JAMES CORLE AND COLIN CORLE, INDIVIDUALLY ANDAS ASSIGNEES OF JEOFFREY LEE BAUTER TEETER ANDJEFFREY S. TEETER, PLAINTIFFS-RESPONDENTS,V ALLSTATE INSURANCE COMPANY, DEFENDANT-APPELLANT.KENNEY SHELTON LIPTAK NOWAK LLP, BUFFALO (JESSICA L. FOSCOLO OFCOUNSEL), FOR DEFENDANT-APPELLANT.WELCH, DONLON & CZARPLES PLLC, CORNING (MICHAEL A. DONLON OF COUNSEL),FOR PLAINTIFFS-RESPONDENTS.Appeal from an order of the Supreme Court, Steuben County (JosephW. Latham, A.J.), entered March 30, 2017. The order denied the motionof defendant for summary judgment.It is hereby ORDERED that the order so appealed from isunanimously affirmed without costs.Memorandum: This action arises out of an incident in whichplaintiff Colin Corle (Colin) was accidently shot by Jeoffrey LeeBauter Teeter, who was insured under a policy issued by defendant.Plaintiff James Corle (James), individually and on behalf of his then-infant son, Colin, commenced a personal injury action against Teeterand his father, Jeffrey S. Teeter. Defendant disclaimed coverage,asserting that the accidental shooting was not a covered loss underthe policy. James ultimately obtained a judgment in the personalinjury action against the Teeters in excess of $350,000.James then brought a direct action against defendant,individually and on behalf of his then-infant son, as an injuredperson/judgment creditor under Insurance Law § 3420 (a) (2) and (b)(1). In that action, Supreme Court granted the motion of James forsummary judgment, holding that the accidental shooting was a coveredloss under the insurance policy and awarding him the $50,000 policylimits of the Teeters’ liability policy.Thereafter, the Teeters assigned all of their rights and claimsagainst defendant to James and Colin who, individually and as theTeeters’ assignees, commenced this action alleging that defendantdisclaimed coverage in bad faith. Defendant moved to dismiss theaction pursuant to CPLR 3211 (a) (5) and (7). The court converteddefendant’s motion to dismiss into a motion for summary judgment,without first providing notice to the parties, and denied the motion.Initially, we agree with defendant that the court erred inconverting the motion to dismiss to a CPLR 3212 motion for summaryjudgment. Although the court was authorized to treat the motion asone for summary judgment upon “adequate notice to the parties” (CPLR3211 [c]), no such notice was given. Further, recognized exceptionsto the notice requirement are inapplicable here inasmuch as neitherparty made a specific request for summary judgment, and the recorddoes not establish that they deliberately charted a summary judgmentcourse (see Mihlovan v Grozavu, 72 NY2d 506, 508 [1988];Carcone vD’Angelo Ins. Agency, 302 AD2d 963, 963-964 [4th Dept 2003]).Nevertheless, we conclude that defendant was not entitled todismissal of the complaint under CPLR 3211 (a) (5) based on resjudicata. Contrary to defendant’s contention, we conclude that thefailure of James to litigate the bad faith claim in the earlierInsurance Law § 3420 (a) (2) action does not bar litigation of thatclaim in the instant action. “Under the doctrine of res judicata, aparty may not litigate a claim where a judgment on the merits existsfrom a prior action between the same parties involving the samesubject matter. The rule applies not only to claims actuallylitigated but also to claims that could have been raised in the priorlitigation . . . Additionally, under New York’s transactional analysisapproach to res judicata, ‘once a claim is brought to a finalconclusion, all other claims arising out of the same transaction orseries of transactions are barred, even if based upon differenttheories or if seeking a different remedy’ ” (Matter of Hunter, 4 NY3d260, 269 [2005];see O’Brien v City of Syracuse, 54 NY2d 353, 357[1981]).Insurance Law § 3420 (b) (1) provides that, “[s]ubject to thelimitations and conditions of paragraph two of subsection (a) of thissection, . . . any person who . . . has obtained a judgment againstthe insured or the insured’s personal representative[] for damages forinjury sustained . . . during the life of the policy or contract” maymaintain an action against the insurer “to recover the amount of ajudgment against the insured or his personal representative.” Such anaction may be “maintained against the insurer under the terms of thepolicy or contract for the amount of such judgment not exceeding theamount of the applicable limit of coverage under such policy orcontract” (§ 3420 [a] [2]).We conclude that, under Insurance Law § 3420 (a) (2) and (b) (1),an injured party’s standing to bring an action against an insurer islimited to recovering only the policy limits of the insured’sinsurance policy. Contrary to defendant’s contention, we concludethat, if an injured party/judgment creditor seeks to recover from theinsurer an amount above the insured’s policy limits on a theory ofliability beyond that created by Insurance Law § 3420 (a) (2), thestatute does not confer standing to do so. However, if the insuredassigns his or her rights under the insurance contract to the injuredparty/judgment creditor, then the injured party/judgment creditor maysimultaneously bring a direct action against the insurer pursuant toInsurance Law § 3420 (a) (2) along with any other appropriate claim,including a bad faith claim, seeking a judgment in a total amountbeyond the insured’s policy limits.Here, when James commenced the prior action pursuant to InsuranceLaw § 3420 (a) (2) individually and on behalf of Colin, the Teetershad not yet assigned their rights under the insurance contract toJames and Colin. As a result, James did not have standing to bring abad faith claim against defendant (cf.Bennion v Allstate Ins. Co.,284 AD2d 924, 924-926 [4th Dept 2001]). Thus, because James lackedstanding to bring a bad faith claim against defendant at the time hebrought the Insurance Law § 3420 (a) (2) action, we conclude that thedoctrine of res judicata does not bar this action (see generallyHunter, 4 NY3d at 269;Summer v Marine Midland Bank, 227 AD2d 932, 934[4th Dept 1996]), and defendant’s motion insofar as it sought todismiss the complaint pursuant to CPLR 3211 (a) (5) was properlydenied.We recognize that the First Department held otherwise on similarfacts inCirone v TowerIns. Co. of N.Y.(76 AD3d 883 [1st Dept 2010],lv denied16 NY3d 708 [2011]). To the extent that the FirstDepartment inCironeconcluded that an injured person/judgmentcreditor who commenced an action against the insurer pursuant toInsurance Law § 3420 (a) (2) had standing to assert a bad faithsettlement practices claim in that action in the absence of anassignment from the insured, we disagree with that conclusion anddecline to followCirone.We reject defendant’s further contention that the court erred indenying its motion insofar as it sought to dismiss the complaint underCPLR 3211 (a) (7), for failure to state a cause of action. Viewingthe facts as alleged by plaintiffs in the light most favorable to themand affording plaintiffs all favorable inferences (see generallyWhitebox Concentrated Convertible Arbitrage Partners, L.P. v SuperiorWell Servs., Inc., 20 NY3d 59, 63 [2012]), we conclude that plaintiffssufficiently stated a cause of action for bad faith against defendant.Entered: June 8, 2018 Mark W. BennettClerk of the Court
