Kelly v. Bremmerman

• Decision Date: 28 December 1967
• Citation: 234 N.E.2d 217,21 N.Y.2d 195,287 N.Y.S.2d 41
• Parties: , 234 N.E.2d 217 Audrey R. KELLY, as Insurance Commissioner of the Commonwealth of Pennsylvania, as Statutory Liquidator of General Mutual Fire Insurance and Reinsurance Company (Dissolved), Appellant, v. Sidney BREMMERMAN, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 41

287 N.Y.S.2d 41

21 N.Y.2d 195, 234 N.E.2d 217

Audrey R. KELLY, as Insurance Commissioner of the Commonwealth of Pennsylvania, as Statutory Liquidator of General Mutual Fire Insurance and Reinsurance Company (Dissolved), Appellant, v. Sidney BREMMERMAN, Respondent.

Court of Appeals of New York.

Dec. 28, 1967.

Richard Rodwin, Harry Rodwin and Jacques B. Gelin, New York City, for appellant.

Philip C. Pinsky, Syracuse, for respondent.

BREITEL, Judge.

Plaintiff, the Insurance Commissioner of the Commonwealth of Pennsylvania, appeals as of right from an order of the Appellate Division, Fourth Department. Plaintiff Commissioner, suing as the statutory liquidator of a Pennsylvania mutual insurance company which failed in 1951, brought this plenary action in 1963 against defendant, a former policyholder of the company, to collect an assessment totaling $1,274.71. While the complaint was framed in a single cause of action, the assessment was based on two policies previously owned by defendant, one of which expired in 1950 and the other in 1951. The parties cross-moved for summary judgment and the Supreme Court, Onondaga County, 42 Misc.2d 148, 247 N.Y.S.2d 655, granted plaintiff Commissioner's motion in an opinion. The Appellate Division reversed in an opinion, 23 A.D.2d 346, 260 N.Y.S.2d 971, and granted judgment to defendant policyholder dismissing so much of the assessment as was apportioned to the 1950 policy. The court also held that 'a trial of the factual issues should be had to determine whether the defendant is liable' for the remaining portion of the assessment attributable to the second (1951) policy.

It is concluded that the order of the Appellate Division should be affirmed insofar as it granted summary judgment to defendant on the 1950 policy. With respect to the 1951 policy, however, the Appellate Division order is nonfinal and the appeal therefrom should be dismissed.

In 1949, defendant, a New York resident, took out a liability and collision policy on a tractor and trailer with the General Mutual Fire Insurance and Reinsurance Company, a mutual company incorporated in Pennsylvania. General Mutual was not licensed to do business in New York but it is alleged that defendant's coverage was written by an agent in Pennsylvania, having been transmitted through a New York excessline broker (see Insurance Law, § 122, Consol.Laws, c. 28, subd. 1). Defendant's policy, effective from September 19, 1949 to September 19, 1950, contained the following provisions relating to his liability for assessment of additional premiums:

'MUTUAL PROVISIONS: THE INSURED IS HEREBY NOTIFIED--That by virtue of this policy he is a member of the GENERAL MUTUAL FIRE INSURANCE AND REINSURANCE COMPANY, PHILADELPHIA, PENNA., and that the annual meeting of said company is held at its home office on the fourth Monday in April of each year.

'The liability to premium calls on this policy is limited to an amount not to exceed one time the premium written in this policy.

'Any such additional premium, as so limited, shall be levied within one year from the date of expiration or cancellation of this policy and not later.'

Upon expiration of this policy on September 19, 1950, defendant took out another at a lower premium, providing coverage from September 19, 1950 until September 19, 1951. This policy contained the same provisions set forth above.

On November 2, 1951, more than a year after the expiration date of defendant's 1950 policy and less than two months after the expiration date of the 1951 policy, the Court of Common Pleas (Dauphin County, Pa.) ordered the dissolution of the company and the appointment of plaintiff Commissioner as its liquidator. Under Pennsylvania law, the Commissioner was thereupon 'vested * * * with title to all of the property, contracts, and rights of action of (the company) * * * as of the date of the order so directing him to liquidate' (Purdon's Pa.Stat.Ann., tit. 40, § 206).

On January 10, 1958, over six years later, the Commissioner filed a petition with the Court of Common Pleas, requesting for the first time 'an additional premium or assessment' from all policyholders 'who had policies (issued by the company) in force between December 22, 1947 and November 1, 1951 (the loss period).' The assessments were to be based upon each policyholder's 'proportionate share of the losses occurring during the period of (his) membership'. The petition was granted on May 10, 1958, and defendant, who had been a policyholder during the 'loss period,' subsequently received a notice of assessment of $695.41 on the 1950 policy (approximately 90% Of the original premium) and $579.30 for the 1951 policy (100% Of the original premium).

After demand and refusal, the Commissioner began this action on July 8, 1963. The complaint, framed as one cause of action, demanded a total recovery of $1,274.71. The answer raised five affirmative defenses applicable to both policies, including the policy provision that precluded the imposition of additional premiums more than one year after expiration.

Special Term entered judgment for the Commissioner on both policies. The court held that it was bound by full faith and credit to enforce the Pennsylvania assessment decree and, while defendant might raise defenses 'of an individual nature', the one-year policy limitation 'is not a personal defense inasmuch as it goes to the very essence of the assessment order.' As for the Statute of Limitations, the court held that the action was timely as it had been instituted within six years of the assessment decree (May 10, 1958).

The Appellate Division reversed and held that the one-year policy limitation barred the Commissioner from levying an assessment on the first policy because it had expired on September 19, 1950, more than one year before the order of dissolution on November 2, 1951. The limitation was held not to bar the assessment on the second policy, even though a demand was not made until 1958, on the ground that 'as the company had the right to levy an assessment against this policy at the time the order of liquidation was entered, that right was preserved to the liquidator.' The court also denied summary judgment to either party on the 1951 policy, holding that a trial would be necessary to determine 'the legality of the contract' and the applicability of the Statute of Limitations.

Before turning to the merits, there is a threshold question (not raised or briefed by either party) as to whether an appeal may be taken from any part of the Appellate Division order. Certainly, it is non-appealable as of right insofar as it denied summary judgment to either party on the 1951 policy and directed a trial (McKenna v. Metropolitan Life Ins. Co., 247 N.Y. 527, 161 N.E. 169; Apfel v. Auditore, 244 N.Y. 507, 155 N.E. 875; Cohen and Karger, Powers of the New York Court of Appeals, § 40, p. 161).

As noted above, the complaint was framed as only one cause of action, but the Appellate Division, in discussing and disposing of the case treated it as if two assessment claims were presented, one on each policy. While the two claims are related, in some respects they involve truly separate issues because the insurance policies upon which they are based differ in one important respect--their expiration dates. Consequently, the claim on the 1950 policy was 'impliedly severed' and is, therefore, appealable, even though there is a relatively close relationship between the claims (see Sirlin Plumbing Co. v. Maple Hill Homes, 20 N.Y.2d 401, 283 N.Y.S.2d 489, 230 N.E.2d 394 (indicating that recent decisions have applied the doctrine of implied severance even when the claims involved are directly related and arise out of the same transaction); compare Lichtenstein v. Levitt, 8 A.D.2d 789, 188 N.Y.S.2d 948, mot. for lv. to app. dsmd. 7 N.Y.2d 705, 193 N.Y.S.2d 1026, 162 N.E.2d 753; 7 N.Y.2d 720, 193 N.Y.S.2d 457, 162 N.E.2d 637 (refusing to apply rule when causes of action were not separately stated and were mutually interdependent)).

The Commissioner makes three arguments that defendant may be assessed under the 1950 policy: New York is bound by 'full faith and credit' to implement the 1958 assessment decree affecting policyholders between December 22, 1947 and November 1, 1951; the one-year limitation clause in the policy contravenes Pennsylvania law; and, even if it does not, it is not binding upon the Commissioner.

As the Appellate Division held, even though defendant was not a party to the Pennsylvania proceedings, the assessment decree is conclusive in this action as to the necessity for the assessment and the amount charged (see, e.g., Great Western Tel. Co. v. Purdy, 162 U.S 329, 16 S.Ct. 810, 40 L.Ed. 986). But, as the Pennsylvania decree was in rem only, defendant is entitled to raise any personal defenses he may have in this action, including defenses based upon the provisions of his policy. This court summarized the applicable principles in Stone v. Penn Yan, Keuka Park & Branchport Ry., 197 N.Y. 279, 238--284, 90 N.E. 843, 845. 'In this suit by the receiver to recover the amount of the assessments upon the policies held by the...