Royal Ins. Co. of America v. Ru-Val Elec. Corp.

Decision Date12 March 1996
Docket NumberNo. CV-92-4911.,CV-92-4911.
Citation918 F. Supp. 647
PartiesROYAL INSURANCE COMPANY OF AMERICA and Safeguard Insurance Company, t/a Royal Insurance Company as subrogees of Clement and Rose Vicari, Plaintiffs, v. RU-VAL ELECTRIC CORP., The New York Board of Fire Underwriters and The Aetna Casualty and Surety Company, Defendants, v. The AETNA CASUALTY AND SURETY COMPANY, Third Party Defendant.
CourtU.S. District Court — Eastern District of New York

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Michael J. Sommi, John F. Brown, Jr., Paul R. Bartolacci, Cozen and O'Connor, New York City, for plaintiffs.

George R. Daly, Donald T. Rave, Jr., Timothy P. Lennon, Bigham Englar Jones & Houston, New York City, for defendant New York Board of Fire Underwriters.

William R. White, White, Quinlan, Staley & Ledwith, Garden City, NY, for defendant Ru-Val Electric Corp.

Michael Majewski, Mineola, NY, for third party defendant.

AMENDED MEMORANDUM AND ORDER

WEINSTEIN, Senior District Judge:

                I.    Introduction..............................................................650
                II.   Facts.....................................................................651
                      A. The Parties............................................................651
                      B. Town Ordinance.........................................................651
                III.  Procedural History........................................................652
                IV.   New York Law Applicable...................................................652
                V.    Law Relating to Determination of Status as Servant or Independent Contractor
                      ..........................................................................652
                      A. Generally..............................................................652
                      B. Policy Considerations Where Principal is Governmental Body.............653
                      C. Application to Facts...................................................654
                VI.   Law Relating to Statute of Limitations....................................655
                      A. Claims Against Municipalities..........................................655
                      B. Contract and Tort Claims...............................................656
                      C. Application to Facts...................................................658
                VII.  Law Relating to Governmental Immunity.....................................658
                      A. Sovereign Immunity.....................................................658
                      B. Modern Local Government Immunity.......................................659
                      C. Immunity and Independent Contractors...................................659
                      D. Application to Facts...................................................660
                VIII. Conclusion................................................................660
                

I. Introduction

A fire caused significant property damage to a house, allegedly because of defective wiring. The involved insurance companies disagree about which of them is liable. One defendant, the New York Board of Fire Underwriters, seeks protection of local government immunity from tort liability and asserts various statute of limitations defenses against any liability for its alleged negligent inspection of the wiring. This memorandum addresses only the Board's motion for summary judgment.

Its inspectors, the Board claims, are authorized by town ordinance as the town's representatives to perform electrical inspections, and thus are entitled to the immunity from tort liability that protects town employees. The Board also maintains that plaintiffs' claim is barred by applicable statutes of limitation. It argues that it and its inspectors, as authorized representatives of the municipality, are entitled to protection under General Municipal Law section 50-i (requiring that a suit against a town be brought within a year plus ninety days) and section 50-e (requiring that a municipality be notified of a claim within 90 days). Alternatively, it urges that under the general three-year negligence and six-year contract statutes of limitations the claim is barred because claims accrue at the latest at the time a certificate of passing inspection is issued by the Board.

For the reasons indicated below, the Board's motion for summary judgment is granted because, while the Board is not entitled to the protection due a municipality or its employees, the suit against it is barred under general statutes of limitations.

II. Facts

A. The Parties

Clement and Rose Vicari hired defendant Ru-Val Electric Corporation as an electrical contractor for the construction of their residence in Oyster Bay, Long Island. Ru-Val completed the work in January 1987. Defendant New York Board of Fire Underwriters inspected the electrical work on November 25, 1986 and issued a certificate of compliance with electrical codes on December 5, 1986.

On August 24, 1992 a fire at the Vicari residence resulted in property damage. An investigation showed that the electrical work performed by Ru-Val violated numerous fire and safety codes and standards and that the violations contributed to the fire.

Plaintiffs are insurers suing as subrogees of the Vicaris on their claim for property damage. They filed the original complaint in this action against Ru-Val on October 16, 1992. Ru-Val has been dissolved but its insurer, Aetna Casualty and Surety Company, is a defendant.

Plaintiffs later named the Board as a defendant in an amended complaint, filed on November 4, 1993. They maintain that Ru-Val's code violations should have been detected by the Board inspector.

The Board is a not-for-profit corporation formed in 1867 by insurance companies operating within New York pursuant to a special act of the State Legislature. Its purpose is to decrease fire losses. It has authority to perform electrical inspections and to investigate fraudulent claims. It also runs a "fire patrol" and engages in fire prevention and public relations work.

Until 1977 the Board was the only private organization available to perform electrical inspections for municipalities within the State. Many municipalities, including the town of Oyster Bay, authorize the Board to perform electrical inspections and issue certificates of compliance with electrical codes.

To accomplish its purposes, the Board maintains a central office in New York City and regional offices around the state. The parties have stipulated that the Board is responsible for hiring, training, supervising, assigning, scheduling, paying and firing its inspectors. The Board receives its fee directly from the owner or the contractor and pays no part of it to the town.

B. Town Ordinance

An Oyster Bay town ordinance establishes the role of the Board in connection with town electrical standards. Section 1.1.5 of the Electrical Code of the Town of Oyster Bay requires that all electrical wiring in the town conform to the National Electrical Code ("NEC") except where the Town Code provides otherwise. The NEC is a set of safety standards for electrical work developed and adopted by the National Fire Prevention Association ("NFPA"). See Part V.B infra.

Section 1.1.8 provides that Board inspectors are "representatives" of the Town to inspect electrical installations:

The Chief Inspector, and each of the duly appointed inspectors of the New York Board of Fire Underwriters are hereby authorized as representatives of the Town of Oyster Bay to make inspections and reinspections of all electrical installations ... and to approve or disapprove the same. In no event, however, will the cost or expense of such inspections and reinspections be a charge against the Town of Oyster Bay.

The inspector reports to the town's building inspector. Section 1.1.9 provides:

It shall be the duty of the Inspector to report in writing to the Chief Bldg. sic Inspector, whose duty it shall be to enforce all the provisions of this Ordinance.... The Inspector shall make inspections and reinspections of electrical installations ... upon the written request of an authorized official of the Town.... The Inspector is authorized to make inspections and reinspections of electrical wiring installations, devices, appliances, and equipment ... where he deems it necessary for the protection of life and property....

III. Procedural History

Plaintiffs, Royal Insurance Company of America and Safeguard Insurance Company of America, have brought this diversity action as subrogees of the Vicaris. They seek to hold Ru-Val — or as a practical matter its insurer since Ru-Val is without funds — liable for the property damage caused by the fire. They also seek recovery against the Board for negligence because its inspector issued a certificate of compliance despite code violations.

The Board moved for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. The Board maintains that it is entitled to the same immunity against tort liability granted to local governments and their officials because it and its inspectors are the authorized town representatives for electrical inspections. The Board also maintains that plaintiffs' claims against it are barred by the statute of limitations.

Based on the pleadings, legal memoranda, and oral argument, it became clear that the motion raised important issues requiring further factual development. The court converted the motion to one for summary judgment and provided an opportunity for discovery and further briefing.

IV. New York Law Applicable

Federal courts sitting in diversity apply the substantive law of the forum state on outcome-determinative issues. See Erie R.R. v. Tompkins, 304 U.S. 64, 80, 58 S.Ct. 817, 823, 82 L.Ed. 1188 (1938); 28 U.S.C. § 1652 (1988). Applicable is the forum state's statute of limitations. See Guaranty Trust Co. v. York, 326 U.S. 99, 109-11, 65 S.Ct. 1464, 1470-71, 89 L.Ed. 2079 (1945).

Summary judgment is appropriate when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); ...

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