New South Ins. Co. v. Dobbins
(2nd Dept., decided 3/2/2010)
It's not easy for plaintiff insurers to obtain default judgments in declaratory judgment actions. In addition to establishing the defendants' defaults, the plaintiff insurers must establish, prima facie, that they are entitled to the relief sought. That usually entails demonstrating, in evidentiary form, the merits of the coverage defenses which form the basis of the DJ action. A verified complaint, by itself, won't suffice if the insurer's coverage defenses are based on facts outside the personal knowledge of the person who verified the complaint.
New South insured Adrienne Dorns, who allowed James Dobbins, Sr., to drive her vehicle. On July 31, 2006, Dobbins Sr. was involved in a collision with a vehicle owned by Quadrozzi Concrete Corp. and operated by Emanuel Paradiso. Dobbins Sr., James Dobbins, Jr., Felita Dobbins, and Jamie Dobbins all claimed to be within the Dorns vehicle at the time of the accident, and all made no-fault claims to New South. In his MV-104 and subsequent interview, Paradiso indicated that there was only one occupant of the Dorns vehicle at the time of the accident. New South conducted examinations under oath of the Dobbins claimants and then commenced this DJ action against Dorns and the four Dobbins, seeking a declaration that its policy with Dorns afforded no liability, no-fault or uninsured motorists coverage in relation to the July 31, 2006 accident by reason of: (1) Dorns's policy application misrepresentations; and (2) the Dobbins' fraudulent misrepresentations of the identities and numbers of the occupants of the Dorns vehicle. All defendants failed to appear, and New South moved for a default judgment against all.
Nassau County Supreme Court Justice F. Dana Winslow denied New South's initial motion, based primarily on New South's failure to submit a complete copy of Dorns's insurance policy with New South in support of its motion. Justice Winslow also found that New South could only cancel the policy prospectively for application fraud and noted:
New South moved to renew and reargue, this time submitting a complete copy of the insurance policy at issue. On that motion to renew and reargue, Justice Winslow granted New South a default judgment as to no-fault claimant Jaime Dobbins, but denied the motion as to no-fault claimants James Dobbins, Jr. and Felita Dobbins. The court found that New South had not established via evidentiary material that James Jr. and Felita were not in the Dorns vehicle at the time of the accident:[A]lthough the DOBBINS defendants' [EUO] testimony seems evasive and inconsistent , and is contradicted, in some respects, by the accident report, the record to date does not unequivocally demonstrate that any individual defendant was not in the vehicle at the time of the accident. Plaintiff has not sufficiently established that it is entitled to wholesale relief from its obligations under the policy with respect to any individual defendant. To the extent that plaintiff assert that a particular claim is fraudulent, its remedy is to issue a disclaimer pursuant to the Insurance Law and applicable regulations, or to defend against such claim in any
proceeding in which coverage is sought.
In granting New South a default judgment as to Jaime Dobbins, however, the court found that Dobbins Sr.'s admissions in his MV-104 and telephone report to New South supported the inference that there were only two adult passengers -- James Jr. and Felita -- in the vehicle at the time of the accident.Plaintiff relies on the Form MV-104 filed by the driver of the adverse vehicle, Manny E. Paradiso, which indicates only one occupant in the vehicle driven by DOBBINS. The Affidavit of Brinton Max Esty, plaintiff's investigator, sworn to on July 17, 2007, refers to Mr. Paradiso's statement, in the MV-104 and in a subsequent interview, that DOBBINS was the sole occupant. These statements, however, are inadmissible hearsay, and cannot be relied upon to support plaintiff's prima facie showing of entitlement to the relief sought. Although, as plaintiff contends, defaulters may be deemed to have admitted the facts alleged in the complaint, that rule can only apply where the allegations were made or verified by someone with first-hand knowledge. See Woodson v. Mendon Leasing Corp., 100 NY2d 62; State v. Wiliams, 44 AD3d 1149. In the case at bar, plaintiff's attorney verified the Complaint, and plaintiff's investigator lacked first-hand knowledge of who was in the DOBBINS vehicle at the time of the Incident.
Plaintiff also cites inconsistencies in the testimony of JAMES JR., FELITA and JAMIE in their No-Fault examinations under oath, with respect to the circumstances of the Incident and the description of the adverse vehicle. The Court finds these to be inconclusive and insufficient to demonstrate that the purported passengers were not in the DOBBINS vehicle at the time of the Incident.
New South appealed the second order to the Appellate Division, and the Second Department AFFIRMED, holding:
If New South had obtained an affidavit from the adverse driver that there was only one occupant of the Dorns vehicle at the time of the accident, would that have been enough? Perhaps. But relying on hearsay statements and affidavits from those lacking first-hand knowledge in moving for a default judgment in a insurer-commenced declaratory judgment action will probably never be enough.The Supreme Court properly, upon renewal and reargument, adhered to so much of its original determination as denied the plaintiff leave to enter judgment against the defendants James Dobbins, Jr., and Felita Dobbins, upon their default in answering the complaint. In support of its motion, the plaintiff offered the complaint, which was verified by plaintiff's counsel, and an affidavit of the plaintiff's investigator, neither of whom possessed personal knowledge of the facts constituting the claim (see CPLR 3215; Woodson v Mendon Leasing Corp., 100 NY2d 62, 70-71; Hosten v Oladapo, 44 AD3d 1006; Finnegan v Sheahan, 269 AD2d 491). The statements from the driver of the other vehicle that the plaintiff's investigator relied upon in his affidavit constituted inadmissible hearsay (see CPLR 4518[a]; Hochhauser v Electric Ins. Co., 46 AD3d 174, 179-183; Metropolitan Cas. Ins. Co. v Shaid, 23 Misc 3d 1140[A]). Accordingly, entry of a default judgment against these defendants was properly denied on the papers before the Supreme Court.