N.Y. Ins. Ass'n, Inc. v. State

• Decision Date: 27 October 2016
• Citation: 2016 N.Y. Slip Op. 07076,145 A.D.3d 80,41 N.Y.S.3d 149
• Parties: NEW YORK INSURANCE ASSOCIATION, INC., et al., Appellants, et al., Plaintiffs, v. STATE of New York et al., Respondents.
• Court: New York Supreme Court — Appellate Division

145 A.D.3d 80
41 N.Y.S.3d 149
2016 N.Y. Slip Op. 07076

NEW YORK INSURANCE ASSOCIATION, INC., et al., Appellants, et al., Plaintiffs,
v.
STATE of New York et al., Respondents.

Supreme Court, Appellate Division, Third Department, New York.

Oct. 27, 2016.

41 N.Y.S.3d 152

O'Connell & Aronowitz, Albany (Jeffrey J. Sherrin of counsel), for appellants.

Eric T. Schneiderman, Attorney General, Albany (Victor Paladino of counsel), for respondents.

Before: PETERS, P.J., McCARTHY, GARRY, CLARK and AARONS, JJ.

CLARK, J.

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Appeal from an order of the Supreme Court (McDonough, J.), entered March 31, 2015 in Albany County, which, among other things, granted defendants' motion for summary judgment dismissing the third amended complaint.

Plaintiff New York Insurance Association, Inc. (hereinafter NYIA) is a non-profit trade association comprised of property and casualty insurance companies, domestic and foreign, that issue insurance policies throughout New York. Pursuant to Financial Services Law § 206 and its repealed predecessor, Insurance Law former § 332, certain of NYIA's members, including the six named plaintiff property and casualty insurance companies (hereinafter collectively referred to as plaintiff insurers), are required to pay assessment fees to defray the operating expenses of the Department of Financial Services (hereinafter DFS) and its predecessor, the Insurance Department

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¹ —two administrative bodies charged with supervising and regulating the insurance industry (see Financial Services Law §§ 102, 201). Specifically, domestic insurers and licensed United States branches of alien insurers domiciled in New York (hereinafter collectively referred to as insurers) are required to pay their pro rata shares of the annual expenses of the Department (see Insurance Law former § 332; Financial Services Law § 206). Insurers receive quarterly invoices demanding payment of their pro rata shares of the Department's annual expenses and, at the end of each fiscal year, they receive final or “true-up” assessment invoices requiring those insurers that had paid less than their pro rata

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shares to pay the difference and affording those insurers that had overpaid the option of a refund or a credit against subsequent assessments (see Insurance Law former § 332[b]; Financial Services Law § 206[b] ). Assessments are deposited into the Department's “339.B6 account,” a special revenue fund.

In April 2008, the Legislature enacted a budget bill for fiscal year 2008–2009, which included the costs of various governmental programs (hereinafter referred to as the sub-allocated programs)—most of which were administered by other state agencies—in the Department's appropriated expenses. The budget bills enacted for the fiscal years from 2009–2010 through 2012–2013 also included the costs of the sub-allocated programs. Further, in February 2009, the Legislature enacted a statute which provided that, notwithstanding any law to the contrary, for fiscal year 2008–2009, “the total value of the annual assessment w[ould] be equal to the total value of the [D]epartment's enacted appropriations,” as opposed to the Department's actual expenses, and that, if the total value of the assessment exceeded the Department's actual annual expenses, the State Comptroller was, at the request of defendant Director of the Budget, authorized and directed to transfer up to $4.5 million from the unencumbered balance of the Department's 339.B6 account into the general fund of defendant State of New York (L 2009, ch 2, part H, § 1). The Legislature enacted five similar statutes for fiscal years 2009–2010 and 2010–2011 (see L 2009, ch 56, part PP, § 2 [up to $15 million]; L 2009, ch 503, part E,

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§ 3 [up to $575 million]; L 2009, ch 503, part E, § 5 [up to $4.94 million]; L 2010, ch 56, part JJ, § 9 [up to $500 million]; L 2010, ch 56, part JJ, § 14 [any amount] ). Pursuant to these statutes, six transfers of the unused assessments were made from the Department's 339.B6 account into the State's general fund, totaling over $89 million.

In January 2010, NYIA and plaintiff insurers (hereinafter collectively referred to as plaintiffs) commenced this action for, among other things, declaratory relief challenging the assessments levied during fiscal years 2008–2009 and 2009–2010 to fund the sub-allocated programs, as well as the statute enacted in February 2009 that authorized the transfer of unused assessments from the 339.B6 account into the State's general fund (see L 2009, ch 2, part H, § 1). In 2011 and 2013, following joinder of issue, plaintiffs filed amended complaints extending the scope of their claims to include the assessments levied during fiscal years 2010–2011 and 2011–2012 to fund the sub-allocated programs and to add five causes of action challenging the statutes authorizing the five additional transfers of the unused assessments during fiscal years 2009–2010 and 2010–2011. Defendants answered both amended complaints.

In November 2013, plaintiffs and defendants each moved for summary judgment, and, in February 2014, plaintiffs moved for leave to file a third amended complaint to join as parties other individual members of NYIA and to extend their existing claims to include the portions of the assessments levied during fiscal year 2012–2013 to fund the sub-allocated programs. Defendants cross-moved for an order holding the parties' summary judgment motions in abeyance and, in the event that Supreme Court granted plaintiffs leave to file a third amended complaint, for permission to conduct additional discovery. Supreme Court granted defendants' cross motion, held the summary judgment motions in abeyance pending the conclusion of further discovery, granted plaintiffs' motion to the extent of allowing them to file a third amended complaint and otherwise denied

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plaintiffs' motion. Plaintiffs filed a third amended complaint and defendants answered. Thereafter, upon the completion of discovery and after the parties supplemented their respective summary judgment motions, Supreme Court, among other things, granted defendants' summary judgment motion dismissing the third amended complaint and declared that Financial Services Law § 206 and its repealed predecessor,

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Insurance Law former § 332, were “constitutional, valid and enforceable as applied to plaintiffs.” Plaintiffs appeal.

Plaintiffs' claims, insofar as relevant to this appeal,² can be separated into two categories: those that challenge the propriety of including the costs of the sub-allocated programs in the annual assessments levied during fiscal years 2008–2009 through 2012–2013 and those that challenge the six statutes authorizing the retention of assessments levied in excess of the Department's actual expenses in fiscal years 2008–2009, 2009–2010 and 2010–2011, as well as the transfers of unused assessments into the State's general fund. Causes of action one through four fall into the former category, while causes of action six through eleven fall into the latter category. We first focus our attention on those of plaintiffs' arguments concerning causes of action one through four.

Plaintiffs challenge Supreme Court's dismissal of portions of their first cause of action, as well as their second cause of action, as time-barred. “In order to determine the [s]tatute of [l]imitations applicable to a particular declaratory judgment action, the court must ‘examine the substance of that action to identify the relationship out of which the claim arises and the relief sought’ ” (Matter of Save the Pine Bush v. City of Albany, 70 N.Y.2d 193, 202, 518 N.Y.S.2d 943, 512 N.E.2d 526 [1987], quoting Solnick v. Whalen, 49 N.Y.2d 224, 229, 425 N.Y.S.2d 68, 401 N.E.2d 190 [1980] ; see Gress v. Brown, 20 N.Y.3d 957, 959, 958 N.Y.S.2d 675, 982 N.E.2d 595 [2012] ; Thrun v. Cuomo, 112 A.D.3d 1038, 1040, 976 N.Y.S.2d 320 [2013], lv. denied 22 N.Y.3d 865, 2014 WL 1316287 [2014] ). “If that examination reveals that the rights of the parties sought to be stabilized in the action for declaratory relief are, or have been, open to resolution through a form of proceeding for which a specific limitation period is statutorily provided, then that period limits the time for commencement of the declaratory judgment action” (Solnick v. Whalen, 49 N.Y.2d at 229–230, 425 N.Y.S.2d 68, 401 N.E.2d 190 ; accord Press v. County of Monroe, 50 N.Y.2d 695, 701, 431 N.Y.S.2d 394, 409 N.E.2d 870 [1980] ; see Gress v. Brown, 20 N.Y.3d at 959, 958 N.Y.S.2d 675, 982 N.E.2d 595 ; Spinney at Pond View, LLC v. Town Bd. of the Town of Schodack, 99 A.D.3d 1088, 1089, 953 N.Y.S.2d 314 [2012] ). “Where, as here, governmental activity is being challenged, the immediate inquiry is whether the challenge could have been advanced in a CPLR article 78 proceeding” (Northern Elec. Power Co., L.P. v. Hudson Riv.-Black Riv. Regulating

145 A.D.3d 88

Dist., 122 A.D.3d 1185, 1187, 997 N.Y.S.2d 793 [2014]...