The New York Black Car Operators' Injury Compensation Fund Inc., Plaintiff, v. MITCHELL LAWRENCE KORDER ATIBA REYNOLDS (2025)

In this action, plaintiff, the New York Black Car Operators' Injury Compensation Fund Inc. (a workers' compensation insurance carrier), seeks to recover the amount of a lien on a settlement obtained by defendant Atiba Reynolds in a prior personal-injury action. Reynolds was represented in that action by defendant law firm, Eppinger, Reingold & Korber, and one of the law firm's partners, defendant Mitchell Lawrence Korder (together, the Eppinger defendants).

The Eppinger defendants had purchased an insurance policy that they believe covers the claims brought against them by plaintiff. The insurer initially agreed to defend the action and retained counsel (Lewis Brisbois Bisgaard & Smith LLP) to represent the Eppinger defendants. Several months later, the insurer notified the Eppinger defendants by letter that it was now disclaiming coverage and would be withdrawing its provision of a defense in 30 days.

Following service of the notice of disclaimer, Lewis Brisbois conferred with the Eppinger defendants and told them that it would agree to remain their counsel in this action only if the Eppinger defendants agreed to pay their legal fees directly. The Eppinger defendants refused, on the ground that they believed their insurer's disclaimer to be invalid and that Lewis Brisbois was required to continue representing them unless and until this court granted Lewis Brisbois leave to withdraw.

Lewis Brisbois then filed this motion for leave to withdraw.¹ The motion is denied.

The Appellate Division has repeatedly held that when a law firm retained by an insurer to represent a policyholder moves to withdraw on the ground that the insurer has since disclaimed coverage, and the policyholder contests withdrawal based on a view that the disclaimer is invalid, the law firm's withdrawal motion should be denied.² (See Laura Accessories, Inc. v A.P.A. Warehouses, Inc., 140 AD2d 182, 182 [1st Dept 1988] [reversing grant of leave to withdraw]; Dennis v Young, 106 AD2d 762, 763 [3d Dept 1984] [same]; Monaghan v Meade, 91 AD2d 1014, 1015 [2d Dept 1983] [same].) A withdrawal motion "under such circumstances is an improper attempt to test the disclaimer of coverage by the insurer," which instead must occur through a "declaratory judgment action in which the defendant would be able to adequately litigate the facts of [the insurance company's] disclaimer." (Holloman v Manginelli Realty Co., 81 AD3d 413 [1st Dept 2011] [affirming denial of leave to withdraw] [internal quotation marks omitted].) And this rule applies when, as here, the law firm relies on the argument that "withdrawal is permitted if the client refuses to pay." (Sojka v 43 Wooster LLC, 19 AD3d 266, 267 [1st Dept 2005] [reversing grant of leave to withdraw].)

Accordingly, it is

ORDERED that the motion of Lewis Brisbois Bisgaard & Smith LLP to withdraw as counsel for the Eppinger defendants is denied; and it is further

ORDERED that the parties shall appear before this court for a telephonic preliminary conference on August 1, 2025.

DATE: 7/10/2025

FOOTNOTES

1.   Plaintiff has filed an affirmation stating that it takes no position on the withdrawal motion. (See NYSCEF No. 14 at 1.)

2.   A limited exception to this principle may arise when the law firm has moved to withdraw for the same reason that the insurer is disclaiming coverage, such as the policyholder's consistent lack of cooperation with counsel in defending the action. (See Dillon v Otis Elevator Co., 22 AD3d 1, 3-5 [1st Dept 2005].) But the current motion does not come within that exception: Lewis Brisbois's withdrawal motion is based solely on the insurer's disclaimer, rather than both motion and disclaimer having a common origin.

Gerald Lebovits, J.