HNRK Coverage Corner
On May 25, 2018, Judge Furman of the SDNY issued a decision in American Ins. Co. v. Kartheiser, Case No. 17-CV-5545 (JMF), denying a motion to dismiss a subrogation action for failure to join the insured as a party.
In American Ins. Co., an insurer brought a subrogation action in federal court, seeking to recover amounts it paid to the insured for property damage caused by the defendant. Joining the insured -- which was was separately suing the defendant in state court for amounts not covered by the insurer -- would have defeated diversity jurisdiction in the insurer's federal subrogation action. The Court held that insured need not be joined as a party, since it was not an indispensable party for purposes of Fed R. Civ. P. 19:
Under long-settled Second Circuit law, Watson Photography is “clearly” not an indispensable party and Defendants’ motion must be denied. See Arkwright-Boston Mfrs. Mut. Ins. Co. v. City of N.Y. (“Arkwright-Boston”), 762 F.2d 205, 209 (2d Cir. 1985). In Arkwright-Boston, as here, an insurer sued in federal court to recover for payments made to its insured, while the insured sued the same defendants in state court to recover its deductible. On appeal, the Second Circuit affirmed the district court’s denial of the defendants’ motion to dismiss pursuant to Rule 12(b)(7). “In a subrogation case,” the Court explained, “the insurer and the insured are ‘necessary’ parties, but clearly they are not indispensable parties.” Id. at 209 (citing United States v. Aetna Cas. & Sur. Co., 388 U.S. 366 (1949)). The insured’s “state action,” the Court continued, “seeks only its . . . deductible, while [the insurer’s] federal subrogration suit is for the [money] it paid to [the insured]. These two claims are separate and distinct, and . . . [t]he fact that the defendants may be required to defend more than one action arising from the same tort is not grounds for finding the insured an indispensable party to its insurer’s partial subrogation action.” Id.; see also St. Paul Fire & Marine Ins. Co. v. Universal Builders Supply, 409 F.3d 73, 81 (2d Cir. 2005) (“[I]f joinder of the absent insured or insurer would deprive the court of jurisdiction over the subject matter of the action, the court may properly proceed in accordance with Rule 19 to adjudicate the rights of the suing plaintiff alone; the consequence is that the defendant may have to defend two or more actions on the same tort.” (internal quotation marks omitted)).
Arkwright-Boston compels denial of Defendants’ motion. As in Arkwright-Boston, AIC seeks only to recover the money it paid to Watson Photography. (See Am. Compl. ¶ 3). By contrast, Watson Photography seeks to recover in its state-court action only the “damages [that] are not covered under [Watson’s] insurance policy.” (Docket No. 18, Ex. 7, at ¶ 11). Accordingly, there is no danger of double recovery. And in the absence of such a danger, the mere risk that a finding in one action would be given collateral estoppel effect in the other does not alone render Watson Photography an indispensable party. See, e.g., Arkwright-Boston Mfrs. Mut. Ins. Co. v. City of N.Y., No. 84-CV-5724 (CSH), 1984 WL 1263, at *2 (S.D.N.Y. Nov. 21, 1984) (“Although defendants may be collaterally estopped from denying liability in a subsequent state court trial if found liable in negligence in the trial of this action, there is no possibility of double recovery against defendants.”), aff’d, 762 F.2d 205; see also, e.g., Allstate Ins. Co. v. Choi, No. 06-CV-3870 (CPS), 2007 WL 29384, at *3 (E.D.N.Y. Jan. 4, 2007) (“Resolution of the action between [the insurance company] and the defendants for the amounts paid by [the insurance company] on the policy will not impede the [the insured’s] ability to pursue their state court remedies.”).
- Partner
Bradley Nash represents policyholders in insurance disputes and other parties in complex commercial litigation in state and federal courts in New York and across the country. Brad focuses his practice on insurance recovery for ...
Search Blog
Recent Posts
- Delaware Bankruptcy Court Rules That Qui Tam Action Filed Under Seal—and Never Served—Triggers D&O Policy’s Prior and Pending Litigation Exclusion
- “Related Acts” and the Claims Made Policy—The Policy Provision that “Cannot Be Applied Literally”
- California Court Rules that FTC’s Civil Investigative Demand is Not a Covered Claim Under Technology Errors and Omissions Policy
- Delaware Court Dismisses D&O Coverage Action as Premature Under Policy’s “No Action” Clause
- Chubb Prepares to Pay $350 Million to State of Maryland for Baltimore Bridge Collapse
- Sixth Circuit Rules That Insurer is Entitled to Reimbursement of Defense Costs, Holding That Reservation of Rights Letter Created an Implied-In-Fact Contract
- Fifth Circuit Holds Contract Exclusion Does Not Bar Defense Coverage for Ticket Holders Lawsuit Arising From Festival Cancelled During Covid-19 Pandemic
- HNRK Secures Win for Syngenta in Insurance Coverage Appeal at Delaware Supreme Court
- New York Court Considers Evidence Regarding Insurers Handling of Prior Claims in Denying Insurer’s Motion for Summary Judgment
- HNRK Insurance Recovery Partners Author Article for Chambers 2024 Global Practice Guide
Popular Categories
- Insurance Coverage
- Policy Exclusions
- D&O Policies
- CGL Policies
- Duty to Defend
- Damages
- E&O Policies
- Related Claims
- Occurrence/Accident
- Rules of Interpretation
- Additional Insured Endorsement
- Business Interruption Coverage
- Cyber Coverage
- Construction
- Bad Faith Claims Handling
- Indemnification and Advancement
- COVID-19
- Pollution Exclusion
- Duty to Cooperate
- Advertising Injury
- Excess Insurance
- Personal and Advertising Injury
- Insurance Brokers
- Confict of Laws
- Discovery/Disclosure
- Appraisal
- Attorney Fees
- Covered Loss
- Assignment of Claims
- Disability discrimination
- Implied Covenant of Good Faith and Fair Dealing
- Notice
- Privilege/Work Product
- Priority of Coverage
- Intellectual Property
- Contracts
- Professional Malpractice
- Rescission
- Intervention/Joinder
- Subrogation
- Settlements
- General Business Law
- Unfair Claims Settlement Practices
Archives
- July 2024
- June 2024
- May 2024
- April 2024
- March 2024
- February 2024
- January 2024
- December 2023
- November 2023
- September 2023
- August 2023
- June 2023
- May 2023
- April 2023
- March 2023
- January 2023
- December 2022
- September 2022
- May 2022
- April 2022
- March 2022
- November 2021
- June 2021
- February 2021
- January 2021
- December 2020
- November 2020
- October 2020
- September 2020
- August 2020
- April 2020
- March 2020
- February 2020
- January 2020
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- July 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018