Insureds Allowed to Continue Suit Against Neighbors Even After Receiving Insurance Payment for Garage Crushed by Neighbor's Tree

HOMEOWNERS – ACTUAL CASH VALUE – SUIT AGAINST TORTFEASOR
Hopper v. McCollum
(2nd Dept., decided 8/25/2009)

If insureds collect payment from their homeowners insurer for damage to their garage crushed by their neighbor's rotted tree, can they then also sue their neighbor for damages?  Yes, says the Appellate Division, Second Department.

Plaintiffs' garage was damaged when portions of an allegedly decayed and fractured tree located on their neighbor's adjacent property fell onto it. Plaintiffs made a claim under their homeowners' insurance policy and were paid the policy limit, defined as the actual cash value of the loss under a policy provision entitled "Other Structures Protection."  Plaintiffs then commenced this action against their neighbor.  The defendant moved to dismiss the complaint pursuant to CPLR 3211(a)(5) on the ground that the plaintiffs had received payment through their homeowners' insurance policy and were not entitled to any additional recovery from her.  Putnam Supreme converted the motion to dismiss into one for summary judgment and granted the motion.

In REVERSING the motion court's decision and reinstating plaintiffs' complaint, the Second Department held:

Contrary to the defendant's contention, the plaintiffs are not precluded from maintaining this action against the defendant simply because they received payment from their insurance carrier (see generally Fisher v Qualico Contr. Corp., 98 NY2d 534, 538; Spectra Audio Research, Inc. v Chon, 62 AD3d 561; Corsa v Pacific Indem. Co., 52 AD3d 450, 451; Winkelmann v Hockins, 204 AD2d 623, 623-624). If the trier of facts in this matter finds the defendant liable and awards damages to the plaintiffs, then the plaintiffs' receipt of the insurance payment may be relevant as a possible setoff against the damages award (see CPLR 4545[c]; Fisher v Qualico Contr. Corp., 98 NY2d at 539-540). 

Although the court's decision mentions that plaintiffs received the policy limit from their homeowners insurer, it also states that "the plaintiffs could have sought additional reimbursement from their insurance carrier if they submitted proof that they repaired, rebuilt, or replaced the garage within 180 days of payment, [which] they did not do[.]"  I'm not sure which is true, but it probably does not matter to the holding.  If the actual cash value of the plaintiffs' garage exceeded the limit of their "Other Structures Protection" coverage, they could sue for their uninsured loss.  The decision does not indicate why the plaintiffs' homeowners insurer did not join as a co-plaintiff to recover its payment or whether it had commenced a separate subrogation action against plaintiffs' neighbor. 

What if the plaintiffs were unsuccessful in their claim of negligence against their neighbor?  Would that finding collaterally estop their homeowners insurer from pursuing its subrogation claim?  It shouldn't.  Proceeding as a subrogee is different than suing as an assignee, and only assignees should be collaterally estopped by a finding on the merits against their assignors.  Moreover, to the extent that plaintiffs such as the ones in this case either are subject to a setoff against a damages award for payments they had received from their insurer or can be said not to be able to recover for those insurance payments in the first place, the insurer's subrogation interest is not at issue in an insured's separate tort action to recover the insured's uninsured loss.