Opinion
CA 02-01127
May 2, 2003.
Appeal from an order of Supreme Court, Niagara County (Lane, J.), entered February 26, 2002, which, inter alia, denied the motion of Daniel J. Stein to dismiss action No. 3.
BOUVIER, O'CONNOR, LLP, BUFFALO (BRIAN A. MAC DONALD OF COUNSEL), FOR DEFENDANT-APPELLANT AND INTERPLEADING PLAINTIFF-APPELLANT.
LIPSITZ, GREEN, FAHRINGER, ROLL, SALISBURY CAMBRIA LLP, BUFFALO (JOHN A. COLLINS OF COUNSEL), FOR PLAINTIFFS-RESPONDENTS AMY M. WALKER AND WESLEY WALKER.
CHELUS, HERDZIK, SPEYER, MONTE PAJAK, P.C., BUFFALO (JENNIFER V. SCHIFFMACHER OF COUNSEL), FOR INTERPLEADER DEFENDANT-RESPONDENT AND PLAINTIFF-RESPONDENT.
PRESENT: PINE, J.P., HURLBUTT, KEHOE, BURNS, AND HAYES, JJ.
MEMORANDUM AND ORDER
It is hereby ORDERED that the order so appealed from be and the same hereby is modified on the law by granting the motion of Daniel J. Stein in action No. 3 and dismissing that action as time-barred and as modified the order is affirmed without costs.
Memorandum:
Amy M. Walker was injured in an automobile accident on May 24, 1995. She and her husband thereafter commenced action No. 1, seeking to recover damages for personal injury from Daniel J. Stein, the defendant in action Nos. 1 and 3 and the plaintiff in action No. 2. Action No. 1 was settled by a stipulation placed on the record in open court on February 20, 2001. By the terms of that stipulation, Stein was to pay the Walkers $300,000 in settlement and "general release" of the personal injury claim, while Stein, the Walkers, and the Walkers' insurer, Allstate Insurance Company (Allstate), the plaintiff in action No. 3 and a defendant (along with the Walkers) in action No. 2, would reserve "whatever rights or obligations or defenses" they otherwise might have with respect to any attempt by Allstate to recover from Stein an amount equivalent to the $42,000 in additional personal injury protection (APIP) benefits paid by Allstate to the Walkers over and above the statutorily mandated $50,000 of no-fault coverage. Such APIP payments had been made by Allstate beginning June 29, 1998.
Notwithstanding the stipulation of settlement, a dispute almost immediately arose among the parties concerning both the language of a "general release" prepared by counsel for Stein for execution by the Walkers and the terms of two drafts by which Stein tendered the $300,000 settlement proceeds to the Walkers. The dispute concerned whether the settlement and contemplated "general release" in fact reserved a right on the part of Allstate to recover from Stein an amount equivalent to the APIP benefits paid by Allstate to Amy Walker. Accordingly, the Walkers accepted a draft for $200,000 but rejected another for $100,000 made payable to them, their attorney, and Allstate. On motion of the Walkers in action No. 1, Supreme Court granted a judgment for the Walkers against Stein in the amount of $101,906.30, representing the unpaid $100,000 portion of the settlement, plus interest, costs and disbursements. Stein subsequently moved to vacate that judgment. On May 4, 2001, before that motion was decided, Allstate commenced action No. 3, seeking to recover from Stein an amount equivalent to the APIP benefits paid to Amy Walker. Stein thereafter commenced action No. 2, an interpleader action by which he sought leave to pay into court the outstanding $100,000 of the agreed-upon settlement amount and thereby obtain a discharge from any further liability to the Walkers or Allstate. Subsequently, Stein moved to dismiss action No. 3 as, inter alia, untimely commenced. Allstate moved and the Walkers cross-moved to dismiss the complaint in action No. 2. Stein appeals from an order that denied his motions to vacate the judgment in action No. 1 and to dismiss action No. 3, and that granted the motion of Allstate to dismiss the complaint in action No. 2.
We conclude that the court should have granted Stein's motion in action No. 3 and dismissed Allstate's action as untimely commenced. Allstate's action, i.e., a non-statutorily derived action commenced by the insurer of the injured party to recover from the tortfeasor amounts paid by the insurer to the insured, is properly characterized as a subrogation action ( see Aetna Life Cas. Co. v. Nelson, 67 N.Y.2d 169, 174; Country Wide Ins. Co. v. Osathanugrah, 94 A.D.2d 513, 514, affd 62 N.Y.2d 815; Liberty Mut. Ins. Co. v. Clark, 296 A.D.2d 442; Seven Sixty Travel v. American Motorists Ins. Co., 98 Misc.2d 509, 512-515, affd 73 A.D.2d 761; Nationwide Mut. Ins. Co. v. Schwartz, 172 Misc.2d 503, 505). Indeed, Allstate itself so characterizes the action, alleging in its complaint against Stein that, upon payment of the APIP payments to the Walkers, Allstate "became subrogated to the rights [of the Walkers] against" Stein, the tortfeasor.
Allstate's subrogation action is governed by the same statute of limitations applicable to action No. 1, the personal injury action commenced by the Walkers against Stein ( see Matter of Allstate Ins. Co. [Clarendon Natl. Ins. Co.], 259 A.D.2d 971, 972; Matter of Prudential Prop. Cas. Ins. Co. [Bacchus], 226 A.D.2d 384, 385; State Farm Mut. Auto. Ins. Co. v. Regional Tr. Serv., 79 A.D.2d 858, 859; Nationwide Mut. Ins. Co., 172 Misc.2d at 505). That is consistent with the principles that a subrogation claim is derivative of the underlying claim and that the subrogee possesses only such rights as the subrogor possessed, with no enlargement or diminution ( see Country Wide Ins. Co., 94 A.D.2d at 515; Liberty Mut. Ins. Co., 296 A.D.2d at 442-443; State Farm Mut. Auto. Ins. Co., 79 A.D.2d at 859; Nationwide Mut. Ins. Co., 172 Misc.2d at 505; see generally Federal Ins. Co. v. Andersen Co., 75 N.Y.2d 366, 372; United States Fid. Guar. Co. v. E.W. Smith Co., 46 N.Y.2d 498, 504; Exchange Mut. Indem. Ins. Co. v. Central Hudson Gas Elec. Co., 243 N.Y. 75, 78-80). It is likewise consistent with the principle that a defendant in a subrogation action has against the subrogee all defenses that he would have against the subrogor, including the same statute of limitations defense that could have been asserted against the subrogor ( see State Farm Mut. Auto. Ins. Co., 79 A.D.2d at 859; Seven Sixty Travel, 98 Misc.2d at 512-514; Nationwide Mut. Ins. Co., 172 Misc.2d at 505; see generally Hartford Fire Ins. Co. v. Advocate, 78 N.Y.2d 1038, 1040; Federal Ins. Co., 75 N.Y.2d at 372; Utica Mut. Ins. Co. v. Avery, 261 A.D.2d 802, 803, lv denied 93 N.Y.2d 818).
We thus conclude that Allstate's subrogation action is governed by a three-year limitations period, which began to run on the date of the accident ( see Liberty Mut. Ins. Co., 296 A.D.2d at 442-443; Allstate Ins. Co., 259 A.D.2d at 971-972; Prudential Prop. Cas. Ins. Co., 226 A.D.2d at 385; Nationwide Mut. Ins. Co., 172 Misc.2d at 505). Consequently, we modify the order by granting Stein's motion in action No. 3 and dismissing that action as time-barred inasmuch as it was not commenced within three years of the accident.
In concluding that the subrogation action was timely commenced, the court erroneously reasoned that Allstate's subrogation claim did not come into existence, and hence did not accrue, until Allstate paid the APIP benefits to the Walkers. The dissent is similarly mistaken in regarding Allstate's acquisition of subrogation rights upon the making of APIP payments to the Walkers as an "accrual" distinct from the accrual of the underlying claim to which Allstate became subrogated by reason of such payments. That conclusion, as previously indicated herein , is inconsistent with the theory underlying the doctrine of subrogation and the rules governing the prosecution and defense of subrogation claims.
In light of the foregoing, the paradox perceived by the dissent, i.e., that the subrogation claim had to have been (but could not have been) interposed before it in fact "accrued" upon payment of APIP benefits, is illusory. In any event, the paradox represents a problem of Allstate's own making. That problem does not result, as the dissent supposes, from the failure of Allstate to commence a separate subrogation action "preemptively" or anticipatorily. Instead, it results from the failure of Allstate to insist on the resolution of its subrogation claim against the tortfeasor for APIP payments as part of a global settlement of the personal injury claims ( cf. Prudential Prop. Cas. Ins. Co., 226 A.D.2d at 384-385). In that connection, we note that Allstate had made all of the APIP payments in question and was aware of its right of subrogation against the tortfeasor at the time of the settlement and "general release" negotiated in action No. 1.
Further, in resolving the statute of limitations issue, the court erred in relying on a statutory recoupment case ( see Matter of Motor Veh. Acc. Indem. Corp. v. Aetna Cas. Sur. Co., 89 N.Y.2d 214, 219-222; see also Aetna Life Cas. Co., 67 N.Y.2d at 173-175) rather than on subrogation cases. The Third Department likewise erroneously relied on a statutory recoupment case in its decision in Cardinell v. Allstate Ins. Co. ( 258 A.D.2d 853, 855), which was heavily relied on by Supreme Court. For that reason, unlike that court, we place no reliance on the decision in Cardinell. Cases involving the Motor Vehicle Accident Indemnification Corporation (MVAIC) and other statutory recoupment cases are inapposite because MVAIC as an entity is purely a creation of statute, and its rights and obligations are likewise derived entirely from statute and regulations ( see Motor Veh. Acc. Indem. Corp., 89 N.Y.2d at 221). Further, the relevant statutes and regulations specifically confer upon MVAIC and other insurers "loss-transfer" or "responsibility-shifting" rights that arise upon payment ( id. at 221). Here, in contrast to the MVAIC and other statutory recoupment cases, there is no statutory source of right (because APIP benefits are contractual and optional, not statutorily mandated), and action No. 3 is properly governed by common-law principles of subrogation ( see Allstate Ins. Co., 259 A.D.2d at 971-972; Prudential Prop. Cas. Ins. Co., 226 A.D.2d at 385; Nationwide Mut. Ins. Co., 172 Misc.2d at 505-506).
We affirm those parts of the order denying Stein's motion to vacate the money judgment entered in favor of the Walkers against Stein in action No. 1 and granting the motion of Allstate to dismiss the complaint in action No. 2.
We respectfully dissent in part. We disagree with the majority that action No. 3, commenced by Allstate Insurance Company (Allstate) against Daniel J. Stein, was not timely commenced. Although we agree with the majority that the applicable statute of limitations for Allstate's subrogation action is three years, we cannot agree that the statute begins to run on the date of the underlying motor vehicle accident. Rather, we agree with Supreme Court that the statute begins to run on the date of the first payment of additional personal injury protection (APIP) benefits.
Here, the underlying motor vehicle accident involving Amy M. Walker and Stein occurred on May 24, 1995. Thus, the three-year statute of limitations applicable to action No. 1, the negligence action commenced by Amy Walker and her husband against Stein, began to run on May 24, 1995. As the majority correctly notes, Allstate's action against Stein is properly characterized as a subrogation action. However, as the majority also notes, APIP payments by Allstate to the Walkers as a result of the accident did not begin until June 29, 1998. The majority concludes that Allstate's action against Stein is time-barred because the three-year statute of limitations with respect to the Walkers' action against Stein began to run on May 24, 1995, and Allstate's action against Stein was not commenced until May 4, 2001. Indeed, under the majority's analysis, the statute of limitations had already run approximately one month before the first APIP payment was made by Allstate. In our view, the majority's analysis and resulting conclusion are erroneous. Instead, we conclude that Allstate's action was timely commenced because the three-year statute of limitations did not begin to run until June 29, 1998, the date on which the first APIP payment was made by Allstate.
Allstate's subrogation rights cannot be said to have accrued until Allstate made its first APIP payment to the Walkers. While the majority refers to Supreme Court's misplaced reliance on statutory recoupment case law, the majority fails to recognize the underlying general principle referred to therein, that "[a] cause of action accrues, for the purpose of measuring the period of limitations, 'when all of the facts necessary to the cause of action have occurred so that the party would be entitled to obtain relief in court'" ( Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. Sur. Co., 89 N.Y.2d 214, 221, quoting Aetna Life Cas. Co. v. Nelson, 67 N.Y.2d 169, 175). That principle is not limited to statutory recoupment case law, and it applies equally to this case. Here, Allstate's right of subrogation was dependent upon a payment of APIP benefits, and it is illogical to conclude, as does the majority, that the statute of limitations with respect to the subrogation action began to run before Allstate's right of subrogation accrued. Indeed, had the Walkers elected not to commence a negligence action against Stein or, for that matter, had Allstate not made any APIP payments to the Walkers, any subrogation action commenced by Allstate preemptively, in order to avoid the running of the statute of limitations imposed by the majority, would be subject to dismissal based on the fact that no subrogation rights had yet accrued. In any event, such a preemptive subrogation action would, at a minimum, constitute a waste of judicial resources. In addition, we note that the majority refers to "the paradox perceived by the dissent" as arising from "the failure of Allstate to insist on the resolution of its subrogation claim against the tortfeasor for APIP payments as part of a global settlement of the personal injury claims." Allstate was not a party to the underlying personal injury action, nor did it have the right to intervene as of right pursuant to CPLR 1012. In addition, it was not granted permission to intervene pursuant to CPLR 1013. Thus, contrary to the statement of the majority, Allstate had no right to "insist" on the resolution of its subrogation claim. We therefore would affirm.