Opinion
600351/04.
Decided December 9, 2004.
The issue in this action for insurance coverage, is whether an unnamed beneficiary's claim for loss is barred by a shortened statute of limitations clause in the policy notwithstanding the beneficiary's alleged lack of notice thereof.
Defendant The Charter Oak Fire Insurance Company, sued herein as The Travelers Indemnity Company, moves for summary judgment dismissing the complaint of plaintiff Diamond Lease (U.S.A.), Inc. on the ground that it is contractually barred. For the reasons set forth herein, the motion is granted.
In February 2001, plaintiff entered into an agreement with non-party North East Swiss Inc. (Swiss) whereby plaintiff agreed to sell certain equipment (a Tornos Deco-2000 Machine Tool and an SSF Model 220 Automatic Bar-Feeder) to Swiss for $252,358.40. In accordance with the parties' agreement, in early March 2001, the equipment was delivered to Swiss at 37 Elkay Drive, Chester, New York (the Premises). According to plaintiff, on March 10, 2001, there was a fire at the Premises, causing irreparable damage to the equipment. At the time of the fire, Swiss held a general commercial liability insurance policy with defendant for coverage during the period of January 17, 2001 to January 17, 2002 (the Charter Oak Policy). The Charter Oak Policy included a Business Owners Property Coverage Special Form, which provides, in section F(4), that:
Legal Action Against Us
No one may bring a legal action against us under this Coverage Form unless:
a. There has been full compliance with all of the terms of this Coverage Form; and
b. The action is brought within 2 years after the date on which the direct physical loss or damage occurred.
(the limitations clause).
Plaintiff is a beneficiary, but not a named-insured, of the Charter Oak Policy. Additionally, plaintiff held an insurance policy in its own name with The Tokio Marine and Fire Insurance Company, Ltd. which was in effect on the date of the loss (the "Tokio Policy").
In a letter dated April 30, 2001 (the April 2001 letter), plaintiff advised defendant of the equipment loss and its expectation that the equipment would be covered under the Charter Oak Policy.
In 2001, defendant sent plaintiff two letters (the 2001 letters). In the first letter, dated May 22, 2001, defendant requested a copy of the Tokio Policy from plaintiff. In the second letter, dated August 31, 2001, defendant informed plaintiff that it was taking steps to obtain the Charter Oak Policy in order to determine whether coverage existed for the equipment loss.
By letter dated March 4, 2003 (the March 2003 letter), defendant informed plaintiff that it would pay plaintiff $100,000 for its claim ($125,000 for the value of the equipment, less $25,000, the amount defendant deemed plaintiff was entitled to receive under the Tokio Policy).
On February 10, 2004, nearly three years after the date of the fire, plaintiff commenced this action against defendant seeking additional insurance proceeds under the Charter Oak Policy for the loss of the equipment. Plaintiff asserts three causes of action against defendant, including breach of contract.
Defendant filed its answer, dated March 22, 2004, denying plaintiff's substantive allegations and asserting various affirmative defenses, including the defense that this action is barred by the limitations clause in the Charter Oak Policy.
Discovery in this action is not yet complete. However, at the July 1, 2004 oral argument, I ordered defendant to turn over all documents in its possession relating to the question of whether plaintiff received notice of the Charter Oak Policy. All other discovery has been stayed pending the resolution of this motion.
Defendant maintains that it is entitled to summary judgment because the action was not commenced within two years of the date of plaintiff's loss as required by the limitations clause. Plaintiff responds that summary judgment should be denied because a genuine issue of fact exists as to whether: (1) plaintiff received notice of the limitations clause; (2) defendant's partial payment of plaintiff's claim extended the limitations clause for a reasonable period; and/or (3) defendant is estopped from asserting the statute of limitations defense because it denied plaintiff's claim five days before the two-year limitations period allegedly expired. Plaintiff also argues that the motion is premature and should be denied pending further discovery.
In the absence of a policy provision regarding accrual or of a specific statute governing accrual, the six-year statute of limitations in an action for breach of an insurance contract commences to run when the contract is breached ( see CPLR 213; Medical Facilities, Inc. v. Pryke, 62 NY2d 716). However, where, as here, a provision in an insurance policy requires that an action be commenced within a period shorter after the date of loss than that provided for under the CPLR, it is enforceable ( see Carnegie Hill 90th Street, Inc. v. Greater NY Mut. Ins. Co., 271 AD2d 333 [1st Dept 2000] [two-and-one-half years]). Plaintiff does not contend that Swiss, the named insured under the policy, did not receive notice of the limitations clause. Nor does plaintiff claim that the limitations clause is invalid on its face. Rather, plaintiff argues that, in order to be bound by the limitations clause, it should have received notice of the Charter Oak Policy, which it did not. Thus, plaintiff asserts that, due to this lack of notice, an issue of fact exists as to whether it is bound by the limitation clause.
A beneficiary's rights, "like the rights of the promisee, are absolutely defined by the terms of the contract" (13 Williston on Contracts § 37:23 [4th ed], citing Restatement of Contracts § 309, comment b). "To the same extent that third parties can take advantage of beneficial and favorable terms of the contract, they are also bound by any inadequacies of the contract" ( id.).
Similarly, a subrogee stands in the shoes of the subrogor and is entitled to and inherits both the strength and infirmity of the subrogor's position ( see generally 23 NY Jur 2d, Contribution, Indemnity and Subrogation § 128).
Plaintiff's April 2001 letter to defendant demonstrates that plaintiff knew of the existence of the Charter Oak Policy shortly after the date of the loss. Moreover, defendant, in the 2001 letters, notified plaintiff that defendant was reviewing the Charter Oak Policy to determine plaintiff's coverage, if any, for the loss. Plaintiff has not submitted any evidence showing that it requested a copy of the Charter Oak Policy from defendant or that defendant purposefully denied plaintiff a copy of the Charter Oak Policy. Defendant was under no obligation to call plaintiff's attention to the limitations clause ( see Blitman Constr. Corp. v. Ins. Co. of North America, 66 NY2d 820, 823, citing Proc v. Home Ins. Co., 17 NY2d 239, 245). Since plaintiff was aware that defendant was reviewing its claim under the Charter Oak Policy, "[a] reasonable and prudent person would have investigated the coverage afforded him and his potential liability" ( Wasau Ins. Cos. v. Feldman, 213 AD2d 179, 181 [1st Dept 1995]; see also, Matter of East Coast Ins. Co. (Fanselow), 49 AD2d 848 [1st Dept 1975]). Plaintiff simply sat on its rights by not seeking a copy of the Charter Oak Policy and determining what, if any, conditions may have applied to its claim. Under these circumstances, plaintiff cannot seek the benefit of the coverage provided by the Charter Oak Policy without being subject to the limitations of that coverage ( see Hirshfeld v. Maryland Casualty Co., 249 AD2d 274, 275 [2nd Dept 1998] [citations omitted]).
New Medico Assocs. v. Empire Blue Cross and Blue Shield ( 249 AD2d 760 [3rd Dept 1998]), upon which plaintiff relies, is factually distinguishable from this case. In New Medico, the Third Department found that an issue of fact existed as to whether the assignee of medical insurance contract benefits received sufficient notice of a shortened limitations period. Unlike here, the assignee in New Medico received a Benefits Booklet from the insurer that did not contain the shortened limitations period.
Plaintiff's argument that an issue of fact exists as to when the cause of action accrued is unpersuasive. It is contended that the claim arose on March 4, 2003, the date defendant allegedly breached the Charter Oak Policy by providing payment for only a part of plaintiff's alleged loss. However, the Charter Oak Policy, incorporating language similar to that contained in Insurance Law § 3404, states that an action against defendant must be brought "within 2 years after the date on which the direct physical loss or damage occurred." This phrase does not mean anything different than the words "after inception of the loss," which refers to the date of the catastrophe insured against, and not to the accrual of the cause of action against the insurer for failure to pay ( see Proc, 17 NY2d supra at 245).
Plaintiff also alleges that a question of fact exists as to whether defendant is estopped from relying on the limitations clause. Specifically, plaintiff argues that a question exists as to whether's defendant's partial payment of its claim, five days before the expiration of the two-year limitations period, excused plaintiff's commencement of this action two months after the limitations period expired. However, plaintiff does not make any allegations of any representations or conduct by defendant which could have misled plaintiff into believing that the limitations clause would not be strictly invoked ( Blitman, 66 NY2d supra at 823 [citations omitted]). "Evidence of communications or settlement negotiations between an insured and its insurer either before or after expiration of a limitations period contained in a policy is not, without more, sufficient to prove waiver or estoppel" ( Gilbert Frank Corp. v. Federal Ins. Co., 70 NY2d 966, 968 [citations omitted]). Nor does plaintiff provide any proof that defendant's partial payment of plaintiff's claim extended the limitations period for a reasonable period. Such unsubstantiated allegations or assertions are insufficient to raise material questions of fact for trial ( id. at 967). In light of plaintiff's failure to come forward with evidence that it was lulled "into sleeping on its rights under the insurance contract, plaintiff has failed to establish the existence of triable issues of fact as to defendant's alleged waiver of, and/or estoppel from enforcing the shortened statute of limitations contained in the policy" ( id. at 968).
The argument asserted by plaintiff that the motion is premature because additional discovery is necessary to determine whether plaintiff had notice of the limitations clause is unavailing. Plaintiff has "advanced no non-speculative basis to believe that additional discovery might yield evidence warranting a different disposition" ( Rosario v. N.Y.C. Tr. Auth., 8 AD3d 147, 148 [1st Dept 2004]).
CONCLUSION
Accordingly, it is
ORDERED that the motion by defendant, The Charter Oak Fire Insurance Company, sued herein as The Travelers Indemnity Company, for summary judgment dismissing the complaint is granted, and the complaint is dismissed with costs and disbursements to defendant, as taxed by the Clerk of the Court upon the submission of an appropriate bill of costs; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.