December 7, 2017

Hertz Vehs., LLC v Cepeda (2017 NY Slip Op 08603)

Headnote

A provider cannot recover defense attorney fees under the insured-defense rule when the insurer owes no duty to defend its assignors. After successfully defending a no-fault declaratory judgment action, the provider sought attorney fees as assignee of the claimants' reimbursement rights. The rule permitting an insured to recover fees for successfully defending an insurer's declaratory judgment action rests on the insurer's duty to defend. The assignors were passengers in the insured vehicle, and the insurer owed them no such duty. The Appellate Division, First Department, affirmed the order, insofar as appealed from, denying the provider's request for attorney fees.

Reported in New York Official Reports at Hertz Vehs., LLC v Cepeda (2017 NY Slip Op 08603)

Hertz Vehs., LLC v Cepeda
2017 NY Slip Op 08603 [156 AD3d 440]
December 7, 2017
Appellate Division, First Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
As corrected through Wednesday, January 24, 2018
As corrected through Wednesday, February 7, 2018


[*1]
 Hertz Vehicles, LLC, Respondent,
v
Dariel Cepeda et al., Defendants, and Innovative Health Chiropractic, P.C., Appellant.

Law Office of Gregory A. Goodman, P.C., Hauppauge (Gregory A. Goodman of counsel), for appellant.

Robyn M. Brilliant, P.C., New York (Barry Montrose of counsel), for respondent.

Order, Supreme Court, New York County (Joan M. Kenney, J.), entered on or about March 8, 2017, which, to the extent appealed from, denied defendant Innovative Health Chiropractic, P.C.’s request for attorneys’ fees, unanimously affirmed.

Defendant Innovative argues that, as the assignee of the rights of the no-fault claimants in the underlying automobile accident to whom it provided medical treatment, it successfully defended itself in this declaratory judgment action and thus should recover attorneys’ fees just as an insured may recover attorneys’ fees upon successfully defending itself against an action brought by its insurer for a judgment declaring that the insurer had no duty to defend or indemnify it (see U.S. Underwriters Ins. Co. v City Club Hotel, LLC, 3 NY3d 592, 597-598 [2004], citing Mighty Midgets v Centennial Ins. Co., 47 NY2d 12, 21-22 [1979]). This argument is unavailing.

The insured in the circumstances described above may recover attorneys’ fees because “an insurer’s duty to defend an insured extends to the defense of any action arising out of the occurrence, including a defense against an insurer’s declaratory judgment action” (U.S. Underwriters, 3 NY3d at 597-598).

There is no such duty in this case, as Innovative is not an insured to which Hertz owes a duty to defend. Although Innovative was assigned the claimants’ rights for reimbursement of no-fault benefits, the claimants were only passengers in the insured vehicle at the time of the accident, and were not parties to whom Hertz owed a duty to defend (Fiduciary Ins. Co. of Am. v Medical Diagnostic Servs., P.C., 150 AD3d 498 [1st Dept 2017], citing U.S. Underwriters, 3 NY3d at 597-598). Concur—Manzanet-Daniels, J.P., Mazzarelli, Kapnick and Webber, JJ.

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