Damages Offset Under New York General Obligations Law §15-108(a) Not Available To Defaulting Defendant
October, 2006
A joint tortfeasor seeking an offset of damages, pursuant to New York General Obligations Law (“GOL”) §15-108(a), must plead the offset as an affirmative defense or lose the offset. This section of GOL entitles a non-settling tortfeasor to a reduction in damages equal to the greater of: (1) the settling defendant(s)’ equitable share of the damages awarded; (2) the stipulated amount of any settlements; or (3) the amount actually paid by the settling defendant(s). The court has discretion to allow amendment of an answer to include the affirmative defense, however, a party in default cannot obtain such a reduction, because they have not complied with pleading requirements.
In Dixon v. Globe Realty of New York, Inc., N.Y.L.J. July 28, 2006 at 22 (Sup. Ct., Kings County), one of the defendants failed to respond to the Complaint; Plaintiff moved for default judgment against that defendant and the motion was granted. Id. at * 22. Plaintiff settled with the remaining defendant, then proceeded to an Inquest Hearing against the defaulting defendant and was awarded damages. Id. When Plaintiff entered judgment for the full award, the defaulting defendant filed a motion seeking an offset of those damages in the amount of the earlier settlement pursuant to GOL §15-108(a). Id. The court denied the defendant’s motion, finding the offset unavailable due to that defendant’s default. Id. at * 23.
The decision, in part, relied upon a 1998 holding by New York’s Highest Court, the New York Court of Appeals. In Whalen v. Kawasaki Motors Corp., 92 N.Y.2d 288, 680 N.Y.S.2d 435, 703 N.E.2d 246 (1998), the Court of Appeals allowed a non-settling defendant to amend its answer to include a §15-108(a) affirmative defense after the jury had already returned its verdict. Id. at 293, 680 N.Y.S.2d at 438, 703 N.E.2d at 249. The amendment was permitted, because the plaintiff was not prejudiced in any way, having settled with the other defendant on the eve of trial and plaintiff’s position would not have changed in any way even if the affirmative defense had been imposed in the non-settling defendant’s answer. Id.
The Dixon court reasoned that allowing such an offset would likely take Plaintiff by surprise, because Plaintiff probably settled with the other defendant under the reasonable belief that no offset would be allowed to a defaulting party. Id. at * 23. Accordingly, the Court determined that Plaintiff would be prejudiced if the offset was permitted and that any such prejudice could have been avoided if the defaulting defendant had imposed the §15-108(a) offset as an affirmative defense in a pleading.
Learning Point: Defendants and their insurance companies must thoroughly consider the risks and benefits of not answering a Complaint based in tort against multiple defendants before allowing themselves to be found in default. A defendant found to be in default is precluded from contesting liability, although they may have the opportunity to contest damages. However, a statutorily available offset to damages in the form of N.Y. GOL §15-108(a) will no longer be available to the defaulting party. In an action with multiple tortfeasors, one or more will often settle before or even at trial. Those settlements can significantly reduce the exposure of a defendant at trial or completely extinguish a plaintiff’s damage claims, provided that a defendant has answered and secured for itself the opportunity to impose an affirmative defense of offset based on N.Y. GOL §15-108(a).
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