Roman v. Hudson Telegraph Associates

347 Order, Supreme Court, New York County (Leland DeGrasse, J.), entered June 7, 2004, which denied the motion of GTE Internetworking (now known as Genuity) for dismissal of the third-party complaint against it based on Genuity’s discharge in bankruptcy, unanimously affirmed, with costs. Subsequent to Genuity’s chapter 11 discharge in bankruptcy, the parties entered into a stipulation providing, inter alia, that third-party plaintiff be relieved of the automatic stay in order to proceed with the instant third-party action only for the purposes of attempting to liquidate the claims in state court and to collect on any judgment or settlement only as against Genuity’s insurer. Even without benefit of this so-ordered stipulation, a claim asserted for the sole purpose of establishing the liability of a party’s insurer is not barred by that party’s discharge in bankruptcy. As we held in Lumbermens Mut. Cas. Co. v Morse Shoe Co. (218 AD2d 624 [1995]), discharge of a debt in bankruptcy does not affect the liability or property of any other entity regarding such debt (11 USC § 524 [e]), and state courts generally retain the authority to determine the effect of that discharge. Third-party plaintiff properly seeks to proceed against Genuity only for the purpose of recovering against Genuity’s insurer, which suit is not barred by the discharge injunction (id.). Moreover, Insurance Law § 3420 (a) (1) requires liability insurance policies in New York to provide that insolvency or bankruptcy of the insured shall not release the insurer from the obligation to pay for covered injury or loss sustained while the policy is in effect. Therefore, it was not an improvident exercise of discretion for the motion court to order an immediate trial of the issues of fact raised by the motion— specifically, the issue of the insurer’s liability for the third-party claims against Genuity (CPLR 3212 [c]). Concur—Buckley, P.J., Mazzarelli, Andrias, Marlow and Catterson, JJ.