Drive N.J. Ins. Co. v RT Hospitality Group, LLC
2025 NY Slip Op 02188 [240 AD3d 105]
April 16, 2025
Love, J.
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
As corrected through Wednesday, September 24, 2025


[*1]
Drive New Jersey Insurance Company et al., Respondents,
v
RT Hospitality Group, LLC, Doing Business as Atlantis Gentlemen's Club, Appellant.

Second Department, April 16, 2025


PROCEDURAL SUMMARY

Appeal from an order of the Supreme Court, Queens County (Janice A. Taylor, J.), dated June 8, 2022, in a subrogation action, inter alia, to recover damages pursuant to General Obligations Law § 11-101. The order, insofar as appealed from, denied that branch of defendant's motion which was pursuant to CPLR 3211 (a) to dismiss so much of the cause of action pursuant to General Obligations Law § 11-101 as sought to recover payments made by plaintiff as to a nonparty and for property damage.

 

Drive N.J. Ins. Co. v RT Hospitality Group, LLC, 2022 NY Slip Op 34978(U), affirmed.


HEADNOTE


Intoxicating Liquors - Dram Shop Act - Action by Insurer as Subrogee

Plaintiff insurance company was permitted to maintain, as subrogee, an action alleging that defendant club violated the Dram Shop Act (General Obligations Law § 11-101 [1]) by continuing to serve alcohol to a visibly intoxicated patron who then drove a vehicle owned by plaintiff's insured, resulting in an accident that damaged the vehicle and injured its passengers. A plaintiff may recover damages for personal injuries if they establish that there was some reasonable or practical connection between an illegal sale of alcohol and the plaintiff's injuries. The purpose of subrogation is to allocate responsibility for the loss to the person who in equity and good conscience ought to pay it, in the interest of avoiding absolution of a wrongdoer from liability simply because the insured had the foresight to procure insurance coverage. It entitles an insurer to stand in the shoes of its insured to seek indemnification from third parties whose wrongdoing has caused a loss for which the insurer is bound to reimburse. Since the owner of the vehicle and the passengers had causes of action pursuant to the Dram Shop Act against defendant to recover damages arising out of the accident on the theory that defendant unlawfully served the driver when she was visibly intoxicated, then plaintiff was entitled to stand in the shoes of its insured and seek indemnification from defendant.


APPEARANCES OF COUNSEL

Kiernan Trebach LLP, New York City (Lori F. Graybow of counsel), for appellant.

Law Offices of Jan Meyer & Associates, P.C., New York City (Jonathan L. Leitman of counsel), for respondent.


{**240 AD3d at 106} OPINION OF THE COURT

Love, J.

In 1873, the Legislature enacted the first version of what is now commonly known as "the Dram Shop Act," a statute creating an exception to the common-law rule that "one who provided intoxicating liquor was not liable for injuries caused by the drinker" (D'Amico v Christie, 71 NY2d 76 [1987]; see L 1873, ch 646). Since it was enacted, the Dram Shop Act has been amended and relocated on several occasions and is presently codified in General Obligations Law § 11-101 (see L 1963, ch 576, as amended by L 1980, ch 281, § 20; Civil Rights Law § 16, repealed by General Obligations Law § 19-101; Rutledge v Rockwells of Bedford, 200 AD2d 36 [2d Dept 1994]). A question of apparent first impression before this Court on this appeal is whether a subrogee is permitted to maintain an action under the Dram Shop Act.

I. Relevant Facts and Procedural History

At all relevant times, the plaintiff, Drive New Jersey Insurance Company (hereinafter Drive Insurance), provided automobile insurance to Ironbound Fitness, LLC (hereinafter Ironbound),{**240 AD3d at 107} which owned a 2019 BMW i8 (hereinafter the vehicle). Drive Insurance alleged that on or about October 29, 2019, Hazem A. Aly, an employee of Ironbound, was present at a club owned by the defendant, RT Hospitality Group, LLC, doing business as Atlantis Gentleman's Club (hereinafter Atlantis), with Ashley M. Perez and Lorain Abreu-Mateo. Drive Insurance further alleged that although Aly, Perez, and Abreu-Mateo were visibly intoxicated, Atlantis, through its employees, continued to serve Aly, Perez, and Abreu-Mateo alcohol. Upon leaving Atlantis, Perez drove the vehicle, with Aly and Abreu-Mateo as passengers, and thereafter they were involved in a single-vehicle accident near the intersection of Grand Central Parkway and Meridian Road in Queens. Each occupant of the vehicle sustained injuries. As a result of the accident, Drive Insurance issued medical and related payments as to Perez in the amount of $27,755.40, Aly in the amount of $256,580.84, and Abreu-Mateo in the amount of $85,539.52, together with payments for damage to the vehicle in the amount of $131,719.72. Drive Insurance further alleged that its insured was forced [*2]to pay a deductible in the amount of $2,000. All together, Drive Insurance issued payments totaling $507,595.48.

In July 2021, Drive Insurance, as subrogee of Ironbound, commenced the instant action asserting a first cause of action pursuant to the Dram Shop Act and a second cause of action alleging common-law negligence. Under both causes of action, the plaintiff sought to recover the above amounts together with attorney's fees. In November 2021, Atlantis moved pursuant to CPLR 3211 (a) (7) to dismiss the complaint for failure to state a cause of action. In an order dated June 8, 2022 (2022 NY Slip Op 34978[U] [Sup Ct, Queens County 2022]), the Supreme Court granted, without opposition, those branches of Atlantis's motion which were to dismiss the second cause of action, so much of the first cause of action as sought reimbursement for payments made as to Perez, and the claim for attorney's fees. In addition, over the plaintiff's opposition, the court granted that branch of Atlantis's motion which was to dismiss so much of the first cause{**240 AD3d at 108} of action as sought reimbursement for payments made as to Aly on the ground that Aly had filed an action against Atlantis, and, therefore, Drive Insurance could only recover those payments by lien on that action (see Insurance Law § 5104 [b]). The court denied the remaining branch of the motion, which was to dismiss so much of the first cause of action as sought to recover payments as to Abreu-Mateo and relating to vehicle damage. The court concluded that Atlantis's contention that an automobile insurer may not bring a subrogation action under the Dram Shop Act was without merit.

II. Discussion

General Obligations Law § 11-101 (1) provides, inter alia, that

"[a]ny person who shall be injured in person, property, means of support, or otherwise by any intoxicated person, or by reason of the intoxication of any person, . . . shall have a right of action against any person who shall, by unlawful selling to or unlawfully assisting in procuring liquor for such intoxicated person, have caused or contributed to such intoxication."

A plaintiff generally may recover damages for personal injuries if he or she establishes that there was some reasonable or practical connection between an illegal sale of alcohol and the plaintiff's injuries (see Flynn v Bulldogs Run Corp., 171 AD3d 1136, 1137 [2d Dept 2019]; Giordano v Zepp, 163 AD3d 781, 782 [2d Dept 2018]; Covert v Wisla Corp., 130 AD3d 966, 967 [2d Dept 2015]; Tavarez v Sidetracks, LLC, 128 AD3d 806, 807 [2d Dept 2015]). However, "[t]he Dram Shop Act does not create a cause of action in favor of one injured as a result of his or her own intoxicated condition, and the mere youth of the injured person does not constitute an exception to the voluntary intoxication rule" (Kudisch v Grumpy Jack's, Inc., 112 AD3d 788, 789 [2d Dept 2013]; see Sheehy v Big Flats Community Day, 73 NY2d 629, 635 [1989]; O'Gara v Alacci, 67 AD3d 54, 57 [2d Dept 2009]; Rudden v Bernstein, 61 AD3d 736, 738 [2d Dept 2009]). In addition, a plaintiff who purchased alcohol for the tortfeasor cannot maintain a Dram Shop Act cause of action (see Esposito v Rail Bar & Grill Corp., 169 AD3d 870, 871 [2d Dept 2019]; Pineda v Javar Corp., 96 AD3d 731 [2d Dept 2012]).

"The purpose of subrogation is to 'allocate[ ] responsibility for the loss to the person who in equity and good conscience ought to pay it, in the interest of avoiding absolution of a wrongdoer from liability simply because the insured had the foresight to procure insurance coverage' " (Millennium Holdings LLC v Glidden Co., 27 NY3d 406, 414 [2016], quoting North Star Reins. Corp. v Continental Ins. Co., 82 NY2d 281, {**240 AD3d at 109} 294 [1993]). "Equitable subrogation 'entitles an insurer to stand in the shoes of its insured to seek indemnification from third parties whose wrongdoing has caused a loss for which the insurer is bound to reimburse' " (id. [internal quotation marks omitted], quoting ELRAC, Inc. v Ward, 96 NY2d 58, 75 [2001]).

Atlantis contends that, because the Dram Shop Act does not expressly provide for subrogation, as compared to Insurance Law §§ 3440, 5213, and 5218, subrogation is not permitted under the Dram Shop Act. Atlantis further contends that, for public policy reasons, allowing for subrogation under the Dram Shop Act would shift the burden of economic loss onto dram shop keepers. Contrary to Atlantis's contention, there is no support in the statute which suggests that subrogation claims may not be made under the Dram Shop Act. Moreover, Atlantis's contention that allowing subrogation here would improperly shift liability onto dram shop keepers is without merit. All subrogation actions involve an insurer seeking to recover sums paid out, pursuant to a policy for which it received premiums, from the wrongdoer who caused the harm, rather than allowing that wrongdoer to escape all liability simply because the insured paid for insurance (see Millennium Holdings LLC v Glidden Co., 27 NY3d at 414). Accordingly, public policy and the purpose of equitable subrogation favor the subrogee over a dram shop keeper.[*3]

"On a motion to dismiss the complaint pursuant to CPLR 3211 (a) (7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Antoine v Kalandrishvili, 150 AD3d 941, 941 [2d Dept 2017]; see Eccles v Shamrock Capital Advisors, LLC, 42 NY3d 321, 342 [2024]).

"Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss" (Eccles v Shamrock Capital Advisors, LLC, 42 NY3d at 343 [internal quotation marks omitted]; see SV Vernon 43, LLC v Malik, 138 AD3d 730, 731 [2d Dept 2016]).

Here, Drive Insurance alleged that Aly, Perez, and Abreu-Mateo were injured and the vehicle was damaged by Perez, who was visibly intoxicated at the time that Atlantis sold her alcohol. Accordingly, the Supreme Court properly determined that Drive Insurance was entitled to assert, as subrogee, a{**240 AD3d at 110} cause of action pursuant to the Dram Shop Act and that Drive Insurance stated a claim against Atlantis for violation of the Dram Shop Act. If the owner of the vehicle and the passengers have causes of action pursuant to the Dram Shop Act against Atlantis to recover damages arising out of the accident on the theory that Atlantis unlawfully served Perez when she was visibly intoxicated, causing the accident and their injuries, which causes of action do not fall into one of the exclusions discussed, supra, then, since Drive Insurance alleges that it made payments as to the damaged vehicle and the injured passengers pursuant to the policy, Drive Insurance is entitled to stand in the shoes of its insured and seek indemnification from Atlantis based on Atlantis's alleged violation of the Dram Shop Act.

Atlantis's remaining contentions are without merit.

Accordingly, the order is affirmed insofar as appealed from.

Barros, J.P., Ford and Hom, JJ., concur.

Ordered that the order is affirmed insofar as appealed from, with costs.

Appeal from an order of the Supreme Court, Queens County, dated June 8, 2022.

Motion by the appellant to strike stated portions of the respondents' brief on the ground that they raise certain arguments for the first time on appeal. By decision and order on motion of this Court dated October 23, 2023, the motion was held in abeyance and referred to the panel of Justices hearing the appeal for determination upon the argument or submission thereof.

Upon the papers filed in support of the motion and the papers filed in opposition thereto, and upon the argument of the appeal, it is

Ordered that the motion is denied.