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Declaratory Judgment Finding that the Insurer Was Not Obligated to Defend or Indemnify the Insured Precluded, Under the Doctrine of Collateral Estoppel, Suit by Plaintiff Against the Insurer—Plaintiff Was In Privity with the Insured Pursuant to Insurance Law 3420 and Had No Greater Rights than the Insured

The defendant insurer had obtained a declaratory judgment finding that the insurer was not obligated to defend or indemnify the insured, VTEQE group, because the insured had not complied with the policy’s notice requirements.  Plaintiff obtained a judgment against VTEQE.  The instant action was brought seeking payment of the judgment from VTEQE’s insurer.  The Second Department determined that plaintiff was collaterally estopped from suing the insurer because of the declaratory judgment.  By suing the insurer plaintiff stood in the shoes of the insured and has no greater rights than the insured.  The court explained the relevant analysis:

“Collateral estoppel, or issue preclusion, precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party . . . whether or not the tribunals or causes of action are the same'” … . “The doctrine applies if the issue in the second action is identical to an issue which was raised, necessarily decided and material in the first action, and the [party against whom the issue was decided] had a full and fair opportunity to litigate the issue in the earlier action” … . The party seeking the protection of collateral estoppel bears the burden of proving that the identical issue was necessarily decided in the prior action and is decisive of the present action … . ” The party against whom preclusion is sought bears the burden of demonstrating the absence of a full and fair opportunity to contest the prior determination'” … . “Generally, a nonparty to a prior litigation may be collaterally estopped by a determination in that litigation by having a relationship with a party to the prior litigation such that his own rights or obligations in the subsequent proceeding are conditioned in one way or another on, or derivative of, the rights of the party to the prior litigation” … .

Here, Hudson established, prima facie, that the plaintiff is in privity with the VTEQE group for the purpose of the application of collateral estoppel … . When a plaintiff maintains a direct action against an insurer pursuant to Insurance Law § 3420, it “stands in the shoes” of the insured and can have no greater rights than the insured … . River View at Patchogue LLC v Hudson Ins Co, 2014 NY Slip Op 08000, 2nd Dept 11-19-14

 

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