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New York Appellate Court Emphasizes The Importance Of Timely Settlement Payments

October 6, 2022

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In New York, when an action to recover damages is settled, the settling defendant has twenty-one (21) days after tender of the required documents to pay all sums to the settling plaintiff. CPLR 5003-a. If the settling defendant fails to do so, then the plaintiff is authorized to enter a judgement “for the amount set forth in the release, together with costs and lawful disbursements, and interests,” without further notice to the defendant. CPLR 5003-e.

The Appellate Division, Second Department addressed these rules in the recent case of <em><a href="">Levine v. American Multi-Cinema, Inc.</a> </em>In that case, plaintiff tripped and fell on property owned by the defendant and the case was settled for $25,000. Two weeks after settling, counsel for defendant informed the Supreme Court that the parties had settled, and a stipulation of discontinuance would soon be filed. Prior to doing so, defense counsel sent plaintiff’s attorney a draft release.

The plaintiff’s attorney subsequently returned an executed copy of the release and, citing CPLR 5003-a, requested that defendant send the settlement check within twenty-one (21) days. Twenty-six (26) days later, defense counsel informed plaintiff’s attorney that they would only disburse the settlement proceeds after a Medicare lien had been paid, and a lien payoff letter issued. The insurer then paid the lien in the amount of $1,716.18.

Plaintiff moved for leave to enter a judgment with interest, pursuant to CPLR 5003-a. As this motion was pending, a Clerk’s judgment was entered against the defendant for $25,000, plus costs, disbursements, and interest. Defendant subsequently paid the settlement check, minus the lien payment, which was rejected by plaintiff’s counsel. Defendant then cross-moved to vacate the clerk’s judgment and the Supreme Court granted the motion.

The Second Department reversed, holding that plaintiff had fulfilled the obligations set forth in CPLR 5003-a when she tendered a duly executed general release and stipulation of discontinuance to defendant’s counsel. Contrary to defendant’s argument, nothing in their general release obligated the plaintiff to provide lien information or a payoff letter as a condition precedent to payment, so the Supreme Court’s decision was incorrect.

The <em>Levine</em> case highlights the importance of complying with CPLR 5003 when paying personal injury settlements in New York. The failure to do so can subject defendants and their insurers with additional exposure in the form of costs and interest. The case also highlights the importance of addressing Medicare issues before settlement and the need to include appropriate language in releases if lien or payoff information is required.

Thank you to Rebecca Pasternak for her contribution to this post. Please contact <a href="">Andrew Gibbs</a> with any questions.


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