A New York court told the State Insurance Fund to pay $75,000, confirming state insurers can’t dodge indemnity payouts just by claiming immunity.
The state’s Appellate Division, Second Department, ruled on June 18, 2025, that the New York State Insurance Fund (NYSIF) can be subject to enforcement proceedings to satisfy indemnity obligations - even if it can’t be directly sued for damages. The case helps clarify how and when state-affiliated insurers can be drawn into recovery efforts, especially in large injury disputes.
It started when carpenter Pedro Morocho was injured after falling from an unsecured extension ladder at a job site. He sued Doran Construction Corp., and a jury awarded him more than $19 million. Doran then brought a third-party claim against Bipex Construction, its subcontractor, which was insured by NYSIF. The court held that Bipex was responsible for indemnifying Doran.
After Doran and its insurer paid $1,190,849.32 toward the judgment - and later another $75,000 - Doran asked NYSIF to reimburse the latter amount. The Fund had already reimbursed the first payment, but refused to cover the $75,000.
Doran responded by filing a motion under CPLR Article 52, naming NYSIF as a garnishee - a third party holding funds for Bipex - and asking the court to order payment.
NYSIF argued that as a state entity, it was protected by sovereign immunity and could not be brought into Supreme Court in such proceedings. But the court rejected that argument. It held that while NYSIF could not be sued for damages, it could still be ordered to pay funds it was holding for someone else, such as an insured client. Crucially, the court said this did not violate immunity protections, since the Fund was not the judgment debtor.
NYSIF also questioned whether Doran was attempting to engineer a backdoor reimbursement scheme. Doran’s lawyer had previously called it a “bucket brigade” of payments and reimbursements. Still, the court found no legal basis to dismiss the case on those grounds.
Finally, the court denied NYSIF’s motion to compel discovery into the origin of Doran’s $75,000 payment. Doran had already stated it had no assets and was no longer in business.
The ruling reinforces how courts can apply Article 52 procedures to state insurers acting as garnishees. For insurance professionals, especially those handling indemnity and claims litigation, it’s a reminder that state immunity doesn’t block all efforts to enforce payment - especially when the state’s role is limited to holding funds on behalf of an insured.
