Public Adjustment Bureau, Inc. v Greater New York Mutual Insurance Co NY Slip Op 30293(U) March 16, 2006 Supreme Court, New York County Docket

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1 Public Adjustment Bureau, Inc. v Greater New York Mutual Insurance Co NY Slip Op 30293(U) March 16, 2006 Supreme Court, New York County Docket Number: /2005 Judge: Louis B. York Republished from New York State Unified Court System's E-Courts Service. Search E-Courts ( for any additional information on this case. This opinion is uncorrected and not selected for official publication.

2 [* 1 ] PUBLIC ADJUSTMENT BUREAU, INC. vs GREATER NY MUTUAL INS. CO.. Sequence Number : 001 DISMISS ACTION INDEX NO. MOTION DATE MOTION SEQ. NO. MOTION CAL. NO. The following papers, numbered 1 to were reaa on UIIB rnotlon tolfor Notice of Motion/ Order to Show Cause - Affldavlts - Exhibits... PAPERS NUMBERED Answering Affidavits - Exhlbits Replying Affidavits Cross-Motion: Yes & No /' Upon the forsgolng papers, it Is ordered that this motion 1~ I J. S. C. WFK ane; izi FINAL DISPOSITION Check if appropriate: 0 DONOTPOST 0 REFERENCE-... -

3 [* 2 ] Supreme Court of the State of New York County of New York Part 2 PUBLIC ADJUSTMENT BUREAU, INC., Index No /05 DecisionlOrder - against - Plaintiff, Present: Hon. Louis B. York Justice, Supreme Court GREATER NEW YORK MUTUAL INSURANCE CO. and SEWARD PARK HOUSING CORP., Defendants. Around January 15, 1999, co-defendant Seward Park Housing Corpor#+,$ (Seward) sustained a substantial property loss when its multi-level garage collapsed. Co-defendant Greater New York Mutual Insurance Company (Insurance) had issued a policy to Seward which was in effect on the date in question. Plaintiff Public Adjustment Bureau, Inc. (PAB) is a public adjuster which represents insured parties in the evaluation and potential settlement of their claims. % Insurance Law (g)(2). Around January 17, IWQ, Seward entered into a contract with PA6 in which the parties agreed as follows: TO THE INTERESTED INSURANCE COMPANIES: We retain Public Adjustment Bureau, Inc. to perform valuable services, to include preparatlon and submission of clalm detail and to advise and assist In the adjustment of claim detail and to advise and assist In the adjustment of the loss by collapse of January 15, 1999, at [the premises in question.] We agree to pay and hereby assign and request payment of expenses, 1

4 [* 3 ] disbursements and seven percent of the amount of loss and salvage be distributed to Public Adjustment Bureau, Inc. when adjusted or otherwise recovered, regardless to whom the loss is payable... (emphasis supplied). The agreement further acknowledged that PA6 could receive no more than 12 1/2 Oh per cent of Seward s recovery. The parties could not resolve the underlying matter outside of court, and as a result, a litigation between Seward and Insurance ensued. In March, 2004, after trial, Seward obtained a jury verdict of $1 5,447, against Insurance. With interest, the total was $18,296, Accordingly, PAB gave notice to Insurance that it had a lien on the judgment and that under the terms of its agreement with Seward it should be named as an additional payee entitled to 7 W % of Seward s judgment. In addition, it commenced this action against Insurance and Seward. In the action, PAB seeks a declaratory judgment against Insurance and Seward forcing Insurance to acknowledge PAB s lien and name it as an additional payee. In the meantime, Seward set out to enforce its judgment. It entered judgment against Insurance on April 21, Then, on April 26, 2005, it served a restraining notice freezing the bank account of Insurance, which initially refused to pay on the basis of its appeal of the verdict. This rendered Insurance unable to operate. Accordingly, Insurance wrote a check for $18,409, to Seward. And, on May , it obtained an order from this court on Seward s consent, which directed JP Morgan Chase, Insurance s bank, to honor the check and vacate the restraining order on Insurance s account. As stated, both defendants object to the relief PAB seeks in the complaint. Each 2

5 [* 4 ] bases its objection on a different theory. According to Seward, its agreement with PAB was conditional: PAB had to adjust the loss and/or settle the claim. Seward states that PA6 did neither. The claim went to trial and Seward received a judgment after verdict, without any involvement by PAB. Therefore, PAB has no right to a portion of the judgment. According to Insurance, PAB could not enter into a contingency agreement with Seward, and Insurance is not allowed to make a payment to PAB based on such an agreement. Instead, under the applicable laws and regulations, an insured can only request that PAB is included on an insurance company s check to at the time of the settlement or payment of the claim. Now, all parties have moved for relief. Seward moves to dismiss the action as against it; PAB cross-moves for summary judgment against Seward; and Insurance cross-moves to dismiss the action as against it. For the reasons below, the court grants Insurance s cross-motion to dismiss the claims asserted against it, and denies both Seward s motion to dismiss and PAB s cross-motion for summary judgment pending a hearing. First, the court denies Seward s motion for summary judgment and the portion of PAB s cross-motion that seeks summary judgment against Seward. Seward argues that the agreement between itself and PAB provides for payment only in the event of settlement of the claim. In making this argument, Seward defines the tern adjust as synonymous with settlement. In opposing Seward, plaintiff PAB argues that for the purposes of the contract, the terms adjust and settle both can refer to resolution at trial. The dispute, PAB claims, was settled by the jury verdict - and PAB helped adjust this claim to its ultimate resolution by verdict. 3

6 [* 5 ] Both parties have proposed unnecessarily strained readings of the contract. The contract, which the court has excerpted above, see at pp. 1-2, does not hinge solely on the meaning of the words settle and adjust. Instead, it provides that PAB will be compensated for preparing and submitting the claim details and for advising and assisting in both the adjustment of the claim details and the adjustment of the loss at issue. In addition, Seward agrees that PAB would be paid when the claim was adjusted or otherwise recovered. Id. Thus, the contract explicitly indicates that PAB was to receive its payment - which the contract sets forth as expenses, disbursements and seven percent of the amount of loss and salvage - as long as Seward recovered its losses by some method. Accordingly, as long as PAB performed the work described in the contract, it is entitled to 7% of the money Seward has recovered. Seward argues that dismissal of the complaint is nonetheless appropriate because PAB did not perform any work in connection with the adjustment of the claim. The contract indicates that payment would be for PAW valuable services. According to Seward, these valuable services were not rendered. Therefore, PAB did not fulfill its contractual obligations. Based on this, Seward argues that its obligation to pay PAB has not been triggered. PAB objects to Seward s contention that it petformed no work. It characterizes Seward s statement as conclusory and unsubstantiated; and, it counters with evidence which it claims establishes its own position. It submits Seward s proof of loss statements, which it purportedly sent to PAB for review and comment; it claims that the However, the court notes that, in its reliance on 1 I NYCRR , Insurance implicitly accepts that the claim was settled by the verdict. See infra at p. 6. 4

7 [* 6 ] building damage was calculated by an agent of PAB; and, it submits the affidavit of Gerald Scheer, one of its principals, detailing the involvement of PAB. According to Scheer, Mr. Scheer personally attended five or six five-hour-long meetings in which he helped to calculate the loss and discussed the calculations with iepresentatives of Seward. In addition, he states, early on a PAB employee spent two work days assessing the damage; PAB retained a company to assist it in its calculations; PAB suggested the retention of an engineer; PAB worked with the engineer and other specialists in order to determine the cause of the loss at issue; and, PAB review and approved all proofs of loss prior to their use in litigation. The issue, then, is whether PAB performed valuable services for Seward. PAB has submitted some evidence which purportedly substantiates its contention; and, Seward has submitted no evidence to support its own argument. Moreover, as PAB points out, Seward had the right to cancel its contract with PAB, and it did not do so at any point - even when settlement efforts failed and the case went to trial. Together, this suggests to the court that PAB should prevail. However, in light of the paucity of the evidence Submitted thus far and the amount of money in dispute here, this matter is best determined at a hearing, where each side will have a full opportunity to support its position. %Q General Star Indem. Go. v. Custom Editions Unholstew Corn,, 940 F. Supp. 645, 653 (S.D.N.Y. 1996)(finding issue of fact as to whether adjuster performed valuable services prior to its discharge). Next, the court turns to Insurance s motion for dismissal. Initially, the court rejects Insurance s argument that the payment agreement is insufficiently specific to allow for Payment. On the Contrary, the arrangement between PAB and &ward is 5

8 [* 7 ] sufficiently clear as to the method by which PAB s fee should be computed. $&E Meadowbrook -Richman, Inc. v. Associated Financial Corp., 253 F. Supp. 2d 666, (S.D.N.Y. 2003)(decided under New York law). Thus, if there had been notice to Insured of the fee arrangement and of PAB s status as public adjusters for Seward, it would not be able to escape its obligation to pay the money Seward agreed to pay to PAB based on this argument. See Goldstein Affiliates, Inc. v, Afftliated FM Ins. Co., 178 A.D2d 301, , 577 N.Y.S.2d 284, 285 (Int Dept. 1991). Nonetheless, Insurance contends that it acted properly in refusing to pay PAB a portion of the proceeds. It relies on 11 NYCRR 25.12, which states in pertinent part that [wlhen a claim is settled where the insured is represented by a public adjuster, upon the request of the insured, the insurerk check may be made payable to both the public adjuster and the insured or to the public adjuster named as a payee.... After the jury reached its verdict in the underlying case, PAB notified Insurance of its alleged right to a percentage of the proceeds. However, Seward did not authorize Insurance to pay PAB a percentage of the verdict. According to Insurance, if it had paid PAB, it would have violated this provision of the NYCRR. In addition, Insurance notes that the agreement on which PAB relies did not explicitly provide that there should be an assignment of a portion of Seward s insurance proceeds to PAB. Instead, the contract requires Seward to pay PAB 7% of its recovery. Therefore, Insurance concludes that it has no legal obligation under 1 I NYCRR Section 25.6 or the form to which that provision refers, see 11 NYCRR Section 25.13(a), to pay PAB. 6

9 [* 8 ] Finally, insurance refers to Circular Letter Number 17 (1993), which the Superintendent of Insurance of New York State sent to both insurers and public adjusters throughout the state. The Circular, which Insurance annexes to its motion, states that in the past some insurance companies routinely paid public adjusters out of the settlement proceeds based on the compensation agreement between the insured and the adjuster. In addition, the Circular notes that these companies did so without receiving any express direction from the insured. The Circular states that this practice was improper, and clarifies: The only time that an insured can request that any insurer s check be made payable to both the insured and the public adjuster, or to the public adjuster not in excess of the agreed upon fee, is at the time of settlement. Any such statement in the compensation agreement... executed prior to the time of settlement... is not permitted under the Regulations. Based on the above, the court finds that Insurance acted reasonably. The pertinent provisions of the NYCRR and the wording of the contract do not impose a duty on the insurer to pay the adjuster directly. Furthermore, Circular Number 17 clarifies that this duty only exists when, at the time of settlement, the insured specifically requests that its insurer render payment to the adjuster. The court does not find merit to PAB s argument that Insurance should have disregarded the guideline; not only does it come from the Department of Insurance and carry great weight, but there is logic behind it. There are legitimate reasons Seward might not have wanted Insurance to pay PAB: Seward may have canceled the agreement, thus obviating its obligation to pay PAB a share of the proceeds; or, PAB could have performed no work, thus failing to satisfy its obligations under the contract. By requiring an insurer to obtain the 7

10 [* 9 ] I consent from its client before it pays the public adjuster under an earlier agreement, therefore, the Superintendent of Insurance is requiring the insurer to ascertain that the terms of the agreement are still in effect on the date of payment. In addition, Insurance acted in apparent good faith and pursuant to a court ordered agreement; and it has already made full payment to its client. Therefore, it no longer has the money in question. PAB is not seeking any damages from Insurance based on the latter's alleged misconduct. Therefore, the issue PAB would have the Court decide is moot. For the reasons set forth above, therefore, it is ORDERED that the motion of Seward for summary judgment and the portion of PAB's cross-motion seeking summary judgment against Seward are granted to the limited extent of setting the matter down for a hearing; and it is further ORDERED that the cross-motion of Insurance seeking to sever and dismiss all claims asserted against it are granted, and these claims are severed and dismissed; and it is further ORDERED that the portion of PAB's cross-motion seeking summary judgment against Insurance is denied; and it is further ORDERED that Seward and PAB are directed to of this Part, at , to s chedule a hearing. i Dated: I 6 j ENTER: -@+