On August 10, 2022, Justice Chan of the New York County Commercial Division issued a decision in Grocery Delivery E-Servs., Inc. v. Flynn, 2022 NY Slip Op. 32700(U), granting summary judgment on a conversion claim based on the defendant’s failure to pass on a settlement payment it had received, explaining:
A conversion claim arises when (1) there’s a specific, identifiable fund; (2) the party has a superior right to the fund; and (3) defendant interfered with the plaintiffs right to possession. An equitable lien is a right to have a fund, specific property, or its proceeds, applied in whole or in part to the payment of a particular debt. A covenant under an agreement to insure the property for plaintiff’s benefit gives plaintiff an equitable lien in any proceeds to the extent of its interest.
Under these principles, HelloFresh has made a prima facie showing entitling it to summary judgment on the conversion claim. HelloFresh submits evidence identifying a specific fund as shown in the Settlement Agreement between Tokio Marine and Mariner in that Tokio Marine paid $263,366 to settle the HelloFresh claim. And the First Department has found that the
insurance proceeds paid by Tokio Marine to Mariner for losses incurred in the product recall constituted a specifically identifiable fund. Moreover, the intent of the SLA requiring Mariner to name HelloFresh as an additional insured under the product recall policy supports a finding that HelloFresh had an equitable lien on the proceeds of the Tokio Marine Policy, and a superior right to the proceeds.HelloFresh has also demonstrated interference with its right to possess the insurance proceeds – the insurance proceeds to settle the HelloFresh claim were deposited into Mariner’s operating account but were not remitted to HelloFresh. Thus, Mariner retained funds that were intended for HelloFresh.
(Internal Quotations and citations omitted).