Sewage Soilage Subrogation

PROPERTY – SUBROGATION – SUBROGATION RECEIPT – IMPAIRMENT OF SUBROGATION RIGHTS
Corsa v. Pacific Indem. Co.
(2nd Dept., decided 6/3/2008)

Plaintiffs' home and contents were damaged when a large quantity of sewage spilled into the basement of their home after a sewer pipe in front of their home collapsed. Pacific made a payment to the plaintiff Carol Corsa pursuant to her homeowner's insurance policy, and she executed a subrogation receipt in connection with that payment. The plaintiffs then commenced an action against the Village of Larchmont and Town of Mamaroneck for their alleged negligence in connection with the sewer pipe collapse. Pacific also brought an action against the village as subrogee of Corsa.

The two actions were consolidated, and plaintiffs settled their action against Larchmont following a liability verdict and executed a general release in favor of Larchmont. Pacific also settled its subrogation action against Larchmont following the liability phase of the joint trial. The plaintiffs then commenced the instant action against Pacific, seeking, among other things, compensation for damage to the real and personal property pursuant to the insurance policy. Pacific moved to dismiss the complaint pursuant to CPLR 3211 based on collateral estoppel and res judicata, and Supreme Court denied the motion.

In AFFIRMING the lower court's order, the Second Department held the neither doctrine applied because plaintiffs settled their action against Larchmont before a final judgment was reached and because the issue of Larchmont's negligence in the two tort actions was not the same as Pacific's alleged breach of contract in this action.

The court also rejected Pacific's argument that the subrogation receipt executed by the parties provided that Pacific's payment of the plaintiffs' claim constituted a full settlement and general release of that claim and, thus, the plaintiffs were barred from seeking further damages against Pacific. The documents executed in conjunction with the subrogation receipt, however, expressly provided that the parties agreed that the payment made by Pacific did not represent a final settlement of that claim.

Lastly, the court rejected Pacific's contention that plaintiffs impaired its subrogation rights by executing a general release in favor of Larchmont when they settled their action. Pacific had brought and settled its own subrogation action against Larchmont and did not submit a copy of the release it executed in connection with that settlement in support of its motion.