March 13, 2012

State Farm Mut. Ins. Co. v Anikeyeva (2012 NY Slip Op 50542(U))


The court considered the facts of the case, where the plaintiff, State Farm Mutual Insurance Company, sought to dismiss the counterclaims made by the defendants in relation to a lawsuit for declaratory judgment and to recover no-fault payments made to the defendant professional corporations. The main issues decided were whether the defendants' counterclaims, which included claims for consequential damages, common law fraud, violation of General Business Law, punitive damages, and violation of Judiciary Law, had any legal standing. The holding of the case was that the motion made by the plaintiff to dismiss the counterclaims for consequential damages, common law fraud, violation of General Business Law, and punitive damages was granted with prejudice, as the defendants did not have a cause of action for these claims. The court also severed and continued the first cause of action for breach of contract.

Reported in New York Official Reports at State Farm Mut. Ins. Co. v Anikeyeva (2012 NY Slip Op 50542(U))

State Farm Mut. Ins. Co. v Anikeyeva (2012 NY Slip Op 50542(U)) [*1]
State Farm Mut. Ins. Co. v Anikeyeva
2012 NY Slip Op 50542(U) [35 Misc 3d 1203(A)]
Decided on March 13, 2012
Supreme Court, Nassau County
Jaeger, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.
Decided on March 13, 2012

Supreme Court, Nassau County

State Farm Mutual Insurance Company, Plaintiff,




Attorneys for Plaintiffs- McDonnell & Adels, PLLC, 401 Franklin Avenue, Garden City, NY 11530

and Rivkin Radler LLP, 926 RXR Plaza, Uniondale, NY 11556

Attorneys for Defendants- The Zuppa Frim, PLLC, 53 Herbert Street, Brooklyn, NY 11222

Steven M. Jaeger, J.

The following papers read on this motion: [*2]

Notice of Motion, Affirmation, and ExhibitsX

Affirmation in Opposition and ExhibitsX

Memorandum of Law on Behalf of Defendants in OppositionX

Reply Memorandum of LawX

Memorandum of LawX

Motion by plaintiff for judgment pursuant to CPLR 3211(a)(7) dismissing defendants’ second, third, fourth, fifth and sixth counterclaims as alleged in defendants’ [Second] Amended Answer and Counterclaims is granted, with prejudice as to the second, third, fifth, and sixth counterclaims, and without prejudice as to the fourth counterclaim. The first cause of action for breach of contract is severed and continued.

In 2010 plaintiff commenced this action for a declaratory judgment and to recover no-fault payments made to the defendant professional corporations. Defendants asserted six counterclaims in their amended answer. Plaintiff previously sought dismissal of five of the counterclaims, and on that motion this Court directed defendants to serve a second amended answer and counterclaims in compliance with statutory pleading requirements (Order dated August 10, 2011, annexed as Exhibit E to plaintiff’s moving papers).

Plaintiff now seeks dismissal of the same five counterclaims for consequential damages, common law fraud, violation of General Business Law ァ349, punitive damages, and violation of Judiciary Law ァ487, as alleged in the [Second] Amended Answer and Counterclaims. Plaintiff contends that defendants’ only sustainable cause of action is for breach of contract based upon State Farm’s allegedly improper failure to pay no-fault benefits.

3211 Dismissal Standard

On a motion to dismiss pursuant to CLR 3211, the facts as alleged must be accepted as true, the pleader must be accorded the benefit of every favorable inference, and the court must determine only whether the facts as alleged fit within any cognizable theory (Samiento v World Yacht Inc., 10 NY3d 70, 79 [2008]; Arnav Industries, Inc. Retirement Trust v Brown, Raysman, Millstein, Felder & Steiner, LLP, 96 NY2d 300, 303 [2001]). The criterion on a motion pursuant to CPLR 3211(a)(7) is whether the pleader has a cause of action (Leon v Martinez, 84 NY2d 83, 88 [1994]).


At the outset the Court notes for the record that defendants’ [Second] [*3]Amended Answer and Counterclaims is 79 pages long and contains 528 paragraphs, as compared to the Amended Answer and Counterclaims which was 172 pages long and contained 981 paragraphs. While this second amended pleading is shorter, it still suffers from “a mass of verbiage and superfluous matter” (Tankoos v Conford Realty Co., 248 AD 614 [2nd Dept 1936]). Nevertheless the Court will review the [Second] Amended Answer and Counterclaims pursuant to the dismissal standard of CPLR 3211(a)(7), to determine if defendants have a cause of action against plaintiff, other than one for breach of contract.


The third counterclaim purports to allege a cause of action for common law fraud. Defendants allege that State Farm promised pre-accident policy holders, and by extension the defendants, that it would pay up to $50,000 per eligible injured person (EIP), that these promises were false, and that policy holders purchased insurance from State Farm in reliance upon these false promises. Post-accident misrepresentations included that State Farm would fairly adjust the EIPs’ claims, and timely pay all legitimate claims, and in reliance thereon, the defendants accepted the assignment of claims from EIP assignors who were State Farm policy holders. The post-accident representations include the alleged “predetermined” Independent Medical Examinations (“IMEs”), the alleged use of “fraud mills,” the alleged improper Peer Review Reports, alleged “sham investigations by legally unqualified investigators,” alleged improper use of Examinations Under Oath, alleged routine denial of proper claims, and alleged false and deceptive litigation practices.

A tort obligation is a duty imposed by law to avoid causing injury to others (New York University v Continental Ins. Co., 87 NY2d 308, 316 [1995]). A simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated (Clark-Fitzpatrick, Inc. v Long Is. R. R. Co., 70 NY2d 382, 389 [1987]; Yenrab, Inc v 794 Linden Realty LLC, 68 AD3d 755 [2nd Dept 2009]; Heffez v L & G General Const. Inc., 56 AD3d 526 [2nd Dept 2008]). This legal duty must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract (Clark-Fitzpatrick, Inc. at 389). Furthermore, the allegation that a party entered into a contract while lacking the intent to perform is insufficient to state a cause of action for fraud (Dune Deck Owners Corp v Liggett, 85 AD3d 1093 [2nd Dept 2011]; Stangel v Chen, 74 AD3d 1050 [2nd Dept 2010]).

Here, both the alleged pre-accident promises and post-accident [*4]misrepresentations arise out of the State Farm’s contractual obligation to honor its policies and make no-fault payments as required by the no-fault regulations. No separate obligation or tort duty to pay no-fault claims exists. On this record defendants have no cause of action against State Farm for fraud, and accordingly dismissal of the third cause of action for common law fraud must be granted.

General Business Law ァ349

In the fourth counterclaim defendants allege that State Farm has committed multiple violations of General Business Law ァ349. This statute declares as unlawful “[d]eceptive acts and practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state” (Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 24 [1995]). To state a claim under this statute a pleader must allege (1) acts or practices that are “consumer oriented,” (2) that such acts or practices are misleading in a material way, and (3) that the pleader has suffered actual harm by reason of those acts (Gaidon v Guardian Life Ins Co of America, 94 NY2d 330, 344 [1999]). Conduct is “consumer oriented” if it has “a broader impact on consumers at large” and may “potentially affect similarly situated consumers” (Oswego at pp. 25-26).

Here, defendants allege that State Farm has used inaccurate and false information to improperly delay and deny claims, that such conduct is “likely to mislead a reasonable consumer in the Acupuncture PCs’ circumstances,” that consumers at large have been injured by such practices, and that such practices have caused actual harm to the Acupuncture PCs and the public in general (see [Second] Amended Answer and Counterclaims, pars. 505-510). The problem with this pleading is that defendants’ injury is indirect or derivative of that suffered by policy holders whose claims were allegedly delayed or denied, and therefore it appears that defendants lack standing to assert this ァ349 claim.

An injury is indirect or derivative when the loss arises solely as a result of injuries sustained by another party (Blue Cross & Blue Shield of NJ Inc v Philip Morris USA Inc., 3 NY3d 200, 207 [2004]). If a pleader could avoid the derivative injury bar by merely alleging that its suit would somehow benefit the public, then the “tidal wave of litigation” guarded against in Oswego (85 NY2d at 26) “would loom ominously on the horizon” (City of New York v Smokes-Spirits.Com, Inc., 12 NY3d 616, 623 [2009]). Where, as here, the claimed injury arises wholly as a result of injury to others, and the pleader “is only secondarily damaged” (MVB Collision Inc v Progressive Ins. Co., 2010 WL 3617134 (Sup Ct, Nassau Cty, 2010)), the claimed injury is not compensable under ァ349.

Defendants attempt to clear the standing hurdle by asserting that they are [*5]assignees of the policy holders whose claims were allegedly delayed or denied, and that as assignees, they stand in the shoes of the assignors ([Second] Amended Answer and Counterclaims, par.16). However the assignment of contractual claims does not automatically entail the right to assert tort claims arising from the contract (Banque Arabe et Internationale D’Investissement v Maryland Nat. Bank, 57 F3d 146, 151 [2d Cir 1995]; State of Ca. Public Employees’ Retirement Sys v Shearman & Sterling, 95 NY2d 427 [2000]; Fox v Hirschfeld, 157 App Div 364 [1st Dept 1913]). Assignments of rights under the no-fault law generally encompass the right of the assignee to sue for payment of the benefits provided tothe assignor. Whether such an assignment includes additional rights depends, inter alia, on the language of the assignment instrument, which has not been submitted to this Court. Under these circumstances dismissal of the fourth counterclaim for violation of General Business Law ァ349 is granted without prejudice (see State Farm Mut. Auto. Ins Co. v Mallela, 175 F Supp 2d 401 [EDNY 2001]).

Judiciary Law ァ487

Judiciary Law ァ487, which governs misconduct by attorneys, provides for the recovery of treble damages from an attorney who is guilty of deceit or collusion, or an alleged chronic, extreme pattern of legal delinquency (Rock City Sound , Inc v Bashian & Farber, LLP, 74 AD3d 1168, 1172 [2nd Dept 2010], lv app dsmd 16 NY3d 826 [2011]; Izko v Sportswear Co, Inc, v Flaum, 25 AD3d 534, 537 [2nd Dept 2006]). This statutory cause of action is only applicable to attorneys and cannot extend derivative liability to a client (Yalkowsky v Century Apts. Assoc., 215 AD2d 214 [1st Dept 1995]).

Defendants’ sixth counterclaim for violation of Judiciary Law ァ487 is based upon the allegation that State Farm’s General Counsel ratified and encouraged the submission of fraudulent affidavits in litigation involving defendants ([Second] Amended Answer and Counterclaims, par. 521). This does not suffice as a basis for a claim pursuant to Judiciary Law ァ487 against State Farm, and the sixth counterclaim is summarily dismissed.

Consequential Damages

In the second counterclaim defendants seek consequential damages based upon “State Farm’s multiple breaches of contract” ([Second] Amended Answer and Counterclaims, par. 464). They seek damages for the loss of defendant Anikeyeva’s business, allegedly caused by the State Farm’s failure to pay no-fault benefits under its policies.

Consequential damages are recoverable for breach of contract in limited [*6]circumstances, where such damages were within the contemplation of the parties as the probable result of a breach at the time of, or prior to, contracting (Bi-Economy Market, Inc v Harleysville Ins Co of New York, 10 NY3d 187, 192 [2008], citing Kenford Co v County of Erie, 73 NY2d 312, 319 [1989]). Defendants were not yet on the scene at the time that the subject insurance policies were issued by State Farm to its policy holders. Therefore, there could have been no contemplation of defendants’ consequential damages at the time the policies were issued. In short, defendants simply have no cause of action for consequential damages based upon the allegations of State Farm’s multiple breaches of contract. Accordingly dismissal of the second counterclaim for consequential damages must be granted.

Punitive Damages

The fifth counterclaim purports to allege a cause of action for punitive damages, based upon State Farm’s “far reaching pattern of false, deceptive and fraudulent conduct,” which “has harmed and will continue to harm, the public at large” ([Second Amended Answer and Counterclaims, par. 515).

New York does not recognize an independent cause of action for punitive damages (Rocanova v. Equitable Life Assur. Society. of U.S., 83 NY2d 603, 616, [1994]; Muniz v Mount Sinai Hosp. of Queens, 91 AD3d 612 [2nd Dept 2012]). Punitive damages are not recoverable for an ordinary breach of contract as their purpose is not to remedy private wrongs but to vindicate public rights (Rocanova at 613). Punitive damages are available where the conduct constituting or associated with the breach of contract is (1) actionable as an independent tort for which compensatory damages are ordinarily available, and (2) sufficiently egregious to warrant the additional imposition of exemplary damages (Rocanova at 613).

On this record defendants do not have an independent tort claim against State Farm, and for this reason there is no need for the Court to address the egregiousness of the alleged conduct by State Farm. Dismissal of the fifth counterclaim for punitive damages must be granted.

It is so Ordered.

Dated: March 13, 2012