Thursday, May 6, 2010

The Statutory One-Year Tolling Period for an Insured's Post-Loss Death Extends the Policy's Two-Year Suit Limitations Period

Dail v. Merchants Mut. Ins. Co.
(4th Dept., decided 4/30/2010)

Most structure property insurance policies in New York contain a condition requiring that any suit against the insurer be brought within two years of the loss (the accrual of which period is somewhat in question now with the recent issuance of the Fabozzi v. Lexington Ins. Co. decision).    But what if the insured dies during that two-year period?  Does the one-year tolling period afforded by New York CPLR 210(a) apply to extend the two-year suit limitations period by one year? Yes, in the opinion of the Appellate Division, Fourth Department.

Merchants Mutual Insurance Company issued a homeowners insurance policy to Louis White, Jr., on February 18, 2005.  On December 5, 2005, the insured property and its contents were destroyed by fire.  On October 31, 2006, Merchants denied Mr. White's claim for policy benefits and, 19 months after the loss date, on July 5, 2007, Mr. White died.  On May 16, 2008, plaintiff was issued letters testamentary appointing her as the executor of the insured's estate. Nearly 31 months after the fire loss, on July 3, 2008, plaintiff commenced this action as executor of decedent's estate, seeking to recover under the policy. The "conditions" section of the policy provided that "[n]o action can be brought [against us] unless the action is started within two years after the date of loss."

Merchants moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and (7), asserting that the action had not been brought within two years of the loss date, as required by the policy.  Supreme Court (John F. O'Donnell, Jr.)  denied that motion and Merchants appealed.

In AFFIRMING the lower court's order, the Fourth Department, in an opinion by Justice Edward Carni, held that the one-year extension of time in CPLR 210 (a) to commence an action that is afforded to a decedent's representative applies to the standard two-year period of limitations contained in homeowner's insurance policies:
Our review of the applicable case law in New York State discloses that the courts have uniformly applied tolling provisions to the two-year period of limitations contained in policies of insurance in accordance with Insurance Law § 3404 (e). In S & J Deli v New York Prop. Ins. Underwriting Assn. (119 AD2d 652), the Second Department rejected the defendant insurer's contention that the period of limitations was a "condition precedent" and held that "[t]he toll contained in CPLR 203 (b) (5) is directly applicable to the limitations period set forth in a fire insurance policy" (id.). In addition, the First Department applied the "[i]nfancy, insanity" toll contained in CPLR 208 to the two-year period of limitations in an insurance policy (Bookstein v Republic Ins. Co., 266 AD2d 113). 

We reject defendant's "condition precedent" theory inasmuch as the cause of action to recover damages for breach of contract based on a fire or a homeowner's insurance policy existed at common law and was not created by the insurance statute containing the two-year period of limitations (see S & J Deli, 119 AD2d 652; Insurance Law § 3404 [e])[FN1]. It has never been incumbent upon an insured to plead and prove compliance with the applicable statute of limitations as a condition precedent in commencing a breach of contract action under the common law against an insurer. Moreover, we perceive no indication in the language of Insurance Law § 3404 (e) indicating that the two-year period of limitations was intended to be in the nature of a condition precedent (cf. Kahn v Trans World Airlines, 82 AD2d 696, 709).

We therefore conclude that the "death toll" in CPLR 210 (a) is applicable to an action against an insurer where the policy at issue contains the two-year limitations period contained in Insurance Law § 3404 (e).

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