Court Denies Motion to Vacate Waiver of SOL Defense in Extension Stipulation

NO-FAULT – INSURANCE LAW § 5104(B) – LIEN RECOVERY – SUBROGATION – STATUTE OF LIMITATIONS – WAIVER OF SOL DEFENSE
GEICO v. West Twenty-Ninth Corp.
(Sup. Ct., Nassau Co., decided 6/18/2008)

In Aetna Life & Cas. Co. v. Nelson, 67 N.Y.2d 169 (1986), the New York Court of Appeals explained:

Insurance Law § 673 (2) [now 5104(b)] offers an insurer two means for recouping first-party benefits paid to a covered person for injuries caused by a noncovered person. Both of the procedures bear some relationship to common-law actions. First, the insurer has the right to proceed directly against the tort-feasor, a right akin to the common-law right of subrogation (Safeco Ins. Co. v Jamaica Water Supply Co., 83 AD2d 427, affd 57 NY2d 994). Second, the insurer may proceed against the injured party by asserting a lien against any recovery obtained by that party from the tort-feasor.

New York Insurance Law § 5104 (b) states:

In any action by or on behalf of a covered person, against a non-covered person, where damages for personal injuries arising out of the use or operation of a motor vehicle or a motorcycle may be recovered, an insurer which paid or is liable for first party benefits on account of such injuries shall have a lien against any recovery to the extent of benefits paid or payable by it to the covered person. No such action may be compromised by the covered person except with the written consent of the insurer, or with the approval of the court, or where the amount of such settlement exceeds fifty thousand dollars. The failure of such person to commence such action within two years after the accrual thereof shall operate to give the insurer a cause of action for the amount of first party benefits paid or payable against any person who may be liable to the covered person for his personal injuries, which cause of action shall be in addition to the cause of action of the covered person; provided however, that in any action subsequently commenced by the covered person for such injuries, the amount of his basic economic loss shall not be recoverable.

In Safeco Ins. Co. v. Jamaica Water Supply Co., 83 A.D.2d 427 (2nd Dept. 1981), affd. 57 N.Y.2d 994 (1982), the Second Department ruled:

Since, as we have found, the statute was intended to, and clearly provides, that a new and independent action is created in favor of the insurer, but only upon the lapse of two years after the injury to the insured, during which the insured had failed to sue for first-party benefits, the insurer's action could not accrue until after both of these conditions have been satisfied. Subdivision 2 of section 673 does not, either expressly or impliedly, evince any intent that the usual term of the applicable Statute of Limitations be shortened or modified in any way. Hence the insurer here was entitled to sue for the first-party benefits within three years after the completion of two years after the injury (since Morris had not sued for such benefits during that period of two years).

If the claimant does sue the tortfeasor during that two-year period after the accident, and includes a claim for first-party BEL benefits, the no-fault insurer's recourse under Insurance Law § 5104(b) is relegated to enforcement of its lien against any tort recovery.

APIP subrogation actions, however, take a 3-year SOL from the accident date. Allstate Ins. Co. v. Stein, 1 N.Y.3d 416 (2004).

The recovery of basic economic loss (BEL) payments in an action under Insurance Law § 5104(b) requires than the defendant be a "non-covered person" which, by the converse of § 5102(j) is any person or entity other than "any pedestrian injured through the use or operation of, or any owner, operator or occupant of, a motor vehicle which has in effect the financial security required by article six or eight of the vehicle and traffic law or which is referred to in subdivision two of section three hundred twenty-one of such law; or any other person entitled to first party benefits."

This case appears to involve a 5104(b) action against a garage owner and employee who was operating a customer's car at the time of an April 8, 2003 accident that injured GEICO's insured, a pedestrian. GEICO commenced this action on September 12, 2007, seeking to recover $47,544 in BEL benefits paid to or on behalf of its insured. Although GEICO's insured had commenced an action against the garage owner and employee five weeks after the accident, GEICO contended that she did not sue for first-party BEL benefits, giving GEICO the right to commence this action within 5 years of the accident date. At some point, not clear from the decision, GEICO's insured settled her personal injury action against the garage owner and driver and executed an unconditional, unreserved and unlimited release.

Counsel for the defendant requested an extension to answer the complaint and, in preparing the corresponding stipulation, apparently included a waiver of any statute of limitations (SOL) defense. Upon realizing that, defense counsel then moved: (1) to vacate and withdraw that SOL waiver; and (2) for summary judgment dismissing the complaint upon the grounds of plaintiff's lack of standing and capacity to sue, statute of limitations, and release.

In his decision, Nassau County Supreme Court Justice Antonio Brandveen outlines and recites the parties' contentions without much analysis and discussion before denying both defense motions:

The defense here has not met the burden of showing that portion of the plaintiff' s stipulation extending time to appear and answer dated January 21 , 2008 , which purports to waive the defense of statute of limitations should be vacated and modified.

These defendants here have failed to satisfy the prima facie burden of establishing entitlement to judgment as a matter of law. This Court determines that material issues of fact exist which require a trial of the action[.]

It is difficult to discern from the facts recited in this decision whether GEICO's action was timely commenced. It is also unclear whether, in denying defendants' motion to vacate the extension stipulation's SOL waiver, the court will consider and rule on that defense at some point in this case.

When in doubt, best practice would be to commence the 5104(b) action within Year # 3 after the accident date, rather than to rely on what has sometimes been called the two-year "tolling provision" of 5104(b). See, Allstate Ins. Co. v. Yetish Inc., 2006 NY Slip Op 50471U, 11 Misc. 3d 134A (App. Term, 2nd Dept., 2006).