What a Defendant's Bankruptcy Does to Your New York Personal Injury Lawsuit
In a December 30 decision in Rollo v. Servico, N.Y., Inc., one of New York's appellate courts had occasion to address an interesting - and important - issue with regard to New York personal injury actions: whether a defendant's bankruptcy filing can mean the death of a personal injury claim.
In this case, the plaintiff sued for the injuries she sustained in a trip and fall accident that occurred on the defendant's property. Despite the fact that the defendant filed for chapter 11 bankruptcy protection, which technically extinguished her claim against the defendant, she claimed that her claim should still be allowed to proceed, because she was only seeking to recover monies provided for under the defendant's liability insurance policy - and not the defendant's private assets.
Although the trial court dismissed the plaintiff's case, the appellate court disagreed, and reinstated the lawsuit, stating as follows:
"It is well established that a bankruptcy discharge "does not bar a plaintiff in a personal injury action from obtaining a judgment against the bankrupt defendant[s] for the limited purpose of pursuing payment from defendant[s'] insurance carrier" (Lang v Hanover Ins. Co., 3 NY3d 350, 355; see Pomerantz v In-Stride, Inc., 39 AD3d 522, 523-524; Roman v Hudson Tel. Assoc., 11 AD3d 346)."
The appellate court further held that even if the defendant had been obligated, pursuant to the terms of its insurance policy, to satisfy a deductible before coverage would be triggered, the insurer would still be required to pay because Insurance Law §3420(a)(1) 'makes clear that bankruptcy does not relieve the insurance company of its obligation to pay damages for injuries or losses covered under an existing policy,' despite the fact that the insured's SIR [Self Insured Retention] might have been discharged in bankruptcy.