Igbara Realty Corp. v. New York Property Ins. Underwriting Ass'n

• Decision Date: 23 October 1984
• Citation: 470 N.E.2d 858,63 N.Y.2d 201,481 N.Y.S.2d 60
• Parties: , 470 N.E.2d 858 IGBARA REALTY CORP., Respondent, v. NEW YORK PROPERTY INSURANCE UNDERWRITING ASSOCIATION, Appellant. BONUS WAREHOUSE, INC., Respondent, v. GREAT ATLANTIC INSURANCE COMPANY OF DELAWARE, Appellant. BONUS WAREHOUSE, INC., Respondent, v. NORTH RIVER INSURANCE COMPANY, Appellant. SYD'S DECORATORS INC., Appellant, v. NEW YORK PROPERTY INSURANCE UNDERWRITING ASSOCIATION, Respondent, et al., Defendant. Patrick M. TREXLER et al., Doing Business as Gandlof's, Appellants, v. AMERICAN HOME ASSURANCE COMPANY, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 60

481 N.Y.S.2d 60

63 N.Y.2d 201, 470 N.E.2d 858

IGBARA REALTY CORP., Respondent, v. NEW YORK PROPERTY INSURANCE UNDERWRITING ASSOCIATION, Appellant.

BONUS WAREHOUSE, INC., Respondent, v. GREAT ATLANTIC INSURANCE COMPANY OF DELAWARE, Appellant.

BONUS WAREHOUSE, INC., Respondent, v. NORTH RIVER INSURANCE COMPANY, Appellant.

SYD'S DECORATORS INC., Appellant, v. NEW YORK PROPERTY INSURANCE UNDERWRITING ASSOCIATION,

Respondent, et al., Defendant.

Patrick M. TREXLER et al., Doing Business as Gandlof's, Appellants, v. AMERICAN HOME ASSURANCE COMPANY, Respondent.

Court of Appeals of New York.

Oct. 23, 1984.

Zachary Robb Greenhill, New York City, for appellant in the first above-entitled action

S. Michael Weisberg, New York City, for respondent in the first above-entitled action.

Charles T. Rubin, New York City, for appellants in the second and third above-entitled actions.

Ira M. Myers, New York City, for respondent in the second and third above-entitled actions.

Mark Easton, Levittown, for appellant in the fourth above-entitled action.

Charles T. Rubin, New York City, for respondent in the fourth above-entitled action.

Philip F. Calderone, Albany, for appellants in the fifth above-entitled action.

Francis J. Holloway and John P. Asiello, Albany, for respondent in the fifth above-entitled action.

OPINION OF THE COURT

MEYER, Judge.

The common thread in these four appeals is the effect of sections 168 and 172 of the Insurance Law on the rights of an insured who fails to file proof of loss with the insurer within 60 days after the insurer's demand in writing. In Igbara Realty Corp. v. New York Property Ins. Underwriting Assn., 94 A.D.2d 79, 463 N.Y.S.2d 211 (1983) the question is involved only peripherally; in the other three cases construction of the sections is determinative of the result.

When an insurer gives its insured written notice of its desire that proof of loss under a policy of fire insurance be furnished and provides a suitable form for such proof, failure of the insured to file proof of loss within 60 days after receipt of such notice, or within any longer period specified in the notice, is an absolute defense to an action on the policy, absent waiver of the requirement by the insurer or conduct on its part estopping its assertion of the defense. In Bonus Warehouse v Great Atlantic Ins. Co., 93 A.D.2d 615, 462 N.Y.S.2d 672 (1983), the order of the Appellate Division should, therefore, be reversed and the certified question answered in the negative, and in Syd's Decorators v. New York Prop. Ins. Underwriting Assn., 97 A.D.2d 722, 468 N.Y.S.2d 631 (1983) and Trexler v. American Home Assur. Co., 96 A.D.2d 686, 466 N.Y.S.2d 528 (1983), the respective orders of the Appellate Division should be affirmed, in each case with costs.

When such a demand has been made, however, and the insured's time to file proof of loss has not expired at the time the insurer's answer in an action on the policy is due, the requirement is not waived by the insurer's service of an answer asserting defenses other than the failure to file proof of loss. In Igbara Realty Corp. v. New York Prop. Ins. Underwriting Assn., the insurer having moved for leave to serve an amended answer asserting defenses of failure to file proof of loss after demand and lack of capacity of the corporate plaintiff insured by reason of its dissolution for nonpayment of taxes prior to issuance of the policy, and for summary judgment on the proof of loss defense, it was, therefore, error for the Appellate Division to deny on the law so much of the motion as sought leave to assert the failure of proof defense. It was not, however, error for that court to reverse so much of the order of Special Term as granted the insurer summary judgment dismissing the complaint for lack of capacity. The order of the Appellate Division in Igbara should, therefore, be modified as hereafter set forth and, as so modified, should be affirmed, with costs, and the certified question answered in the negative.

I

Igbara involves a corporation dissolved for nonpayment of taxes on March 27, 1979, which purchased from defendant Underwriting Association a fire insurance policy effective February 23, 1980. On May 31, 1981, the property insured by Igbara was totally destroyed by fire. Action was begun on the policy by service of summons on December 28, 1981, and the complaint was served on January 25, 1982. A demand for the filing of proof of loss, with which blank forms were enclosed, was made by defendant by letter dated January 18, 1982. It was stipulated that the demand was received by Igbara within a few days thereafter. On February 12, 1982, the Underwriting Association served its answer, which consisted of denials only, but on March 4, 1982, it served an amended answer alleging affirmative defenses of increased hazard, willful exaggeration, arson and false swearing, among other defenses.

Thereafter the Association moved (1) for leave to amend its answer to assert as additional defenses (a) the failure of plaintiff to file with defendant proof of loss though more than 60 days had elapsed since receipt by plaintiff of its demand, and (b) plaintiff's lack of capacity to sue, and (2) for summary judgment, ¹ on the ground of plaintiff's failure to file proof of loss. Although summary judgment had not been requested with respect to the defense of lack of capacity, Special Term, without considering the motion to amend or the failure to file proof of loss, dismissed the complaint for lack of capacity, as a matter of law. The Appellate Division, First Department, concluded that it did not necessarily follow that a dissolved corporation may not obtain fire insurance and sue on the policy, but held that the affirmative defenses asserted in the amended answer interposed before the time to file proof of loss had expired was a repudiation by defendant of liability on the policy which excused plaintiff from complying with the demand. It, therefore, reversed on the law the order dismissing the complaint, denied the motion to dismiss, denied leave to assert the defense of failure to file proof of loss, but granted, without passing on the merits of the defense, leave to defendant to serve an amended answer asserting lack of capacity as a defense. The appeal is before us by leave of the Appellate Division, which certified the question whether its order was properly made.

In Bonus Warehouse, plaintiff suffered a fire loss on April 6, 1981 which destroyed its entire stock. At that time plaintiff was insured under fire policies of $50,000 with Great Atlantic Insurance Company and $100,000 with North River Insurance Company. Written demands for proof of loss were made by each carrier by letter, enclosing the necessary forms, which plaintiff concedes were received within a few days after their respective dates (Aug. 31, 1981 from Atlantic and Aug. 27, 1981 from North River). Proofs of loss were not received by the defendant insurers until January 16, 1982 and were rejected as untimely by each company on January 20, 1982. On March 8, 1982, Bonus began separate actions against the two insurers. Each served an answer asserting affirmative defenses, including the failure of plaintiff to file proof of loss within 60 days after demand, and moved for summary judgment on the basis of that defense. Opposing the motions, plaintiff noted that it had met with defendants' adjusters within two or three days after the fire, had supplied defendants with requested data and records and had agreed to submit to examination under oath, and had been misled by the demand which was but two sentences contained in a two-page letter and nowhere informed it that proof of loss had to be submitted within 60 days.

Special Term denied both motions and on appeal the Appellate Division, Second Department, affirmed, holding that under section 172 of the Insurance Law, failure to submit timely proofs of loss is not an absolute defense and may be excused if the failure was not willful and the delay was under all of the circumstances but a technical and unimportant omission. The appeal to us is by leave of the Appellate Division, which certified the question whether its order was properly made.

In the Syd's Decorators case, the fire occurred on October 22, 1980, the insurer's demand that proof of loss be filed and that plaintiff appear for examination under oath was received by plaintiff insured on August 10, 1981, plaintiff's president was examined under oath on October 6, 1981, but no proof of loss was served prior to the commencement of action in September, 1982. Defendant's answer asserted, among others, an affirmative defense based on the failure to file proof of loss and defendant moved for summary judgment on that ground. Noting that the demand had not been renewed after the oral examination, plaintiff asserted that it had believed attendance at the examination to be full compliance with the demand.

Special Term denied the motion and granted plaintiff leave to serve sworn proof of loss forms within 30 days after publication of its decision. The Appellate Division, First Department, reversed, concluding that defendant's letter was not misleading, that submission to examination was neither a substitute for nor excused lack of compliance with the proof of loss requirement, and that because plaintiff had never filed such a proof it could not be deemed in substantial compliance. Plaintiff appealed to this court as of right (CPLR 5601, subd. par. ). ²

Plaintiffs in the Trexler case sustained two separate fire losses on March 24, 1980 and April 1, 1980. Written demands for proofs of loss were received by plaintiffs on June 18 and June 30, 1980, and examination under oath was conducted on July 1, 1980. The case differs from the others in that the demand contained the statement that, "Proofs of Loss and schedules must be filed within sixty (60) days after receipt of this notice", and that the examination ended with the...