Erie County Supreme Court Issues Controversial Decision In Parties’ Dispute Over MLMIC Funds

April 5, 2019


On March 22, 2019, the Supreme Court of Erie County issued a trial-court level decision in the case, Maple-Gate Anesthesiologists, P.C. v. Nasrin, Index No. 818104/2018, concerning entitlement to MLMIC funds distributed in connection with MLMIC’s purchase last fall by National Indemnity Company, a Berkshire Hathaway subsidiary. This decision is the first decision published addressing the merits of the parties’ claims in that case.

The plaintiff is an anesthesiology practice (“Practice”) which brought claims for unjust enrichment and conversion against its former Certified Registered Nurse Anesthetists, who received funds from MLMIC in October 2018. The Practice asserted in this lawsuit that it was entitled to the MLMIC funds because it paid for the MLMIC policies and had been designated the policy administrator for the defendants, and that it would be unjust for the defendants to keep such monies. The defendants moved to dismiss, contending that, as the policyholders, they possessed an ownership interest in the MLMIC funds.

In finding for the policyholders in this case, the court held that the Department of Financial Services’ (“DFS”) decision and New York State Insurance Law indicated that the policyholders would be entitled to the cash consideration, and that there were insufficient grounds to find that an ownership interest in the policy had been transferred to the Practice. The court was not convinced that the Practice’s policy administrator designation, or its payments made on behalf of the defendants, was sufficient evidence to override the defendant’s claims of ownership. The Practice’s purported failure to demonstrate any alleged “ownership” was held to be fatal to both its conversion and unjust enrichment claims.

Importantly, in ruling as it did, the court mistakenly grafted the element of ownership from the conversion claim onto the unjust enrichment claim. Typically, an unjust enrichment claim under New York law does not require ownership over the disputed item, and is thus more flexible in its application, which is based more upon equitable notions of fairness. The court’s erroneous finding remains subject to appellate challenge by the Practice, and we anticipate it will be a source of contention among other parties as they press forward with their own lawsuits concerning distribution of MLMIC funds.

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If you have any questions concerning the impact that this case may have on your practice, please feel free to contact a member of our Litigation and Arbitration Group or the Garfunkel Wild attorney with whom you regularly work.