SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
792
CA 16-00019
PRESENT: CENTRA, J.P., PERADOTTO, LINDLEY, CURRAN, AND TROUTMAN, JJ.
MILTON GRINAGE, PLAINTIFF-APPELLANT,
V MEMORANDUM AND ORDER
DIANE DURAWA AND DANIEL DURAWA, DEFENDANTS.
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ACA INSURANCE COMPANY, RESPONDENT.
RAMOS & RAMOS, BUFFALO (JOSHUA I. RAMOS OF COUNSEL), FOR
PLAINTIFF-APPELLANT.
BILLIG LAW, P.C., NEW YORK CITY (SUZANNE M. BILLIG OF COUNSEL), FOR
RESPONDENT.
Appeal from a judgment (denominated order) of the Supreme Court,
Erie County (Diane Y. Devlin, J.), entered March 25, 2015. The
judgment, inter alia, denied the relief plaintiff sought in his order
to show cause and directed plaintiff to reimburse respondent ACA
Insurance Company in full for Additional Personal Injury Protection
benefits paid to plaintiff.
It is hereby ORDERED that the judgment so appealed from is
unanimously reversed on the law without costs and the matter is
remitted to Supreme Court, Erie County, for further proceedings in
accordance with the following memorandum: Plaintiff commenced the
underlying negligence action against defendants to recover damages for
injuries he sustained in a motor vehicle collision. During the
pendency of the underlying action, plaintiff’s no-fault insurance
carrier, ACA Insurance Company, the nonparty respondent herein, paid
him additional personal injury protection (APIP) benefits pursuant to
their insurance contract. Eventually, defendants’ insurance carrier
offered to settle plaintiff’s claims for the $100,000 limit on
defendants’ no-fault policy. Plaintiff accepted the offer and,
insofar as relevant to the instant appeal, sought by order to show
cause a declaration in Supreme Court that respondent’s subrogation
rights are limited to that portion of the settlement funds allocable
to the category of damages for which APIP benefits are meant to
compensate, i.e., extended economic loss. Respondent did not oppose
the court adjudicating the dispute over its subrogation rights but
contended that plaintiff owed it $37,529.27, i.e., the full amount of
the benefits paid. The court issued a judgment, denominated an order,
that, inter alia, denied the relief plaintiff sought in his order to
show cause and directed plaintiff to pay respondent the full amount
sought by respondent.
-2- 792
CA 16-00019
As a preliminary matter, contrary to respondent’s contention,
this appeal was not rendered moot by plaintiff’s tender of payment to
respondent inasmuch as the parties’ rights will be affected directly
by the outcome of the appeal (see generally Matter of Hearst Corp. v
Clyne, 50 NY2d 707, 714).
Plaintiff contends that, under the “made whole” rule, respondent
has no right of subrogation because plaintiff’s damages exceed the
amount of the settlement. By way of background, the “made whole” rule
provides that, if “the sources of recovery ultimately available are
inadequate to fully compensate the insured for its loses, then the
insurer—who has been paid by the insured to assume the risk of
loss—has no right to share in the proceeds of the insured’s recovery
from the tortfeasor” (Winkelmann v Excelsior Ins. Co., 85 NY2d 577,
581). “In other words, the insurer may seek subrogation against only
those funds and assets that remain after the insured has been
compensated. This designation of priority interests . . . assures
that the injured party’s claim against the tortfeasor takes precedence
over the subrogation rights of the insurer” (Fasso v Doerr, 12 NY3d
80, 87; see Winkelmann, 85 NY2d at 581-582). Although we agree with
plaintiff that the court erred in refusing to apply that rule, on this
record, it is unclear whether the settlement made plaintiff whole.
We also agree with plaintiff’s further contention that the court
erred in directing plaintiff to pay respondent the full amount of the
benefits paid without making a determination as to what portion of the
settlement represented his pain and suffering. The purpose of
subrogation is “to prevent double recovery by the insured and to force
the wrongdoer to bear the ultimate costs” (Scinta v Kazmierczak, 59
AD2d 313, 316; see Aetna Cas. & Sur. Co. v Jackowe, 96 AD2d 37, 44).
Respondent has no right to recoup its losses from damages attributable
to plaintiff’s pain and suffering (see Scinta, 59 AD2d at 316). The
contract provides: “In the event of any payment for extended economic
loss, the Company is subrogated to the extent of such payments to the
rights of the person to whom, or for whose benefit, such payments were
made.” Under that clause, respondent’s right of subrogation extends
only to plaintiff’s claim for extended economic loss (see id. at 317;
see also Allstate Ins. Co. v Stein, 1 NY3d 416, 423). On this record,
however, it is unclear what portion of the $100,000 settlement
represents plaintiff’s recovery for extended economic loss, or whether
such amount exceeds the benefits paid. In addition, we note that the
court failed to declare the rights of the parties (see Kemper
Independence Ins. Co. v Ellis, 128 AD3d 1529, 1530).
We therefore reverse the judgment and remit the matter to Supreme
Court for a determination whether plaintiff’s damages exceed the
amount of the settlement and, if not, what portion of the settlement
is attributable to plaintiff’s extended economic loss and what portion
is attributable to his pain and suffering (see Dymond v Dunn, 148 AD2d
56, 59; Aetna Cas. & Sur. Co., 96 AD2d at 46; see also Matter of
Ackerman [Forbes], 66 AD2d 1027, 1027), and to enter a judgment
declaring the rights of the parties in accordance therewith (see CPLR
-3- 792
CA 16-00019
3001).
Entered: November 10, 2016 Frances E. Cafarell
Clerk of the Court