Monday, March 17, 2014

Insurer Rebuffed In Its Attempt to Latch Subrogation Claim Onto Plaintiff's Tort Action

In Peterson v. New York State Elec. & Gas Corp., the plaintiffs were injured when their home exploded due to a natural gas leak that also destroyed a neighboring mechanic's shop, Pete's Garage. Erie Insurance Company, the insurer for Pete's Garage, paid its insured approximately $50,000 for damages sustained in the explosion.  The plaintiffs sued NYSEG, but Erie failed to intervene in the action or to commence its own action against NYSEG. Instead, Erie moved to sever its subrogation claim from the plaintiffs' personal injury claim.  

In affirming the denial of the motion, the Third Department found that Erie had two options: (1) commence its own action against NYSEG or (2) move to intervene in an action between Pete's Garage and NYSEG. Here, however, the action was between the Petersons, not Pete's Garage, and NYSEG. Moreover, the plaintiffs' complaint failed to include any allegations regarding the damages to Pete's Garage and it was not until 5 years after service of the complaint that the plaintiffs amended their bill of particulars to mention the sums paid by Erie for the Pete's Garage claim.  The Court found that the amendment was ineffective to assert Erie's subrogation claim, in that an amendment to a bill of particulars cannot be used to allege a new theory of liability not originally asserted in the complaint.      

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