If You Must Sue Us on Your Property Claim, You Must Do So Within ____ Years After the Loss

 Quiz time.

Question:

New York law permits property insurers to require that any suits brought against the insurer to recover for any property claims submitted under a property insurance policy must be commenced within how many years after the loss?

Answer:

TWO YEARS for losses caused by the peril of fire 🔥.
ONE YEAR (or less) for losses caused by perils other than fire, like 💨, 💧, ❄, or 💥. 

Be honest.  You didn't know that, did you?  

But indeed, the New York courts have repeatedly and consistently held that although the NY Standard Fire Policy, codified by New York Insurance Law § 3404(e), provides that... 

...[n]o suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within twenty-four months next after inception of the loss,...

...that 24-month period is the minimum for only fire-caused losses.  Why?  Because § 3404(f)(1) provides that 

[s]ubject to the approval of the superintendent, a policy which insures solely against the peril of fire or which insures against the peril of fire in combination with other kinds of insurance either for a divisible or indivisible premium need not comply with the provisions of subsection (e) of this section, provided: (A) the policy contains, with respect to the peril of fire, terms and provisions no less favorable to the insured than those contained in the standard fire policy[.]

See?  So if a policy covering property in New York contains a "Suit Against Us" condition that provides for a shorter period--say, 12 months (one year)--that condition may still be enforced for nonfire losses without violating § 3404(e).  

Don't believe me?  Here's some New York case law that should convince you:

• Barbarovich v. Tower Group, Inc., 2014 NY Slip Op 32708 (Sup. Ct., Kings Co., 2014) (“The policy expressly limits the statute of limitations to one year. Although the standard fire policy in Insurance Law 3404(e) contains a statute of limitation of two years, that limitation applies only to fire insurance claims. The plaintiffs claim for recovery is based on damage caused by wind and rain. Since the policy at issue is a multi-peril policy and the claim is not based on fire damage, the one year statute of limitation is applicable.”)


• Dockweiler v. Allstate Ins. Co., 222 AD 2d 482 (2nd Dept. 1995)(“ Moreover, because the policy in question was a multiperil policy, it could have contained a shorter limitation period which might have been enforceable against nonfire loss claims [see, Insurance Law § 3404 (f)(1)]")


• Bargaintown D. C. v Bellefonte Ins. Co., 78 AD2d 206 (1st Dept. 1980), affd 54 N.Y.2d 700 (1981)(the statutorily mandated two-year limitations period for fire losses, contained in  subdivision (e) section 3404 of the Insurance Law, did not preclude the inclusion in the policy of a shorter limitations period for nonfire losses).

Yesterday I wrote up a coverage analysis and opinion for a client on first- and third-party claims stemming from a longstanding leak of home heating oil from an above-ground storage tank located in the basement of the insured rental dwelling located in upstate New York (aka anything north of the George Washington Bridge or what once was known as the Tappan Zee Bridge and is now known as the Governor Mario M. Cuomo Bridge if you grew up "downstate").  

The landlord's package policy in that matter included an endorsement that contained the following suit condition:

Suit Against Us

No suit to recover for any property claim may be brought against us unless: 

a. the terms of this policy have been fully complied with; and, 

b. the suit is commenced within 1 year after the loss. 

If any law of the state where the premises described in the Declarations are located makes this limitation invalid, then suit must begin within the shortest period permitted by the law.

No laws of New York State make make a limitations period of one year invalid for nonfire losses.  I provided the case law to my client (because it didn't believe me either at first), and it kept the one-year limitations period in the declination letter, quoted as is.   

Tenant Breached Commercial Lease By Not Obtaining Terrorism Coverage

COMMERCIAL PROPERTY – TERRORISM COVERAGE – NEW YORK STANDARD FIRE INSURANCE POLICY – INSURANCE LAW § 3404
Tag 380, LLC v. ComMet 380, Inc.
(Ct. Apps., decided 6/3/2008)

TAG had a 25-year master ground lease with ComMet for 380 Madison Avenue in Manhattan for the period 1989-2014. A provision of the lease required TAG to "keep and maintain" insurance for the value of the building "against loss or damage by fire and against loss or damage by other risks included under the standard Extended Coverage Endorsement as presently adopted for use with the New York Standard Fire Insurance Policy, in an amount not less than the then full insurable value of the Building[.]" Insurance Law § 3404 (e) codified the New York standard fire insurance policy that insures against all "direct loss" caused by fire and lightning, and provides the minimum level of coverage permissible with respect to those perils.

In the aftermath of the September 11, 2001 terrorist attacks, and just prior to the enactment of the Terrorism Risk Insurance Act of 2002 (15 USC § 6701), it became the practice of insurance companies that provided coverage for large commercial properties in New York City to raise their premiums for policies covering potential damage caused by terrorists, or to exclude from coverage altogether all damage from terrorist acts.

TAG's insurance policy — which provided for blanket coverage against all losses without excluding terrorism - expired on June 30, 2002. A month earlier, ComMet had written to TAG, reminding it of the impending expiration date. Before the expiration date, TAG obtained a one-year, all-risk policy that covered all causes of damage, as before, but it specifically exempted from coverage all losses incurred as a result of terrorism. The policy further contained an exclusions section, entitled the "War Risk and Terrorist Exclusion," which disclaimed any action caused even remotely "by terrorism." Indeed, the new policy explicitly stated "TERRORISM IS EXCLUDED."

On August 5, 2002, TAG advised ComMet that it had purchased terrorism insurance valued at $100 million. ComMet asserted that this coverage amount was inadequate, claiming that the insurable value of the building was approximately $400 million. The same day, ComMet sent a Notice of Default to TAG, asserting that it had not complied with the terms of the lease. That Notice initiated a 10-business-day cure period, in which TAG could avoid default by obtaining the required insurance coverage. During this period, TAG did not provide any proof of even the alleged $100 million coverage as required by the terms of the lease.

TAG brought this action in August 2002 by moving for a declaratory judgment and a Yellowstone injunction. ComMet counterclaimed for breach of contract, declaratory judgment, and attorneys' fees. Supreme Court granted the Yellowstone injunction but ultimately ruled in favor of ComMet, awarding damages and attorneys' fees. The Appellate Division modified that order by declaring that TAG had no duty under the lease to maintain terrorism insurance, and reversed the award of damages and attorneys' fees.

In MODIFYING the Appellate Division's order, the unanimous Court of Appeals held that TAG breached its obligation under the lease by obtaining insurance that that excluded from coverage all methods potentially used by terrorists, including the named perils in the lease.

TAG was required to obtain only a "named-perils" policy to provide coverage for fire and the specifically named-perils in the standard Fire Insurance Policy and Endorsement. It is undisputed that the lease here is silent as to whether it includes or excludes acts of terrorism.

Under Section 6.01 (a) of the lease, TAG was required to maintain insurance for the building against fire and loss or damage by other risks under the Standard Fire Insurance Policy and Endorsement, covering windstorm, hail, smoke, riot, civil commotion, explosion and physical contact with the building by an aircraft or vehicle, irrespective of whether the mechanism of loss was the result of a terrorist act. The standard Fire Insurance Policy, as set forth in Insurance Law § 3404 (e), provides that the insuring party must protect against all direct loss by fire and lightning, and provides for other minimum requirements for standard fire insurance policies (see Lane v. Security Mut. Ins. Co., 96 NY2d 1 [2001]). Thus, fire insurance policies must contain "terms and provisions no less favorable to the insured than those contained in the standard fire policy" (Insurance Law § 3404 [f][1][A]). If a policy contains a less favorable term, it "is enforceable as if it conformed with the statutory tandard" (1303 Webster Ave. Realty Corp. v. Great Am. Surplus Lines Ins. Co., 63 NY2d 227, 231 [1984]).

* * * * *

ComMet contends that "terrorism" includes actions taken by individuals who may use any of the enumerated perils to cause damage to the building. TAG, on the other hand, contends that the insurance it procured provided coverage for any of the named perils and thus it met its obligations under the lease, even though its policy
excluded "terrorism." TAG is mistaken.

TAG's insurance violated Insurance Law § 3404. In Lane v. Security Mut. Ins. Co. (96 NY2d 1 [2001]), we held that a fire insurance policy that excludes coverage for an intentional fire set by "an insured" violates Insurance Law § 3404. In that case, the plaintiff-insured's son, a stranger to the policy, damaged the insured premises by setting it on fire. We held that the insurer violated the Insurance Law by providing less coverage than the minimum level of coverage for fire insurance provided in the
standard policy, because it disallowed coverage for a third party intentionally using fire to cause damage to the building. The same reasoning can be applied here too, where terrorists may cause fire damage to a building. We reject TAG's contention that because terrorism is not specifically mentioned as a named peril, it is outside of the coverage.

TAG's policy also failed to meet its coverage obligations under the lease. "Terrorism" is commonly defined as "[t]he use or threat of violence to intimidate or cause panic, [especially] as a means of affecting political conduct (see Black's Law Dictionary 1512-1513 [8th ed 2004]). The term is not limited to a specific cause of harm (e.g. a fire, explosion, collision with an aircraft), but rather it can also describe individuals, with a common purpose, who may potentially utilize any of the lease's named perils to cause damage to the building. Thus, by purchasing a policy that excludes from coverage all methods potentially used by terrorists, including the named perils in the lease, TAG breached its lease.