appropriate action, an ensuing default — even if the party’s reliance on the broker or carrier *614was not entirely reasonable — is excusable, subject to Supreme Court’s discretion. The majority, however, apparently believes that if defendants’ reliance on the assurances of their broker was not objectively reasonable in its entirety, their default cannot be excused, as a matter of law. The majority cites no case law in support of its position that any deviation from an objective standard of due care by a defaulting party is inexcusable. This omission is not surprising, since it is plain that the legislature’s intent in enacting CPLR 5015 (a) (1) was to the contrary. The legislative report on the provision subsequently enacted as CPLR 5015 (a) (1) explains: “The words ‘excusable default’ are substituted for the present words ‘mistake, inadver-tance [sic], surprise or excusable neglect’ [in former Civil Practice Act § 108] with no change in meaning intended” (1959 NY Legis Doc No. 17 at 205 [emphasis added]). Thus, neglect that results in a default may be excusable under CPLR 5015 (a) (1) (see Weinstein-Korn-Miller, NY Civ Prac f 5015.04). Here, Gjonaj’s conduct in promptly sending the legal papers he received to his insurance broker, and then relying on the broker’s assurances that the matter was being handled by the appropriate carrier, was perhaps less than astute, but he was acting in subjective good faith to address the matter, rather than simply ignoring it. If this was neglect, the neglect was excusable.
While, as the majority notes, Gjonaj apparently has attained some success in the real estate business, we have no information about his background that would justify presuming him to be sophisticated in matters of civil procedure. Thus, I strongly disagree with the majority’s statement that Gjonaj “[s]urely . . . knew” that he would not have continued to receive legal papers concerning this action if a lawyer had been retained by the insurer. A lawyer surely would know that, of course, but not necessarily a layperson. Pertinent here is this Court’s observation that “[i]t is not unusual for lay persons to mail process to an insurance company and not to be surprised to hear nothing from the broker or insurance company for some time” (Lirit Corp., 84 AD2d at 704).
In reversing Supreme Court’s discretionary determination that defendants’ inadvertent default was excusable, the majority relies chiefly upon two cases, neither of which is from this Court, and both of which are readily distinguishable on the ground that, in each of them, the defaulting party’s claim of reliance on the broker or insurer was conclusory and unsubstantiated (see Spitzer v Landau, 104 AD3d 936 [2d Dept 2013] [the defendant’s claims to have believed that his broker had *615forwarded the summons and complaint to his insurer, and that the insurer was providing a defense, were “unsubstantiated”]; Trepel v Greenman-Pedersen, Inc., 99 AD3d 789, 791 [2d Dept 2012] [the defaulting defendant’s “assertion that it believed that its insurer . . . was providing a defense is unsubstantiated”]). Trepel is rendered further inapposite by the fact that there is no indication that the defaulting defendant in that case received assurances from an insurance professional that the matter was being handled by the appropriate carrier, as Gjonaj obtained from Sarasky in this case. Moreover, the defaulting defendant in Trepel failed to appear at the inquest even though it had by that time received notice that its insurer had been declared insolvent (id. at 790, 791).
The unsubstantiated claims of reliance in Spitzer and Trepel stand in sharp contrast to this case, in which defendants’ claim of reliance on the broker is not only supported by the sworn account of their principal (Gjonaj) of when he received each document and sent it to the insurance broker (ARM), but is also corroborated by the affidavit of the particular ARM broker who serviced defendants’ account. The ARM broker (Sarasky) acknowledges having received the papers from Gjonaj, having forwarded the papers to ARM’s claims department, and having assured Gjonaj “that all was being taken care of.” Sarasky further admits the error of ARM’s claims department in sending the papers to the wrong carrier — very much as occurred in Mendoza, in which we held excusable a default that resulted when the defendant’s “broker misdirected the complaint to the wrong insurer” (227 AD2d at 302). Moreover, defendants’ reliance on their ARM broker and his assurances was certainly reasonable, since, as attested by both Gjonaj and Sarasky, it had been Gjonaj’s practice for years prior to these events to send all legal papers he received to ARM, in the expectation that ARM would forward the documents to the appropriate liability carrier, as it had done consistently in all previous cases.
It is undisputed that defendants moved to vacate their default two months after Gjonaj received a copy of the post-inquest order directing entry of judgment in the amount of $900,000. Unaccountably, in spite of plaintiff’s own dilatory conduct in prosecuting this action (he waited nearly a year to move for a default judgment and then, after that motion was denied based on the lack of an affidavit of merit, another year to make a second motion), the majority seizes on the two-month gap between Gjonaj’s receipt of the order and the motion to vacate as somehow constituting evidence of gross negligence on *616defendants’ part.2 Of course, once Gjonaj realized from the order awarding damages that the matter was not being defended, some time was required to determine whether defendants’ carrier would undertake the defense, for defendants to retain counsel on their own, and for that law firm to familiarize itself with the action and to prepare motion papers. I believe that, seen in this context, the two-month gap was not unreasonable.
The remaining factors to be considered on a motion to vacate a default also support affirming the order granting that motion. As to whether defendants have a meritorious defense, it seems doubtful that there is any basis for a negligence or Labor Law § 200 claim against defendants, who apparently retained plaintiff’s employer and did not supervise or control his work, and it is not at all clear from the face of the complaint whether plaintiff’s work as a “camera installer” falls within the scope of Labor Law § 240 (l).3 Further, I see no merit in the majority’s assertion that plaintiff would be prejudiced if the action were now required to be decided on the merits. Plaintiff was allegedly injured on May 7, 2010, and commenced the instant action on December 27, 2010. As previously noted, plaintiff proceeded to wait almost an entire year, until December 26, 2011, to move for a default judgment, and then did so without submitting an affidavit of merit. After plaintiff’s defective initial motion for a default judgment was denied, he waited almost another year, until October of 2013, to execute an affidavit of merit and renew the motion for a default judgment. Plaintiff offers no excuse for either of these delays, nor does he claim that his counsel made any inquiry of defendants to learn why they had not answered or otherwise appeared in the action. Given plaintiff’s own dilatory prosecution of this matter and “the strong public policy of this State to dispose of cases on their merits” (Rodgers, 69 AD3d at 511), I would give short shrift to plaintiff’s present assertion that he will somehow be *617prejudiced if we affirm Supreme Court’s order requiring him to prove his case.
In sum, while I agree with the majority to the extent it vacates the $900,000 judgment and directs that a new inquest be held, I believe that we should simply affirm Supreme Court’s provident exercise of its discretion to vacate defendants’ default in its entirety and allow the matter to be adjudicated on the merits as to both liability and damages. To the extent the majority does otherwise, I respectfully dissent.4

. In asserting that I “rel[y] . . . heavily” on Fire Island, the majority ignores the fact that my position is supported, not only by that case, but by no less than seven of this Court’s own decisions, as well as by the general principle of deference to Supreme Court’s exercise of its own discretion and by the preference to decide actions on their merits. Meanwhile, the majority has apparently been able to locate only two decisions, neither decided by this Court, in which it claims to find support for its reversal of Supreme Court to foreclose defendants from contesting liability on the merits.

. Notwithstanding the majority’s claim that its result is based on “the totality of defendants’ conduct,” the emphasis it places on the final two months before defendants moved to vacate their default suggests that the majority itself silently recognizes that defendants’ prior reliance on the assurances of their insurance broker that the matter was being defended was, even if negligent, excusable.

. The majority can find only one decision, which is from the Second Department and has never been cited by this Court, to support its view that this case is “within the ambit of the Labor Law.” Whether camera installation — the activity plaintiff claims to have been performing — falls within one of the categories of work covered by Labor Law § 240 (1), namely, “erection, demolition, repairing, altering, painting, cleaning or pointing of a building or structure,” is a question that defendants should have an opportunity to litigate on the merits in this action.

. It bears noting that the majority, even while it emphatically denies that defendants’ default was excusable, actually excuses that default, in part, by vacating the award of damages and directing that a new inquest be held.