Supreme Court, Westchester County, July 7, 2019

Nolan Heller Kauffman, LLP, Albany, for Joseph Scott, D.O., defendant.

Rivkan Radler LLP, Uniondale, for Medical Liability Mutual Insurance Company, defendant.

Finger & Finger, White Plains, for plaintiff.

{**64 Misc 3d at 910}Motion of defendant Joseph Scott, D.O.^[FN1] (mot sequence No. 1), made pursuant to CPLR 3212, for an order granting summary judgment on the counterclaim for a declaratory judgment against plaintiff Maple Medical LLP, and cross motion of plaintiff (mot sequence No. 2), made pursuant to CPLR 3212, for an order granting summary judgment on the complaint as against Scott.

The court determines as follows:

This lawsuit is one of six litigations^[FN2] before this court that involve plaintiff, as the employer partnership, and individual physicians, as plaintiff's employees. The parties in the separate actions are all represented by the same law firms.

At the heart of all of the actions is the same single legal issue: whether the physician employee or the employer partnership is entitled to a distribution payment made by Medical Liability Mutual Insurance Company (MLMIC).^[FN3] MLMIC is a medical malpractice insurance company that issued policies covering the employee physicians that were paid for by plaintiff as their employer. The parties in all six litigations seek, in essence, a declaratory judgment resolving this one central issue. As such, the court's finding herein will govern and resolve the pending motions in the other five actions.

Plaintiff is a limited liability partnership that operates a multispecialty medical practice in White Plains, NY. Pursuant to the employment agreement between Scott as employee and plaintiff as employer, Scott performed medical services for plaintiff. As part of Scott's employment compensation package, plaintiff paid the malpractice insurance premiums for coverage for Scott. Plaintiff was designated by Scott to serve as his agent for the purpose of administering the policy, the coverages, the reporting requirements, and the payment of the premium.

The policy insuring Scott was issued by MLMIC. At the time that the insurance policy was issued, MLMIC was a mutual insurance{**64 Misc 3d at 911} company owned by its policyholders, one of whom was Scott.

Thereafter, MLMIC negotiated a sale of its business to a subsidiary of Berkshire-Hathaway, which formed a stock company, and paid MLMIC $2.5 billion for the MLMIC assets. This demutualization plan (the plan) was approved by the New York State Department of Financial Services pursuant to Insurance Law § 7307. The plan includes the methodology for the pro rata distribution of the proceeds of the sale to parties in interest. As for Scott's policy, the amount for the distribution allotted to the policy is $128,148 (the payment). The question presented in this action is whether Scott or plaintiff is entitled to the payment. Based upon the disagreement of the parties, the payment is in escrow pending resolution of the dispute.

The complaint asserts four causes of action: declaratory judgment; breach of contract-covenant of good faith and fair dealing; Insurance Law § 7307; and unjust enrichment. The answer includes a counterclaim for declaratory judgment.

Each of the parties now moves for summary judgment on its claims, in essence seeking a declaration of which party is entitled to the payment. The court will accept all papers submitted in this action for its review, notwithstanding Scott's argument that plaintiff did not follow proper procedure. There is no prejudice demonstrated, and this court strongly believes in the resolution of disputes upon the merits.

The court finds that the recent decision of the Appellate Division, First Department in Matter of Schaffer, Schonholz & Drossman, LLP v Title (171 AD3d 465 [1st Dept 2019]), decided April 4, 2019, is dispositive of the issues raised in this matter. Applying the principles set forth in the Matter of Schaffer decision to the facts presented, the court holds that plaintiff is therefore entitled to the distribution of the sales proceeds of MLMIC.

In Matter of Schaffer, the parties, pursuant to CPLR 3222 (b) (2), filed directly with the Appellate Court a statement of stipulated facts, together with their briefs. The statement of facts includes a section entitled "Controversy Presented . . . Issue a declaratory judgment determining whether SS & D or Dr. Title is entitled to the disputed amount."

A review of the facts in Matter of Schaffer reveals that the litigation, like this action, involved a physician named as insured on an MLMIC policy. The doctor's employer, similar to{**64 Misc 3d at 912} [*4]plaintiff, purchased the policy and paid all of the premiums and costs related to the policy. Like Scott, the doctor acknowledged that she did not bargain for the benefit of the demutualization proceeds. Under the facts, the Court held that "[a]warding [the doctor] the cash proceeds of MLMIC's demutualization would result in her unjust enrichment." (171 AD3d at 465 [citations omitted].)

Of note, Scott does not try to distinguish the facts in this case from the facts in Matter of Schaffer. The parties here serve in the same roles as the parties in Matter of Schaffer, and, in fact, MLMIC is the relevant insurance company in both actions. Like in Matter of Schaffer, the named employer here purchased and paid all of the premiums on the medical professional insurance policy covering the physician who now seeks the distribution payment based on the policy. In addition Scott, like the doctor in Matter of Schaffer, does not claim to have bargained for the benefit of the payment. Hence, the issues before the Court in Matter of Schaffer are identical to the issues before this court, namely whether the employee physician, whose MLMIC premiums were paid by the employer, is entitled to the pro rata distribution of the stock sale proceeds.

Acknowledging that the facts are identical in the two actions, Scott argues that the First Department's decision in Matter of Schaffer is not binding on this court. Scott further contends that, in any event, the First Department's determination based on the principles of unjust enrichment was in error because the issue was not properly argued to the Appellate Court.

Where an issue has not been addressed within an appellate department, the Supreme Court is bound by the doctrine of stare decisis to apply precedent established in another department, either until a contrary rule is established by the Appellate Division in its own department or by the Court of Appeals. (Phelps v Phelps, 128 AD3d 1545 [4th Dept 2015]; D'Alessandro v Carro, 123 AD3d 1 [4th Dept 2014]; see Mountain View Coach Lines v Storms, 102 AD2d 663, 664-665 [2d Dept 1984].) As such, in light of the identical facts and legal question presented here and in Matter of Schaffer, the decision in Matter of Schaffer is binding on this court. (See Mountain View Coach Lines v Storms.) Applying the holding from Matter of Schaffer to the facts presented here, the court determines that the payment is appropriately awarded to plaintiff.

In any event, the court finds that the conclusions drawn in the First Department's decision are persuasive, and that a{**64 Misc 3d at 913} similar holding in this action based on the principles of unjust enrichment is warranted. Simply put, awarding Scott the cash proceeds of MLMIC's demutualization would result in his unjust enrichment. (See Matter of Schaffer, Schonholz & Drossman, LLP v Title; see Paramount Film Distrib. Corp. v State of New York, 30 NY2d 415 [1972].)

The court has considered the additional contentions of the parties not specifically addressed herein. To the extent any relief requested by either party was not addressed by the court, it is hereby denied. Accordingly, it is hereby ordered that the motion of defendant Joseph Scott, D.O. (mot sequence No. 1), made pursuant to CPLR 3212, for an order granting summary judgment on the counterclaim for a declaratory judgment against plaintiff Maple Medical LLP is denied; and it is further ordered that the cross motion of plaintiff Maple Medical LLP (mot sequence No. 2), made pursuant to CPLR 3212, for an order granting summary judgment on the first cause of action in the complaint for a declaratory judgment as against defendant Joseph Scott, D.O., is granted; and it is further ordered that the second, third and fourth causes of action in the complaint are dismissed as moot; and it is further ordered, adjudged and declared that plaintiff Maple Medical LLP is entitled to the receipt from the escrow agent currently holding funds due it in the amount of $128,148 plus accrued interest, if any, as to said amount representing the pro rata amount assigned to the account of Joseph Scott, D.O., which said amount shall be paid to plaintiff Maple Medical LLP within 15 days of the service of this order, with notice of entry, upon the escrow agent; and it is further ordered that upon compliance with this order, namely payment of the amounts due plaintiff Maple Medical LLP by defendant Medical Liability Mutual Insurance Company, the action shall be dismissed with prejudice.