Key Points

  • The First Department unanimously reversed a Supreme Court, New York County order and granted Hereford Insurance Company's motion to dismiss a medical provider's coverage claims on res judicata grounds.
  • The panel held that the motion court mistakenly applied collateral estoppel, which generally does not apply to default judgments, instead of res judicata, which can.
  • Res judicata applied because Hereford's earlier declaratory judgment action and the current action involved the same adverse parties and the same coverage-disclaimer issues.
  • The panel rejected the provider's argument that the October 2022 default judgment could not have preclusive effect because its arbitration award had been issued and affirmed first, noting that Hereford filed its declaratory action nearly two months before the provider filed for arbitration.
  • The provider's cross-motion to dismiss Hereford's complaint was denied, and costs were awarded to Hereford.

A New York appeals court ruled Thursday that a default judgment declaring Hereford Insurance Company owed no coverage bars a medical provider's coverage claims against it, even though the provider had already won an arbitration award of more than $14,000 that was affirmed months before the judgment was entered.

A four-justice panel of the Appellate Division, First Department, unanimously reversed a ruling by Justice David B. Cohen of Supreme Court, New York County, who had sided with the provider, Orthopaedics, Spine & Sports Medicine LLP. The unsigned decision was issued by Justices Kapnick, Rosado, O'Neill Levy and Parker-Raso, with Justice Kapnick presiding.

The decision turns on which proceeding came first. Hereford sued for a declaration of no coverage before the provider filed for arbitration, and the panel held that this sequence controlled, even though the arbitration produced an affirmed award before the court entered its default judgment. The panel also held that the trial court had applied the wrong preclusion doctrine.

The dispute arose from injuries allegedly sustained in a collision involving a motor vehicle Hereford insured. According to the decision, Hereford first brought a separate action against the provider and others, seeking a declaration that there was no coverage for claims arising from those injuries.

The provider did not appear in that earlier action. Instead, on June 29, 2021, "almost two months after the action was commenced," it filed a separate claim for arbitration, the panel wrote.

The two proceedings then moved forward on parallel tracks. Hereford moved for a default judgment in its declaratory action on May 25, 2022. The provider won its arbitration, and the award was affirmed on July 8, 2022.

About two weeks later, on July 24, 2022, Hereford commenced the action that led to Thursday's appeal. In October 2022, Supreme Court entered a default judgment in the earlier action, declaring that there was no coverage for the provider's claims. The provider moved to vacate that judgment, the motion was denied, and the provider did not appeal from the order.

In the new action, Hereford moved for summary judgment dismissing the provider's coverage claims as barred by res judicata and collateral estoppel, or in the alternative for judgment against the provider. Justice Cohen denied the motion in an order entered October 16, 2025. He also granted the provider's cross-motion to dismiss Hereford's complaint.

The panel held that the trial court chose the wrong one. "The court mistakenly analyzed plaintiff's motion under the framework of collateral estoppel, which generally does not apply to default judgments," the panel wrote, citing its 2003 decision in Kanat v. Ochsner.

Res judicata, by contrast, "can apply to default judgments," the panel wrote, citing Robbins v. Growney, a 1996 First Department decision. Under its 2020 decision in Rojas v. Romanoff, the panel added, the doctrine "bars claims that were or should have been raised in an earlier suit involving the same parties."

Applying that test, the panel held that "both this action and the prior action involve plaintiff and defendant as adverse parties and raise the same issues." Those issues, according to the decision, were whether Hereford properly disclaimed coverage on two grounds.

The first ground was that the alleged injuries and treatment were unrelated to a covered event. The second was that the treated individuals failed to subscribe to their EUO transcripts and "therefore failed to fulfill a condition precedent to coverage," the panel wrote.

"Supreme Court should have dismissed defendant's coverage claims as precluded," the panel concluded.

The provider had argued that the order of decisions favored it. The panel disagreed. "We reject defendant's argument that the default judgment cannot have preclusive effect because it was issued after the arbitration award was issued and affirmed," it wrote.

The panel's answer rested on filing dates. "Plaintiff filed the prior declaratory judgment action nearly two months before defendant filed its claim for arbitration," the decision says. For that point the panel cited its 2011 decision in Ventur Group, LLC v. Finnerty and a 2019 ruling by the Appellate Term, First Department, in another case involving the same insurer, Hereford Insurance Co. v. Iconic Wellness Surgical Services, LLC.

The panel did not take up any of the parties' other points. "In view of the foregoing, the remaining arguments are academic," it wrote.

The order reverses Justice Cohen's ruling on the law, grants Hereford's motion to dismiss the provider's coverage claims on res judicata grounds, and denies the provider's cross-motion to dismiss the complaint. The panel awarded costs to Hereford.

Hereford was represented by Harlan R. Schreiber of Goldberg, Miller & Rubin, P.C. The provider was represented by Kevin T. Griffiths of The Odierno Law Firm, P.C.

The decision, 2026 NY Slip Op 06524, is uncorrected and subject to revision before publication in the Official Reports.