Two-Year Suit Deadline Runs from Actual Loss Date, Not from Loss Date Used on Insurer's Correspondence

COMMERCIAL PROPERTY – TWO-YEAR SUIT LIMITATION CONDITION – ESTOPPEL 

Kotecki's Grandview Grove Corp. v. Acadia Ins. Co.
(4th Dept., 2/9/2018)

Property insurance policies in New York can limit an insured's time to sue the insurer for breach of the policy to one or two years.  Equitable estoppel is a legal doctrine by which a party to a legal claim or defense can be precluded or "estopped" from taking a legal action that is inconsistent with that party's previous words, claims, or conduct.  For equitable estoppel to apply, however, the party seeking to apply equitable estoppel must have reasonably relied to that party's detriment on the other party's prior words or conduct.

With respect to a suit limitations defense, a defendant may be estopped from pleading such a defense if the plaintiff was induced by fraud, misrepresentations or deception to refrain from filing a timely action.  Plenty of New York insurance coverage cases exist in which insureds have argued -- sometimes successfully and sometimes unsuccessfully -- that their insurers should be estopped from asserting the policy's two-year suit limitations period because they either (1) engaged in a course of conduct which lulled the insureds into inactivity in the belief that their claims would ultimately be processed or (2) induced the insureds by fraud, misrepresentation or deception to refrain from commencing a timely action.

So what if the insurer consistently uses the wrong loss date on all its claim correspondence, including the coverage declination letter that, among other things, advised the commercial insured that it had two years from the reported loss date to sue (per 11 NYCRR § 216.6[c]) and the insured commences suit within two years of that date?  Does estoppel apply?

No, says the Appellate Division, Fourth Department, REVERSING Supreme Court's denial of summary judgment to the insurer, Acadia Insurance Company:

Plaintiff commenced this action to recover under an insurance policy issued by defendant Acadia Insurance Company (Acadia) for loss that it allegedly sustained in a "rain and/or windstorm." Plaintiff reported the loss to its insurance broker, defendant First Niagara Risk Management, Inc. (First Niagara). First Niagara prepared a property loss notice listing the date of loss as June 10, 2013. Acadia investigated the claim, partially denied it in October 2013, and reaffirmed that denial in February 2014. All of Acadia's correspondence listed the date of loss as June 10, 2013. The correspondence also advised plaintiff pursuant to New York insurance regulations that, in the event it wished to contest the denial, plaintiff was required by the policy to commence such an action within two years of the reported date of loss. On June 3, 2015, plaintiff commenced this action. During discovery, it was learned that the actual date of loss was May 28, 2013. In response to Acadia's notice to admit, plaintiff admitted that it noticed the damage to its property on May 28, 2013, that it contacted a roofing company on that date to repair the damage, and that it also contacted First Niagara on that date. Acadia then moved for summary judgment dismissing the amended complaint against it as time-barred.  

Supreme Court erred in denying the motion. Acadia met its initial burden of establishing that plaintiff's action was not commenced within two years of the date of loss as required by the policy (see Compis Servs. v Hartford Steam Boiler Inspection & Ins. Co., 272 AD2d 886, 887 [4th Dept 2000]; see generally Nowacki v Becker, 71 AD3d 1496, 1497 [4th Dept 2010]), and plaintiff failed to raise an issue of fact to defeat the motion (see generally Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). Contrary to plaintiff's contention, it did not raise a triable issue of fact whether Acadia should be equitably estopped from relying on the limitations period provided in the policy. "Under the doctrine of equitable estoppel, a defendant is estopped from pleading a statute of limitations defense if the plaintiff was induced by fraud, misrepresentations or deception to refrain from filing a timely action" (Richey v Hamm, 78 AD3d 1600, 1601-1602 [4th Dept 2010] [internal quotation marks omitted]; see Simcuski v Saeli, 44 NY2d 442, 449 [1978]). "A plaintiff seeking to apply the doctrine of equitable estoppel must establish that subsequent and specific actions by defendant[] somehow kept [him or her] from timely bringing suit' " (Putter v North Shore Univ. Hosp., 7 NY3d 548, 552 [2006]). Here, Acadia did nothing to keep plaintiff from commencing the suit in a timely manner. Although Acadia listed the date of loss incorrectly in its correspondence disclaiming coverage, that was the result of incorrect information provided by First Niagara, plaintiff's agent. In any event, plaintiff was always aware of the actual date of loss and that an action had to be commenced within two years of that date. Thus, plaintiff was not induced by Acadia's conduct to refrain from filing this suit in a timely manner.

No inducement because the insured could not and should not have relied on what it knew or should have known was a erroneous loss date in the insurer's correspondence.