Third-Party Action Against Insurer Should Be Tried Separately From Underlying Liability Action

On March 30, 2021, Justice Grays of the Queens County Commercial Division issued a decision in Board of Mgrs. of the 44-15 Purves St. Condominium v 44-15 Purves St., LLC, 2021 Slip Op 32048 holding that an action against an insurer for denying an insurance claim should be severed pursuant to CPLR 603 from the underlying action to determine liability, stating:

It is well established that it is ‘inherently prejudicial’ to third-party insurers to have the issue of insurance coverage tried before the jury that considered the underlying liability claims (Schorr Bros. Dev Corp v Continental Ins. Co., 174 A.D.2d 722 [1991]). To ensure that there is no prejudice to the third-party defendant insurance company, the main negligence action and the third-party insurance coverage action should be tried separately (Emmetsbergery Mitchell, 7 A.D.3d 483 [2004]). It is also well recognized that insurance coverage issues and negligence or liability actions do not involve common questions of law or fact (Emmetsberger v Mitchell, supra; Haber v Cohen, 74 A.D.3d 1281 [2010;]; Hershfeld v JM Woolworth Risk Retention Group, 164 A.D.3d 1423 [2018]). None of the other parties in the related actions have interposed claims against US Fire. As to the issue of discovery, it is uncontradicted that no other party than Mandarin has served discovery demands on US Fire. Severance is appropriate here so as to avoid involving parties in discovery, or a trial, in which they have no interest (Weiss v Meiselman, 155 A.D.2d 531 [1989]).

The attorneys at Schlam Stone & Dolan frequently represent insurers in civil litigation.

Contact our attorneys at commercialdivisionblog@schlamstone.com if you or a client have questions regarding a claims against an insurer related to a denial of coverage.