Gilbert Frank Corp. v. Federal Ins. Co.

• Decision Date: 07 April 1987
• Citation: 514 N.Y.S.2d 215,129 A.D.2d 414
• Parties: GILBERT FRANK CORPORATION, Plaintiff-Respondent-Appellant, v. FEDERAL INSURANCE COMPANY, Defendant-Appellant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 215

514 N.Y.S.2d 215

129 A.D.2d 414

GILBERT FRANK CORPORATION, Plaintiff-Respondent-Appellant, v. FEDERAL INSURANCE COMPANY, Defendant-Appellant-Respondent.

Supreme Court, Appellate Division First Department.

April 7, 1987.

I.M. Myers, New York City, for plaintiff-respondent-appellant.

S.M. Cheser, New York City, for defendant-appellant-respondent.

Before MURPHY, P.J., and KUPFERMAN, MILONAS, ROSENBERGER and ELLERIN, JJ.

MEMORANDUM DECISION.

Order of the Supreme Court, New York County (Martin B. Stecher, J.), entered on September 18, 1985, which denied defendant's motion for summary judgment dismissing the complaint and denied plaintiff's cross-motion, is affirmed, with costs and disbursements to plaintiff.

Plaintiff-respondent Gilbert Frank Corporation procured a policy of insurance from defendant-appellant Federal Insurance Company for a period of one year beginning on April 7, 1978. Included in the policy was a provision that an action to recover a claim thereunder had to be instituted within one year of the purported loss. On March 29, 1979, when plaintiff's coverage was still in effect, a burglary occurred at its premises in Brooklyn, New York. Defendant thereafter retained Edward R. Reilly & Co., Inc. to examine plaintiff's alleged loss, and the firm appointed one of its employees, George F. Wilkens, to perform the investigatory work. In addition, Platzman & Rosenberg, certified public accountants, was retained to examine plaintiff's books and records in order to ascertain the extent of the loss. William Rosenberg, a member of the latter firm, was assigned to plaintiff's claim.

Although it is unclear precisely when these two companies were first hired, they did begin their investigations before the expiration of the 12-month limitations period and contacted plaintiff for the purpose of obtaining information with regard to the claim in question. However, except for the request for information, there were no further communications between plaintiff and defendant within the 12-month period. Instead, Wilkens and Rosenberg continued to pursue their investigations. Wilkens submitted periodic reports to defendant both before and after the expiration of the period of limitations as to the progress of his work. Rosenberg's report wasn't completed until October of 1980, some seven months subsequent to the expiration of the limitations period. Plaintiff, in the meantime, heard nothing more from defendant or its agents until May 2, 1980, when it was asked to clarify certain matters and provide further documentation. Three other meetings took place between the parties on July 3, 1980, August 20, 1980 and September 2, 1980, and there were also discussions carried on by telephone. On November 13, 1980, defendant extended a settlement offer to plaintiff, which was rejected.

The instant lawsuit was commenced in January of 1981. Defendant, prior to interposing its answer, moved for dismissal pursuant to CPLR 3211 on the ground that the action was barred by the contractual period of limitations. The Supreme Court granted the motion. On appeal, this court unanimously reversed and reinstated the complaint, finding that the record was "insufficient to resolve the factual issue bearing on the claim by the assured that the carrier waived or should be estopped to assert the 12-month period of limitations, provided for in the policy." (91 A.D.2d 31, at 33, 457 N.Y.S.2d 494.) According to the court therein (at 35-37, 457 N.Y.S.2d 494):

We disagree with the suggestion by respondent that a waiver or estoppel may be found only with reference to acts or conduct during the one-year period for commencement of an action. Respondent mistakenly relies upon the authorities which have held that, to find a waiver or estoppel, it must be demonstrated that the insured was misled or lulled into inactivity by the conduct of the insurer [citations omitted]. In those cases, the focus was upon the conduct of the insurer in relation to the inactivity of the insured during the one-year period within which the action should have been commenced. Thus, the court in each case was concerned with whether the insurance carrier had lulled the assured into inactivity so as to estop the insurer from relying upon the untimeliness of the action. Here, however, we are not as concerned with the insurer having lulled its insured into inactivity, as we are with the legal effect of its having embarked upon an apparent, deliberate course of conduct after the limitation period had elapsed, during which the carrier engaged in alleged substantial and protracted negotiations and a review of books and records of account to fix the nature and extent of the loss. There is no explanation offered as to the necessity for the discussions in light of the assertion now made that, at that time, no claim could have been made by or on behalf of the assured.

We are not concerned here with the situation which confronted the Court of Appeals in Proc v. Home Ins. Co. (17 NY2d 239 [270 N.Y.S.2d 412, 217 N.E.2d 135] ) where the court found the facts insufficient to support a claim of waiver or estoppel, concluding that the insured there had slept on his rights and had not been lulled by his insurer into a sense of false security. Unlike the cited cases, this action, at least on the face of the pleading, raises in issue whether the insurer, with knowledge of a defense sufficient to invalidate any claim made on the policy, acted in an inconsistent manner so as to ratify and recognize the continued validity of the claim, thereby equitably precluding the carrier from reliance upon the limitations period as a defense. The principle has been applied to avoid a forfeiture, where the policy is void or voidable and, we find, should be equally applicable on the issue of the availability to the insurer of the defense of Statute of Limitations [citations omitted].

Thus, we conclude that the alternate issues of waiver, estoppel or both raised herein by the insured in response to the claim by its insurer that the action was untimely commenced, present factual issues which cannot be disposed of summarily on this record.

Defendant thereafter filed its answer and asserted the one-year limitations period as a defense. By notice of motion dated July 17, 1985, defendant moved under CPLR 3212 for summary judgment dismissing the action as barred by the time limitations clause contained in the policy of insurance. Plaintiff cross-moved to dismiss the limitation of time defense. In denying both motions, the Supreme Court noted that "there is very little before me that was not before the Appellate Division when it reversed Special Term previously." Although both parties filed notices of appeal from the Supreme Court's order, only defendant perfected its appeal. In that respect, it is defendant's contention that opinions expressed by this court in its prior decision constituted obiter dicta and do not necessarily have to be followed in connection with the current appeal.

The law is well-established that a request for documentation by the insurer and/or settlement discussions between the parties, whether prior or subsequent to the expiration of a contractual period of limitations, generally do not warrant an estoppel and cannot be deemed a waiver. (Blitman Construction Corp. v. Insurance Company of North America, 66 N.Y.2d 820, 498 N.Y.S.2d 349, 489 N.E.2d 236; Kaufman v. Republic Insurance Company, 35 N.Y.2d 867, 363 N.Y.S.2d 451, 323 N.E.2d 189; Proc v. Home Insurance Company, 17 N.Y.2d 239, 270 N.Y.S.2d 412, 217 N.E.2d 136; Procco v. Kennedy, 88 A.D.2d 761, 451 N.Y.S.2d 487; Van Hoesen v. Pennsylvania Millers Mutual Insurance Company, 86 A.D.2d 733, 447 N.Y.S.2d 47.)

The fact pattern in the present matter, however, is not only distinguishable from those in the foregoing cases, but also seems to present a unique situation. This is because both parties were evidently under the impression that they were operating within a two-year limitations framework. There is, indeed, evidence in the record that defendant doubted whether a 12-month limitations provision was legally enforceable. Nicholas R. Addesa, Regional Property Supervisor for Federal Insurance Company, asserts in the affidavit which he submitted in support of defendant's motion to dismiss that "although I was aware of the twelve month provision in the policy, it was then my belief that such time limit had been increased by the Legislature to two years." It was only when he was advised of "a very recent decision of the Appellate Division, the Bargaintown case, that I learned that that increase to two years was held to apply to fire claims only." It was apparently as a result of defendant's misapprehension regarding the validity of the time limitations clause, a misapprehension which seems to have been shared by plaintiff, that most of the contacts between the insurer and the insured occurred after the expiration of the 12-month period, and defendant's agents didn't complete their investigations until well into the second year following the burglary.

Unfortunately, there do not appear to be any other cases concerning the implications of a mistake made by an insurance carrier in construing a limitations period contained in a policy which it wrote. Graziane v. National Surety Corporation, 102 A.D.2d 950, 477 N.Y.S.2d 813, which largely relied upon our prior ruling in the instant matter, is not at all instructive on this point. In Graziane, there were, as here, extensive and lengthy negotiations which took place after the expiration of the limitations period, but, unlike the matter herein, these contacts continued over a period of five years after the affirmative defense of untimeliness had been interposed. At any rate, the issue is not simply the existence of negotiations between the insurer and insured subsequent to the expiration of the 12-month period.

As this court has already stated when the instant action was previously before...