New York State Court of Claims

New York State Court of Claims

WESTCHESTER v. THE STATE OF NEW YORK, #2001-013-024, Claim No. 95194, Motion No. M-63726


Reciprocal defense provision in a contract between the State and the County of Westchester does not require that each party provide its own defense in claims arising from the contract simply because there may in some instances be a conflict of interest if one party is obligated to defend or provide a defense for the other. That portion of the County's private attorneys' bill which represents efforts directed toward persuading the State to provide a defense will not be deducted from the award.

Case Information

Claimant short name:
Footnote (claimant name) :

Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
Motion number(s):
Cross-motion number(s):

Claimant's attorney:
Defendant's attorney:
Attorney General of the State of New York
BY: J. Gardner Ryan, Esq.Assistant Attorney General
Third-party defendant's attorney:

Signature date:
November , 2001

Official citation:

Appellate results:

See also (multicaptioned case)


On August 15, 2001, the following papers were read on Defendant's motion to set aside a prior decision of this Court pursuant to CPLR 4404:
1. Notice of Motion and Supporting Affirmation of J. Gardner Ryan, Esq., Assistant Attorney General, with Annexed Exhibits ("Ryan Affirmation")

2. Affirmation in Opposition of Charles M. Feuer, Esq., with Annexed Exhibits ("Feuer Affirmation")

3. Filed Papers: Claim; Answer; Decision and Order filed May 6, 1999 ( Motion No. M-58341, Cross-Motion No. CM-58626); Decision filed June 11, 2001

This is a claim to recover the amounts paid by Westchester County for legal representation in connection with its defense in a Federal civil rights action. That action arose from the November 1985 death of James Smiley, an inmate of Sing Sing Correctional Facility (Sing Sing). The inmate's estate sued several State defendants and also named as defendants Westchester County Medical Center (WCMC) and two of its employees, Dr. Kenneth Lerrick and Bernard Weinstein. It was alleged that Dr. Lerrick committed medical malpractice in his treatment of Smiley; that Weinstein, an administrator of WCMC and/or a supervisor of the County medical facilities, negligently failed to promulgate rules and regulations and to adequately supervise the care given to the decedent; and that WCMC was vicariously liable for the acts of its employees.

At the time that James Smiley was being treated at WCMC, an agreement between the State of New York and Westchester County provided that inmates of Sing Sing were to receive medical treatment at WCMC. In connection with such treatment, the agreement provided, in the first paragraph of Article 1, Section 5, the following: (1) that the State would indemnify the County and its officers, employees and agents in connection with claims "arising directly or indirectly out of the State's negligent or tortious acts or omissions in the performance of this Agreement;" (2) that the State would "provide defense for and defend any claims... arising out of this Agreement at its sole expense" and would also bear all other costs and expenses related to such claims; and (3) that the foregoing provisions were not to be construed as requiring the State to indemnify the County or its employees "from its or their sole negligence." In a parallel provision, contained in the second paragraph of Section 5, the County agreed to identical terms with respect to the State.[1]

When the County was sued by Smiley's estate in 1987, it did not initially request that the State provide it with a defense. The County was represented by the County Attorney until October 1990, when the law firm of Wilson, Elser, Moskowitz, Edelman and Dicker (Wilson-Elser) was hired to continue the defense. At the same time that it was engaged in defending the County in Federal court, Wilson-Elser also engaged in continual discussions with representatives of the Attorney General on the issue of whether the State was responsible for providing a defense in the lawsuit. These discussions related to whether the State was responsible under either the Agreement or under Corrections Law §24-a. The Federal claims against Dr. Lerrick and Mr. Weinstein were dismissed on September 30, 1994, and several years later, settlement was reached in the Federal claims against the State. Discussions and negotiations regarding the issue of whether the State had been obliged to provide a defense to the County continued until a May 23, 1996 letter from Donald P. Berens, Deputy Attorney General, finally denied the request. The instant claim ensued.

Prior Decisions

In 1999, the parties cross-moved for summary judgment. I denied both motions, finding that there was an ambiguity in the contract with respect to whether the State was obligated to provide a defense through its Office of the Attorney General or to pay for private attorneys selected by County defendants, or both. I determined, however, that the State's obligation to "provide a defense and defend" was an obligation owed to "the County, its officers, employees and agents" referenced in the first sentence. In so ruling, I rejected the State's contention that the contractual provisions relating to defense obliged each party to defend claims filed against it "at its sole expense" (i.e., that the State was solely responsible for defending any claims filed against the State and the County was solely responsible for defending any claims brought against the County). I reiterated this holding in the subsequent trial decision:

I therefore conclude that the defense clause obliges the State to "provide defense for and defend [the County, its officers, employees or agents from and against] any claims or causes of action of any kind or character directly or indirectly arising out of this Agreement."

(Opn at 12.) Further, I held that the claims brought by the Smiley estate against the County defendants were ones "arising out of" the Agreement, since they related to medical care provided by the County to an inmate of Sing Sing; that the County defendants were entitled to representation by counsel of their own choosing, to be paid for by the State; that the County had provided the State with timely notice of the claims against WCMC and its employees; and that the action against the State was timely, because it had been commenced six months after the May 1998 Federal court order dismissing the Smiley claims. I awarded the sum of $300,118.16 to Claimant, Westchester County.

Current Motion: Interpretation of Section 5 of the Agreement

In concluding that the County defendants were entitled to representation by counsel of their choice, to be paid for by the State, I stated that this was so because there was a "clear conflict of interest" between the County defendants and the State, whose own employees were also defendants in the Federal action. It would have been inappropriate for the State to directly defend the County because the State's own interest was best served by establishing that Smiley's death was caused by the "sole negligence" of County officials.

Defendant has taken the existence of this conflict of interest as further support for its position that the reciprocal defense provisions of Section 5 should be read to impose on each party the responsibility for its own defense in all claims arising under the Agreement. According to defense counsel, this conflict would always be present because "[i]n every case that could arise under the Agreement the financial interest of the defending party to avoid contractual liability for indemnity is necessarily at odds with the professional responsibility of undivided loyalty to the interests of the party defended" (Ryan Affirmation, ¶10). In other words, where the County was sued, the State would have a financial interest in proving that the negligence of County officials was the sole cause of any injury while, at the same time, the State would have an ethical, professional obligation to defend those same officials. Defendant argues, therefore, that the contract should not be interpreted in such a way that it is impossible for the parties to perform their obligations without violating ethical requirements. Claimant simply urges that the Court adhere to its original interpretation of the clause.

If I were to accept Defendant's argument that a conflict of interest would inevitably arise whenever the State attempted to fulfill its duty to "provide a defense for and defend" the County (or, conversely, whenever the County attempted to fulfill its contractual duty to provide a defense for and defend the State), there would be reason to question the earlier holding. The language of the contract clearly contemplates that, at least in some instances, the party owing the duty will be able to fulfill it directly (i.e., by "defending," as opposed to "providing a defense" by paying outside counsel). Neither party could ever directly defend the other if the conflict of interest that is present in the instant case was an inescapable feature of every claim relating to WCMC's treatment of Sing Sing inmates. This view is not accurate, however. A conflict will arise only when the claim is brought against both State and County officials. When the only defendants are County officials and employees, or County employees and defendants other than the State, there is no inherent conflict of interest. The fact that such a conflict will arise in some instances does not invalidate a contractual or statutory obligation to provide a defense. Cases involving insurers and the State itself, particularly those relating to the State's defense obligations under Public Officers Law §17, demonstrate that the mechanism of paying for the services of outside counsel is an accepted and frequently used way to avoid ethical impropriety when circumstances create a conflict of interest between the party owing a defense and the party to whom the defense is owed.

Current Motion: Calculation of Award

Defendant also objects to the amount of damages awarded to Claimant. The $300,118.16 award was arrived at by deducting from the total bill for legal services that was presented by Wilson-Elser the sum of $36,000.00, which represented "the fees expended by the County in pursuit of its rights under the Agreement" (Opn at 17-18), that is, the fees associated with prosecuting this Court of Claims action. Defendant argues that additional amounts should be deducted because some of the law firm's work prior to institution of this action was "attributable to the effort, initiated in 1991, to obtain compliance and/or enforcement of the defendant's purported contractual obligation to provide a defense" (Ryan Affirmation, ¶3).

There is some logic to this argument. It is well-settled that when an insurer or other party breaches its duty to provide a defense, the party to whom the duty was owed may recover amounts it expended in "counsel fees, professional services and disbursements" in connection with providing its own defense in the action. It is also well-settled that, other than taxable costs, the wronged party may not recover sums it expends in an affirmative action brought either to enforce the duty to defend or to secure compensation for breach of that duty (Mighty Midgets v Centennial Ins. Co., 47 N Y 2d 12, 21; Doyle v Allstate Ins. Co., 1 NY2d 439.[2] By extension, one could argue -- as the State does here -- that those hours spent by a defendant's counsel carrying out discussions and negotiations in an attempt to secure an agreement to defend prior to commencing a lawsuit to enforce the right to a defense, are of the same nature and character as those hours spent after commencement of the lawsuit. Defense counsel has cited to no authority for this proposition, however, and research has not disclosed any decision in which such an analogy was made and a subsequent reduction in the award effected.

The lack of such authority may well reflect public policy or a desire to avoid inquiry into the minute-by-minute nature of every action taken by attorneys who are engaged in their client's defense. It is safe to say that whenever an insurer or other party that arguably owes a duty to defend does not immediately agree to provide or pay for such defense, the attorneys hired by the party to whom the duty is owed will expend some time in making demands and attempting to secure their client's rights without resorting to a lawsuit. That is simply part of representing their client's best interests. The time consumed by this endeavor will vary greatly -- from a simple demand letter or a few phone calls to an extended series of meetings -- and that time will inevitably be billed in connection with the underlying action against their client. Consequently, in every action arising from a breach of the duty to defend, some portion of the total bill for "counsel fees, professional services and disbursements" will represent prelitigation efforts to secure the right to a defense. To exclude expenses associated with such efforts from the recovery allowed by law, there would have to be an allocation in every instance. The net effect would inevitably be to discourage efforts to resolve the matter by agreement. Although I can understand the reasoning of Defendant's argument, I have found no authority to support reducing the award by an amount representing the attorneys' prelitigation efforts to persuade the State to provide or pay for the defense that it owed to the County, and I am not inclined to make such a novel, far-reaching ruling in the absence of such authority.

Defendant's motion is denied.

November , 2001
Rochester, New York

Judge of the Court of Claims

[1] The entire text of these provisions is set out in the earlier decision.
  1. [2]The party owing the duty to defend is liable, however, for attorney's fees incurred if the other party is placed in a defensive posture by a suit brought to establish that no duty is owed, on the theory that the duty to defend encompasses the defense of any actions arising out of a particular occurrence (Chase Manhattan Bank v Each Individual Underwriter Bound to Lloyd's Policy No. 790/004A89005, 258 AD2d 1, 4; Mighty Midgets v Centennial Ins. Co., supra at 21).