Third Department Affirms Dismissal of Contract Claim Due to Shortened Limitations Provision in Insurance PolicyPrint Article
- Posted on: Apr 15 2019
In Deutsche Bank National Trust Co. v. Flagstar Capital Markets, the New York Court of Appeals held that an agreement to “delay the commencement” of the statute of limitations “was inconsistent with New York law and public policy.” (Here.) Thus, although parties may agree after a cause of action has accrued to extend the statute of limitations, they may not do so before their agreement. John J. Kassner & Co. v City of New York, 46 N.Y.2d 544, 550, 551 (1979).
Since the parties to a contract cannot extend the statute of limitations, they can, however, shorten it. Kassner, 46 N.Y.2d at 551. “Such an agreement does not conflict with public policy but, in fact, ‘more effectively secures the end sought to be attained by the statute of limitations.’” Id., quoting Ripley v. Aetna Ins. Co., 30 N.Y. 136, 163 (1864). “Thus, an agreement which modifies the Statute of Limitations by specifying a shorter, but reasonable, period within which to commence an action is enforceable provided it is in writing.” Id. (citations omitted).
Often, insurance contracts contain provisions that shorten the statute of limitations for a breach of the policy. Under New York law, the statute of limitations applicable to a breach of contract cause of action is ordinarily six years. CPLR § 213(2). The statute of limitations on a breach of insurance contract cause of action generally starts to run on the date that coverage is disclaimed by the insurer (see Ely—Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, 402 (1993)); however, the parties to an insurance contract may agree that accrual of the claim runs from the date of the underlying loss as opposed to the date of the disclaimer of coverage. Mercedes-Benz Fin. Servs. USA, LLC v. Allstate Ins. Co., 162 AD3d 1183, 1184-85 (2018). If the parties agree to change the accrual date to the date of loss, they must express their intention through distinct language. Generic “date of loss” language, as opposed to “inception of loss” or other similarly specific terms of art, is insufficient to evince such an intent. Id.
On April 11, 2019, the Supreme Court, Appellate Division, Third Department, addressed these issues in affirming the dismissal of a contract claim arising under an insurance policy. Anderson v. Allstate Ins. Co., 2019 N.Y. Slip Op. 02768 (3d Dept. Apr. 11, 2019) (here). As discussed below, the Court found the language in the subject insurance policy sufficient to shorten the statute of limitations thereby making the plaintiff’s contract claim untimely.
Anderson v. Allstate Ins. Co.
Plaintiff, Nicole Anderson (“Anderson”), owns a multiunit residential building in the City of Troy, Rensselaer County that she used for rental income. As owner and landlord of the premises, Anderson obtained an insurance policy from defendant James Mylod, through defendant Jim Mylod Insurance Depot Agency (collectively, “Mylod”), as an agent of defendant, Allstate Insurance Company (“Allstate”).
In 2013, Mylod transferred its book of business to defendant Michael Slovak (“Slovak”). Anderson renewed her insurance policy through Slovak. In the fall of 2014, while the building was undergoing renovations, it was burglarized, resulting in the furnace, hot water heater, plumbing fixtures and copper piping being stolen, and numerous other physical damages being sustained to the interior of the premises.
Thereafter, Anderson filed a claim with Allstate seeking coverage for the damages sustained to the building. On September 18, 2014, Allstate denied the claim citing Anderson’s lack of coverage for theft and water damage.
Anderson commenced the action against defendants on October 19, 2016, alleging, as relevant to the appeal, that Allstate breached the parties’ insurance contract. In lieu of answering, Allstate moved to dismiss the complaint, claiming that the action was not timely commenced within the 24-month time limitation provided for in the parties’ insurance policy. Mylod and Slovak each separately moved to dismiss the complaint for failure to state a cause of action.
The motion court denied Mylod’s and Slovak’s motions, but granted Allstate’s motion, finding that Anderson’s breach of contract cause of action against Allstate had not been timely commenced.
The Third Department’s Decision
The Third Department affirmed.
The Court found that the relevant language in the insurance policy contained specific and distinct language that shortened the statute of limitations to 24 months “after inception of loss.” Slip Op. at *1. Thus, “although the date of the underlying burglary [wa]s not specifically set forth in the record,” the Court held that “the date of the underlying loss” “clearly occurred prior” to the date Allstate disclaimed coverage on September 18, 2014. Id. Accordingly, since Anderson did not file her summons with notice until October 19, 2016, her lawsuit was untimely; it “was unquestionably commenced beyond the applicable 24-month limitations period provided for in the contract.” Id.
The Court also rejected Anderson’s contention that Allstate should have been estopped from asserting that the statute of limitations had run. According to Anderson, Allstate did not provide her with a copy of the policy, despite numerous requests. As a result, she was “unaware of the applicable limitations period provided for therein.” Id. In rejecting the argument, the Court observed that “Allstate did, in fact, provide her with a sample copy of the insurance policy that was in effect on the purported date of loss.” Id. That sample included the relevant statute of limitations language.
“Moreover,” said the Court, “even assuming that Allstate failed to timely provide a copy of the subject insurance policy, such conduct, standing alone, fail[ed] to establish that Allstate willfully withheld disclosure of same, nor [did] it demonstrate any affirmative deception, fraud or misrepresentations by Allstate intended to prevent plaintiff from filing suit or otherwise ‘justifiably lull [her] into inactivity.’” Id. (citations omitted). [This Blog recently wrote about equitable estoppel and the statute of limitations here.]
Anderson serves a good reminder that before bringing a claim arising under a contract, practitioners should check the fine print to be sure that there are no statute of limitations provisions that shorten the time within which to bring an action.