In a March 7, 2011 decision by Justice Kitzes, the court granted defendant CNA Insurance Co.’s motion for summary judgment on its counterclaim seeking the return of $60,000 advanced to the plaintiff insured and dismissed the complaint. The plaintiff brought a breach of contract action after CNA rejected the plaintiff’s insurance claim for business interruption loss arising out of a mechanical breakdown of its machinery. CNA had advanced the plaintiff $60,000 but had not made any other payments. In granting the defendant’s motion, the court found the that the plaintiff did sustain the business interruption due to the mechanical breakdown, received a $60,000 advance from CNA and, without providing CNA any notice, pursued the matter directly against the machine’s manufacturer which resulted in the plaintiff executing a release and a confidential settlement agreement whereby the plaintiff received a one-time payment from the manufacturer exceeding the amount of the business interruption loss. Because the release was incorporated into the settlement agreement, the one-time payment the plaintiff received constituted payment in full for all claims arising out of the mechanical failure, including business interruption loss. The court held that because the release did not reserve any rights of CNA, it impaired CNA’s right of subrogation for the $60,000 against the manufacturer, and CNA was relieved of any further liability under the policy. The court held that CNA’s inability to seek subrogation did not impair its right to seek a return of the $60,000 payment to the plaintiff as the plaintiff was not entitled to receive double payment for the same loss.

Alpha Packaging, Indus. Inc. v CNA, Ins., Sup Ct, Queens County, March 7, 2001. Kitzes, J, ndex No. 9810/2009