Default Denied in Pip/Um Subro Suit for Failure to Plead Essential Facts

The Court’s duty is not “ministerial.” If subject matter jurisdiction is lacking, the Court should “refuse to proceed further and [should] dismiss the action.”

This court decision involves a fact pattern that is not often litigated: it is a PIP and UM subro suit against a non-covered person — that status applying because the defendant was driving without auto insurance. After Utica Mutual paid both PIP and UM benefits to its insured, it brought this subro suit against the uninsured driver. When the defendant failed to answer the Complaint, Utica moved for a default judgment. The District Court first analyzes whether it has jurisdiction to hear the suit because the total amount sought is over $15,000. Then the Court denies the default judgment on the grounds that Utica failed to plead essential elements of both a PIP subro and UM subro claim; in the case of PIP, that its insured did not bring its own tort action within 2 years; and in the case of UM, that the insured sustained a “serious injury.” – LNR

When a Court is presented with a default judgment application, it is tempting to simply grant it and move on to other pressing matters. However, the rule of law, as I understand it, demands more. The Court’s duty is not “ministerial.” See, e.g. McGee v. Dunn, 75 AD3d 624 (2d Dept. 2010). If subject matter jurisdiction is lacking, the Court should “refuse to proceed further and [should] dismiss the action.” See Fry v. Village of Tarrytown, 89 NY2d 714, 718 (1997), quoting Robinson v. Oceanic Steam Nav. Co., 112 NY 315, 324 (1899). No matter how meritorious a claim may be, the Court in such a case would have no power to grant judgment upon it. Likewise, a Court may grant a default judgment by law only if the moving party’s pleadings and proof establish one or more “viable” causes of action. See McGee v. Dunn, supra.

The instant case puts these principles to a test. On multiple points, the plaintiff’s motion, while unopposed, presents facts and circumstances that raise a series of challenging issues. Although the end result of the Court’s analysis is to sustain jurisdiction, that conclusion requires extended discussion. And in the end, deficiencies in plaintiff ‘s pleading and proof result in the denial of the motion, without prejudice to renewal. These issues are discussed, below, in turn.

Plaintiff, Utica Mutual Insurance Company, moves for a default judgment against defendant, Michael Andre Lynton, based upon Mr. Lynton’s failure to answer the complaint following service of process pursuant to CPLR 308(2). The complaint proceeds on the premise that plaintiff “is subrogated to all rights of RAMONA ESTEVEZ as against the Defendant arising out of the claimed occurrence.” The subject “occurrence” was a motor vehicle accident between a vehicle operated by Ms. Estevez and a second vehicle owned and operated by Mr. Lynton. According to plaintiff ‘s papers, it made basic no-fault payments “to or on behalf of ” Ms. Estevez, totalling $15,197.22. It also paid Ms. Estevez $6,000.00 in settlement of her claim for supplementary uninsured motorist benefits.

Monetary claims brought in this Court are ordinarily limited to cases “where the amount sought to be recovered. . . does not exceed $15,000.00.” UDCA §202. However, “[w]here several causes of action are asserted in the complaint, and each of them would be within the jurisdiction of the court if sued upon separately, the court shall have jurisdiction of the action.” UDCA § 211. Although the latter statute has long been a part of the law governing proceedings in this Court, its constitutionality remains open to question. In Mandel v. Kent, 70 AD2d 903 (2d Dept 1979), the Appellate Division held that the County Court’s jurisdictional limit applied “to the entire complaint rather than each cause of action.” It did so based on its reading of Article 6, §11 of the NYS Constitution, which provides that the County Court’s jurisdiction “shall extend not to causes of action’ but only to actions’ where the amount sought to be recovered is beneath a certain amount.” See Westbury Wholesale Produce Co. v. Main Maid Inn, LLC, 186 Misc 2d 911, 914 (Dist Ct NassauCo. 2000)(discussing Mandel).

In Westbury Wholesale Produce Co. v. Main Maid Inn, LLC, supra, Nassau District Court Judge Kenneth Gartner carefully considered whether to apply Mandel’s logic to cases brought under the Uniform District Court Act. In a comprehensive, well-reasoned opinion, he concluded that the Appellate Division, Second Department, “would not extend the Mandelholding to District Court — an extension which would require the Appellate Division to of necessity declare [UD CA §211] … unconstitutional as in contravention of … the New York State C onstitution.” 186 Misc 2d at 916.

Since Judge Gartner’s decision was handed down more than a decade ago, not a single published decision has cited Mandel. Nor have any court decisions questioned the ruling made by Judge Gartner in Westbur y Wholesale Produce Co., respecting the continued applicability of UDCA 211 to District Court pro ceedings. Accordingly, the Court concludes that Ma n del does not nullify UD CA §211, and therefore turns to the question of whether plaintif f ‘s complaint properly pleads and presents “se veral causes of action,” each of which are within the C ourt’s jurisdictional limits. UDCA §211.

The complaint, in this case, separately asser ts two causes of action. The first cause of action seeks judgment holding defendant liable for $15,000.00, based upon plaintiff ‘s payment of basic no fault benefits. The second cause of action seeks judgment holding defendant liable for an additional $6,000.00, based upon its settlement of Ms. Estevez’s supplementary uninsured motorist claim for pain and suffer ing. Although plaintiff ‘s papers admit that plaintiff voluntarily reduced its claim for repayment of basic no-fault benefits to $15,000.00 “to comply with the jurisdiction of this Court,” that reduction begs the question of whether the Court has jurisdiction to consider claims tot aling $21,000.00 in the aggregate.

Notwithstanding defendant’s default in answering the complaint, this Court is empowered to consider plaintiff ‘s motion only if the cl aims fall within the ambit of UDCA §211, and on that point, plaintiff ‘s motion raises a second difficult and complex threshold issue. At first blush, the assertion of separate “causes of action” in the complaint brings the case squarely within the literal language of UDCA §211. Each “cause of action” seeks damages of $15,000.00 or less ($15,000.00 under the first cause of ac tion and $6,000.00 under the second cause of action).

Howe ver, decisions of other Courts make plain that a lower court’s jurisdictional limits cannot be circumvented by the simple expedient of splitting a claim into separately stated “causes of action.” The Civil C ourt’s decision in Kemper v. Transamerica Ins. Co., 61 Misc 2d 7 (Civ Ct NY Co. 1969), is illustrative. In the Kempe r case, plaintiff ‘s complaint asserted four “causes of action” against an insurer, arising from a fire loss. Four categories of damages were sought, each under a different policy provision. Each “cause of action,” on its face, sought damages within the jurisdictional limits of the Civil Court. Nevertheless, the total damages sought by plaintiff, arising f rom “a single fire,” exceeded the Court’s monetary limit.

The Civil Court (Stecher, J.) concluded, on these facts, that the complaint asserted on ly a single “cause of action.” In holding that it lacked jurisdiction as a result, the Court acknowledged that the issue was “not a matter f ree from difficu lty.” As explained in the decision, the words “cause of action” could have different meanings in different contexts. Quoting from a Court of Appeals’ decision involving a statutor y pleading rule (requiring t hat “each cause of action must be separate and numbered”), Payne v. NYS & WRR Co., 201 NY 436, 440 (1911), the Civil Court adopted the following definition for the purpose of assessing its jurisdiction: “If the fac ts alleged show one primary right of the plaintiff, and one wrong done by the defendant which involves that rig ht, the plaintiff has stated but a single cause of action.” 61 Misc 2d at 8, qu oting Payne, supra, 201 NY at 440.

Applying this definition, the Civil Court concluded that the complaint raised only one cause of ac tion:

In the case under consideration the primary right is to be paid under the contrac t for the loss allegedly sustained in a single f ire; and the defendant’s wrong is the failure to make that payment. There can be little doubt that various obligations of payment assumed under a single wr itten contract accr uing at the same time constitute but a single cause of action (Wolf v. Wolf, 22 AD2d 678, 253 NYS2d 509; 5 Williston on Contracts revised edition, s 1291). It is thus apparent that the plaintiff ‘s claim … although stated in what appeared to be four separate causes of action are in fact one cause of action which exceeds the jurisdictional limitation of this court. The instant case involves similar, but not identical, factual circumstances.

Plaintiff ‘s claims, alt hough separately stated in two causes of action, each involve “one wrong done by the defendant,” namely, negligent operation of a motor vehicle by defendant, causing a collision that injured plaintiff ‘s insured. As a result, plaintiff ‘s insured applied for, and received, insurance benefits under the supplementary uninsured motorist and basic no-fault portions of her insurance p olicy. Under the provisions of that polic y, plaintiff obtained subrogation rights which it now asserts in this action.

Just like in Ke mper, it appears that plaintiff ‘s claim, although set forth in two separate “causes of action,” may be viewed as stating “but one cas e of action which exceeds the jurisdictional limit” for claims made in this Court. Kempe r, supra. If so viewed, the C ourt would lack the power to grant the requested relief. Notably, in Kemp e r, the Civil Court was able to transfer the ac tion directly to the Supreme Court, pursuant to Art. VI, §19(f ) of the NYS Constitution. However, this Court lacks similar authority. Compare NYS Const. Art. V1, §19(I). As a consequence, if the claims in this case are found to exceed the Court’s jurisdictional limits, the Court would have no choice but to dismiss the proceeding. See Fry v. Village of Tarrytown, supra, quoting Robinson v. Oceanic Steam Nav. Co., supra. Ironically, if the action were to be dismissed, and then refiled in the Supreme Court, that Court could then transfer the case back to the District Court, as allowed by NYS C onstitution Art. V, §. 19, and CPLR §325(d). In that event, this Court would be empowered, under CPLR §325(d), to determine the claims without regard to other wise applicable monetary limits. Should plaintiff have its cl aims bounced back and forth, like this, to obtain determination of its claims against defendant? I think not. Although the jurisdictional limits of UDCA 202 must be respected, the language of UD CA is broad enough to encompass the subject claims.

As recognized in Kemper , the phrase “cause of action” can have different meanings in different contexts. No hard and fast definition has been applied by our state’s courts. Although allegations emanating from “a single occurrence or transaction” often have been deemed to be part of one cause of action, “distinct causes of action” just as certainly may arise from a single transaction or occurrence. See 1 NY Jur2d Actions § 40. Indeed, it appears well settled that “where a single wrongful act causes injury to both the person and property of another, the party wronged has, and can separately sue upon, distinct causes of action.” 1 NY Jur2d Actions §57; see also 103 NY Jur2d Torts §3 (“A single tortious act which causes damages to a person and to property gives rise to separate causes of action”). “Similarly, a single wrongful act affecting different interests. . . may give rise to a separate cause of action in favor of the owner of each such interest.” 1 NY Jur2d Actions §57.

Not surprisingly, “conflicting decisions in different jurisdictions” have sometimes confounded our state’s courts in determining whether one or more causes of action are being advanced.See Reilly v. Sicilian Asphalt Paving Co., 170 NY 40, 43-45 (1902). But more recent decisions draw a clear distinction between an injured person’s cause of action for pain and suffering, on the one hand, and an insurer’s related cause of action for recoupment of payments for extended economic loss. See Record v. Royal Globe Ins. Co., 83 AD2d 154 (2d Dept 1981). The issue in Record v. Royal Globe was whether an insured’s release of a claim for personal injuries impaired the insurer’s subrogation rights. While the decision did not address issues of jurisdiction, the Court’s analysis hinged upon its recognition that a subrogated claim for “economic loss” (i.e. payments for lost earnings and medical expenses) was very different from a “non-economic” claim for pain and suffering. Since these claims were considered to be separate and distinct, the Court concluded that the release by Royal Globe’s insured of her non-economic claims for pain and suffering had not impaired the insurer’s subrogation rights respecting economic loss.

Viewing the claims in this case in a similar manner, it is apparent that the complaint does, indeed, state separate and distinct causes of action. Although both claims are asserted by the same party, under provisions of the same insurance policy, the first cause of action, for basic no-fault benefits, involves “economic losses” (e.g. medical expenses), whereas the second cause of action, for supplementary uninsured motorist benefits, involves payments for the insured’s pain and suffering. Accordingly, the Court concludes, on balance, that it has jurisdiction over plaintiff ‘s claims. Since the complaint can be read as properly asserting two causes of action, each of which is within this Court’s jurisdiction, see UDCA §211, it will proceed to determine the merits of plaintiff ‘s default judgment application. Plaintiff ‘s motion includes proof of service of the summons and complaint upon defendant, proof of his default, and proof of the facts constituting plaintiff ‘s claims. See CPLR §3215(f ). Nevertheless, before a judgment by default can be granted, the Court must be provided with sufficient facts to establish that the plaintiff possesses legally viable causes of action. See, e.g. McGee v. Dunn, supra; Beaton v. Transit Facility Corp., 14 AD3d 637 (2d Dept 2005). With respect to the first cause of action, the complaint, as amplified by plaintiff ‘s moving affidavits, includes sufficient allegations that defendant was not a “covered person” under no-fault, since he lacked insurance for his vehicle on the date of the accident. Such allegations are “an essential element of an insurer’s right to recoup first-party benefits” in a subrogation action. See County- Wide Ins. Co. v. 3-M Production Sales, 96 AD2d 569 (2d Dept 1983). However, an equally essential element of the cause of action is an allegation that plaintiff ‘s insured failed to commence a lawsuit, of her own, seeking damages for personal injuries arising from the accident. See County-Wide Ins. Co. v. 3-M Production Sales, supra; see also Ins. L. §5104(b). If such an action has been brought, the insurer’s remedies, by law, would be limited to its lien rights against any recovery obtained by verdict or settlement of that action. Ins. L. §5104(b).

On the other hand, if the insured failed to commence such an action within two years after accrual of her claim, then, and only then, would the insurer have “a cause of action for the amount of first party benefits paid or payable against any person who may be liable to the covered person [i.e. its insured] for [her] personal injuries.” Ins. L. §5104(b). Although the facts of this case involve the filing of a lawsuit by the insurer more than two years from the date of the accident, plaintiff’s papers are silent as to whether its insured did or did not file her own lawsuit against Mr. Lynton. In the absence of allegations addressing the issue, the Court will not assume, from such silence, that plaintiff’s first cause of action was properly brought under Ins. L . §5104(b). Consequently, plaintiff ‘s request for judgment by default on the first cause of action is denied, without prejudice to resubmission upon additional proof respecting whether its insured did or did not commence her own personal injury action which might overlap with plaintiff’s claim for first party no-fault benefits in this subrogation lawsuit.

Plaintiff ‘s allegations and proof respecting its second cause of action suffer from a different defect. The latter claim seeks recovery of supplementary uninsured motorist benefits that plaintiff paid to its insured in settlement of her claim for pain and suffering. Although the “serious injury” requirements of Ins. L. 5104(a) do not expressly preclude claims for pain and suffering by a covered person against a non-covered person, this case does not present such a direct claim for pain and suffering. Rather, it involves a claim by an insurer arising from its payment of supplementary uninsured motorist benefits to Ms. Estevez for a “non-economic loss,” pursuant to Ins. L. §3420(f )(2) and the Insurance Superintendent’s regulations (11 NYCRR §60-2.3[f]). Under applicable caselaw holdings, Ms. Estevez could not have properly obtained payment of uninsured motorist benefits for her pain and suffering without proof of serious injury. See Raffellini v. State Farm Mut. Ins. Co., 9 NY3d 196 (2007); see also Meegan v. Progressive Ins. Co., 43 AD3d 182, 184-186 (4th Dept. 2007). Should plaintiff be able to sue the defendant to recoup supplementary uninsured motorist payments without proof that its insured, in fact, sustained a serious injury? In the absence of case law holding otherwise, the Court is not prepared to presuppose such a result. While it can be argued that the insurer is simply standing in the insured’s shoes, the law as written expressly gives the insurer only a limited right to pursue a subrogation claim against a non-covered person, as authorized by Ins. L. §5104(b), for basic first party no-fault benefits, and to the extent an insurer acquires additional subrogation rights by paying supplementary uninsured motorist benefits pursuant to Ins. L. §3404(f), such payments are properly made only in cases involving serious injuries. Consequently, an insurer suing a non-covered person upon such a subrogated claim for supplementary uninsured motorist benefits should properly be required to plead and prove the serious injury in order to obtain a judgment against the defendant on the latter cause of action.

In the instant case, notwithstanding the complaint’s conclusory statement that plaintiff ‘s insured “was caused to sustain personal injuries,” the complaint includes no factual allegations which might satisfy the requirements of Ins. Law §5102(d), defining the sort of “serious injuries” which could form the basis for meeting the statutory definition. Moreover, the medical records submitted with plaintiff ‘s motion do not suffice under the circumstances, since no effort is made to use the records to demonstrate how the injuries and treatments brought the case within the statutory definition of a serious injury. Absent proof, by party affidavit, see CPLR §3215(f), that the personal injury claim at issue was “serious” enough to satisfy the no-fault law’s threshold, the Court cannot conclude that the plaintiff has the right, by law, to recover its payment to its insured under the sub rogation theory asserted. Accordingly, where, as here, an insurer neither properly pleads, nor proves by party affidavit, that its insured suffered a true “serious injury” that justified payment of supplementary uninsured motorist benefits for pain and suffering, it is not entitled, upon a default, to obtain a judgment on the claim merely because the complaint includes a conclusory sentence alleging that plaintiff ‘s insured suffered undefined injuries in the accident. Here, too, that failure of proof requires denial of the motion without prejudice.

For the foregoing reasons, the Court concludes that it has jurisdiction to determine claims by plaintiff that exceed $15,000 in the aggregate. However, due to deficiencies in plaintiff ‘s pleading and proof, the Court must deny plaintiff ‘s motion, without prejudice to renewal.