Allstate Ins. Co. v. Stein

• Decision Date: 19 February 2004
• Citation: 775 N.Y.S.2d 219,1 N.Y.3d 416,807 N.E.2d 268
• Parties: ALLSTATE INSURANCE COMPANY, as Subrogee of AMY M. WALKER, Appellant, v. DANIEL J. STEIN, Respondent. (And Two Other Actions.)
• Court: New York Court of Appeals Court of Appeals

1 N.Y.3d 416

807 N.E.2d 268

775 N.Y.S.2d 219

ALLSTATE INSURANCE COMPANY, as Subrogee of AMY M. WALKER, Appellant, v. DANIEL J. STEIN, Respondent. (And Two Other Actions.)

Court of Appeals of the State of New York.

Argued January 13, 2004.

Decided February 19, 2004.

Chelus, Herdzik, Speyer, Monte & Pajak, P.C., Buffalo (Gregory V. Pajak and Kevin E. Loftus of counsel), for appellant.

Bouvier, O'Connor, LLP, Buffalo (Norman E.S. Greene of counsel), for respondent.

Chief Judge KAYE and Judges G.B. SMITH, CIPARICK, ROSENBLATT, GRAFFEO and READ concur.

OPINION OF THE COURT

R.S. SMITH, J.

This appeal concerns the timeliness of an action by an insurance company as subrogee of an accident victim to whom the insurance company has paid additional personal injury protection (APIP) benefits. The question presented is whether the statute of limitations runs from the date of the accident or the date when the first APIP benefits were paid. We hold that the statute runs from the date of the accident, and that the insurer's action is therefore time-barred.

Factual Background

On May 24, 1995, a vehicle operated by Daniel Stein struck a vehicle being operated by Amy Walker and injured her. New York's No-Fault Law required that Walker have insurance coverage providing "[f]irst party benefits" consisting of reimbursement, to the extent specified by statute, for "[b]asic economic loss" (health expenses, loss of earnings, and other reasonable and necessary expenses) (Insurance Law § 5102 [a], [b]; § 5103 [a]). As the term "no-fault" implies, these first party benefits were payable to Walker regardless of who was at fault, and neither Walker nor her insurer could recover them from Stein (Insurance Law § 5104 [a]).

As authorized by New York Insurance Department Regulations (11 NYCRR) § 65-1.3 (though not required by statute), Walker had also purchased an APIP endorsement from Allstate Insurance Company covering her for "extended economic loss"—i.e., economic loss exceeding the time and dollar limits of the "basic economic loss" that is subject to mandatory no-fault coverage. Recovery of "extended economic loss" from third parties is not restricted by the no-fault statute.

On August 2, 1996, Walker began an action against Stein in Supreme Court, alleging that she had sustained a serious injury, which would permit her to recover noneconomic loss without violating the no-fault statute (Insurance Law § 5104 [a]), and also seeking to recover economic loss other than her basic economic loss. Thus, Walker sought to recover from Stein the same "extended economic loss" that was covered by the APIP endorsement in her Allstate policy.

By June 29, 1998, Walker's basic no-fault coverage had evidently been exhausted, and Allstate made its first payment of APIP benefits to Walker. Allstate alleges that by May of 2001 it had paid more than $42,000 to Walker in APIP benefits. By making those payments, Allstate became subrogated to a portion of Walker's claim against Stein.

On February 20, 2001, counsel for the parties in Walker's action against Stein appeared, along with counsel for Allstate, at a conference before Supreme Court. Walker's counsel stated that Walker and Stein had agreed on a $300,000 settlement of the action. Counsel for Stein stated that the release Stein expected to get from Walker "cuts off any rights that Allstate would have against either Mr. Stein or [Stein's insurance carrier]" and requested a "clarification ... to that effect" from Allstate's counsel. Allstate's counsel, without commenting directly on the request for clarification, stated that Walker "has been made aware of the possible subrogation claim in the amount of 43 thousand dollars ... and that she understands that in entering into this release." Counsel for Walker added his own "clarification" stating that Walker is "giving a general release to the defendant [and] ... is reserving whatever rights or obligations or defenses she or her husband may have to any party to this proceeding, including Allstate Insurance Company, and I'm not conceding on the record that there's a right of subrogation or anything else."

Thus, it seems that the three parties represented at the conference had three different, and inconsistent, understandings of the settlement: Stein understood that he was getting a complete release, good against both Walker and Allstate; Allstate understood that it was preserving what it called a "subrogation claim," though its counsel's statement may be read as implying a claim against Walker for part of the $300,000, rather than against Stein for some additional amount; and Walker apparently understood that she would keep the whole $300,000, and did not recognize that Allstate was entitled to anything. Walker's counsel added that "[W]e're all going to let the law ... determine what rights and obligations, if any, anyone has," and the court echoed this comment: "[I]t's clear on the record that all three parties are saying that they intend to fully enforce their rights to the full extent of the law and defenses that they might have."

On February 23, 2001, Walker's counsel delivered to Stein's counsel an unqualified general release in Stein's favor, executed by Walker and her husband, but not by Allstate. Stein resisted paying Walker the full $300,000 in return for this release. He paid Walker $200,000, and sought to require Walker and Allstate to resolve the allocation of the remaining $100,000 between themselves: first, Stein offered a $100,000 draft payable to both Walker and Allstate; he later began an interpleader action. Walker rejected the $100,000 draft and caused a judgment in the amount of $100,000 to be entered against Stein. Stein moved to vacate the judgment.

Despite its counsel's comments at the settlement hearing, Allstate apparently made no effort to recover from Walker any portion of the $300,000 settlement. However, on May 4, 2001 Allstate, "as Subrogee of Amy M. Walker," began its own action against Stein. This action, the third to be brought (after Walker's original lawsuit and Stein's interpleader action), is the one whose timeliness is now in issue. Allstate's complaint alleged that Walker had been injured through Stein's negligence; that as a result of those injuries, she had suffered losses for which Allstate paid her compensation in the form of APIP benefits; that Allstate had become Walker's subrogee under the terms of its policy and the applicable insurance regulations; and that Allstate was therefore entitled to recover from Stein the APIP benefits it had paid. Stein moved to dismiss Allstate's action based on, among other grounds, the statute of limitations.

Supreme Court resolved the three-cornered dispute by allowing Walker's judgment against Stein to stand, dismissing Stein's interpleader complaint and denying Stein's motion to dismiss Allstate's action. Stein appealed to the Appellate Division, which, by a three-two vote, reversed the denial of Stein's motion to dismiss, holding that Allstate's claim was barred by the statute of limitations. Allstate appeals as of right (CPLR 5601 [a]).

Discussion

Stein contends that Allstate, as Walker's subrogee, stands in Walker's shoes and was therefore required to bring suit by May 24, 1998, three years after the date of Walker's accident, and almost three years before Allstate in fact sued.¹ Allstate contends that, by making APIP payments to Walker, it acquired a new cause of action against Stein on June 29, 1998 and was permitted to sue until three years after that date.²

In deciding the issue in Stein's favor, the Appellate Division majority analyzed the question, we think correctly, as follows:

"Allstate's subrogation action is governed by the same statute of limitations applicable to action No. 1, the personal injury action commenced by the Walkers against Stein. That is consistent with the principles that a subrogation claim is derivative of the underlying claim and that the subrogee possesses only such rights as the subrogor possessed, with no enlargement or diminution. It is likewise consistent with the principle that a defendant in a subrogation action has against the subrogee all defenses that he would have against the subrogor, including the same statute of limitations defense that could have been asserted against the subrogor" (305 AD2d 972, 974 [2003] [citations omitted]).

Allstate does not dispute that the above quotation correctly states the law applicable to subrogation generally. It contends, however, that the right asserted by Allstate in this case is not an ordinary subrogation right, but a creature of statute (as implemented by Insurance Department regulation), and that this case is therefore analogous to Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur....