Court Opinion

ID: 5845660
Source: CourtListenerOpinion
Date Created: 2022-01-12 23:44:54.16782+00
Date Added: 2024-06-11T08:43:54.984041
License: Public Domain

Simons and Hancock, Jr., JJ. (dissenting).
We would reverse and grant summary judgment dismissing the complaint against the defendant Lumbermens. Plaintiffs are those members of defendant ESBA who took advantage of their rights as members to purchase Blue Cross and Blue Shield group health coverage through ESBA. They allege that they paid sums of money to ESBA to be applied as premiums to Blue Cross and Blue Shield for certain periods in 1979 and that ESBA breached its agreement with plaintiffs as members to remit said sums to Blue Cross and Blue Shield. In the third and fourth causes of action plaintiffs allege that certain defendants (not defendant Lumbermens), acting fraudulently and in breach of their fiduciary responsibilities, converted the funds paid to ESBA for health coverage premiums. In the fifth cause of action plaintiffs assert a claim for indemnity directly (not as third-*1099party beneficiaries) against Lumbermens based on the fidelity bond issued by it to ESBA as the insured “to indemnify the Insured against any loss of money or other property which the Insured shall sustain through any fraudulent or dishonest act or acts committed by any of the Employees” (emphasis added). Plaintiffs have no cause of action against Lumbermens on the fidelity bond. The defendant ESBA as an entity is the insured and the bond was issued to cover any loss of money or property which the insured shall sustain through the dishonesty of its employees. Plaintiffs, who have paid ESBA for health insurance, are not the insured and have no contractual relationship with Lumbermens. The bond does not insure against liability asserted by a third party and the obligation of Lumbermens to indemnify ESBA for its losses is not dependent upon the recovery against ESBA of a third-party claim (see 175 East 74th Corp. v Hartford Ace. & Ind. Co., 51 NY2d 585). That plaintiffs as members of ESBA might assert a cause of action against Lumbermens on behalf of the association as the insured for whatever employee defalcation it could establish is irrelevant. No such claim is asserted. Plaintiffs do not purport to sue on behalf of the association or on behalf of the entire membership; on the contrary, they have sued the association as a defendant for their individual losses as those members who have paid money to it for premiums. The cases cited in the majority memorandum (House v Schwartz, 18 Misc 2d 21; Hogan v Williams, 185 Misc 338, affd 270 App Div 789) are not in point, since they involve claims brought by association members to enforce association rights. It is noted that by permitting plaintiffs to sue the bonding company directly, plaintiffs as creditors with claims against ESBA for payment of health insurance premiums are given in effect a preference over ESBA’s other creditors. (Appeals from order of Erie Supreme Court — class action, summary judgment.) Present — Cardamone, J. P., Simons, Hancock, Jr., Callahan and Moule, JJ.