Seven Sixty Travel, Inc. v. American Motorists Ins. Co.

• Decision Date: 20 February 1979
• Citation: 98 Misc.2d 509,414 N.Y.S.2d 254
• Parties: SEVEN SIXTY TRAVEL, INC., Plaintiff, v. AMERICAN MOTORISTS INSURANCE COMPANY and Kemper Insurance Company, Defendants. AMERICAN MOTORISTS INSURANCE COMPANY and Kemper Insurance Company, Defendants and Third Party Plaintiffs, v. Martin TREISTMAN and Howard A. Greef, Third Party Defendants.
• Court: New York Supreme Court

Page 254

414 N.Y.S.2d 254

98 Misc.2d 509

SEVEN SIXTY TRAVEL, INC., Plaintiff, v. AMERICAN MOTORISTS INSURANCE COMPANY and Kemper Insurance

Company, Defendants.

AMERICAN MOTORISTS INSURANCE COMPANY and Kemper Insurance

Company, Defendants and Third Party Plaintiffs, v. Martin TREISTMAN and Howard A. Greef, Third Party Defendants.

Supreme Court, Special Term, Albany County.

Feb. 20, 1979.

Donald B. West, New York City, for third party defendant Martin treistman.

Hesson, Ford, Sherwood & Whalen, Albany, for defendants and third party plaintiffs.

AARON E. KLEIN, Justice.

One of the third-party defendants, Martin Treistman, (Treistman) moves this court for an order pursuant to the Civil Practice Laws and Rules 3212 granting summary judgment against the defendants and third-party plaintiffs, American Motorists Insurance Company and Kemper Insurance Company (Insurers) alleging three (3) grounds in support thereof. As it will appear from the decision which follows, the outcome of this motion will and must turn upon only one of the grounds, the affirmative defense of the statute of limitations.

The facts are significant though not particularly complex. Treistman was the executive vice-president of Blue Tours International, Inc. (Blue Tours) from January through August 1971. It is alleged that the plaintiff, Seven Sixty Travel, Inc. (Travel) contacted Blue Tours during the period to arrange for a tour of the Soviet Union by a group from St. Rose College. Travel in November of 1971 purchased an "errors and omissions" policy of insurance from the insurers.

It is further alleged that payments amounting to fifteen thousand dollars ($15,000) were forwarded by Travel to Blue Tours for the purpose of arranging accommodations and transportation, however, same were not made. Travel, when the group became stranded in Europe, advanced money to complete the tour and later brought suit against the Insurers in the main action under the policy. The answer in the main action is dated December 20, 1972.

In April of 1978 the third-party action was commenced against the movant. He apparently answered sometime thereafter, and now seeks judgment contending the statute of limitations bars a recovery on behalf of the insurers even if assuming Arguendo for the purpose of this motion that the third-party defendants defrauded, and/or embezzled the funds forwarded to them. Treistman's argument is in effect that the insurers' action is derivative in nature and, therefore, is subject to the same statute of limitations as Travel if it had asserted its claim directly against Treistman and the other third-party defendants.

In opposition the Insurers first argue that Treistman has improperly brought this motion, having raised it in the answer rather than moving pursuant to CPLR 3211(a)5. This argument is without merit. Although the usual summary judgment motion is based on the overall merits of the case, and not an individual defense such as the statute of limitations, nevertheless, it may serve as the proper basis for the motion " . . . at any time 'after issue has been joined'. (CPLR 3212, subd. (a))" Weiner v. Miller,56 A.D.2d 819, 393 N.Y.S.2d 21 (No. 6); see also David D. Siegel Commentary Laws of N.Y., CPLR 3212. (3212:20 Vol. 7B McKinney's Cons. Laws of N.Y.)

Next, the Insurers urge that the third-party action is one for indemnification governed by the six year statute of limitation under CPLR 213, subd. 2. Of course, if this court were to find that the third-party action was in fact one for indemnification, the statute of limitation would run not from the commission of the tort, but rather from the time of the judgment if recovered by the plaintiff has been paid where, as here contended, the indemnification action is premised upon a quasi contractual obligation implied in law. (cf. 28 N.Y.Jur. § 33 generally; Hansen v. City of New York, 43 Misc.2d 1048, 1049, 252 N.Y.S.2d 695, 696).

Necessarily, this court must first discern the nature of the third-party action before a decision can be rendered as the statute of limitations. The right of implied indemnification arises when a person " . . . has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other . . . " American Law Institute, Restatement of the Law of Restitution § 76, p. 331; see also Brown v. Rosenbaum, 287 N.Y. 510, 518, 41 N.E.2d 77, 80. This clearly is not the situation before this court since the insurer is a contractual indemnitor with respect to its insured, Travel, and enjoys no such relationship with the third-party defendants.

Perhaps, the best way in which to distinguish the nature of the claim made by the insurers presently is to take an illustrative example of indemnification, and contrast it with the situation at bar. In Macari v. Parsons Hospital, 26 A.D.2d 584, 271 N.Y.S.2d 1009 (Case No. 12) the court permitted the amendment of an answer to include a cross claim by the defendant, hospital, to allege a cause of action for common-law indemnity against the defendant, physicians, as its servants holding that if plaintiff recovers damages based on negligence against the hospital, it would be entitled to indemnification by the physicians. The underlying theory, in this court's view, was that where the master is held liable vicariously for the tort of its servant and pays the judgment, the latter has received a benefit unjustly, and accordingly, the law implies a contract whereby the wrongdoer becomes liable for the damage he has caused. (cf. 28 N.Y.Jur. Indemnity § 11) Thus a like duty was owed to the plaintiff by each of the defendants. This must be contrasted with the case before this court where the relationship between the plaintiff, Travel and the defendant, Insurers is one of contract. The action against the third-party defendants is one of subrogation. The Insurers, pleading in the hypothetical, seek to be substituted in place of their insured to assert its rights against the wrongdoers which have caused the loss for which the Insurers are called upon to pay pursuant to the terms of the insurance contract. (Ocean Accident and Guarantee Corp. v. Hooker Electrochemical Co., 240 N.Y. 37, 47, 147 N.E. 351, 353); Hamilton Fire Insurance Co. v. Greger, 246 N.Y. 162, 164, 158 N.E. 60, 61). In short the insurers are merely substituted for their insured and succeed to its rights. (Travelers Insurance Co. v. Brass Goods Manufacturing Co., 239 N.Y. 273, 276, 146 N.E. 377, 378, citing Leavitt v. C.P.R. Co., 90 Me. 153, 37 A. 886). The situation at bar is unmistakedly analogous to that of the insurance carrier which pursuant to the terms of a collision policy pays its insured's damages and then standing in his shoes is subrogated to his cause of action in negligence against the third-party who is the wrongdoer. (This example is premised on the insurance policy Not having a restriction to the contrary. (cf. Ross v. Pawtucket Mutual Ins. Co., 13 N.Y.2d 233, 246 N.Y.S.2d 213, 195 N.E.2d 892, to be read in conjunction with Siegel, a Biannual survey of New York Practice, 38 St. Johns L.Rev. 406)).

The question now becomes, when does the statute of limitation begin to run on an insurer's cause of action in subrogation. It has been said, "(a)lthough a subrogee might be subject, in other situations, to the same defenses as could be asserted against the person for whom he is substituted, this does not appear true of the defense that the statute of limitations has run. (57 N.Y.Jur. Subrogation § 29 p. 80, citing Bennett v. Cook, 45 N.Y. 268; Ely v. Stone, 173 Misc. 117, 17 N.Y.S.2d 266 (footnotes omitted))." With the foregoing proposition, this court cannot agree. First, in Federal Insurance Company et al. v. United Port Service Company, 23 Misc.2d 142, 199 N.Y.S.2d 552, aff'd. 12 A.D.2d 905, 214 N.Y.S.2d 640, plaintiffs sued as insurers subrogated to the rights of their insured. The defendant moved to dismiss the actions as barred by the three year statute of limitations applicable to actions sounding in negligence since it was alleged that property in possession of the defendant, as bailee, was damaged more than three but less than six years after the incident. The court dismissed the actions as time barred. Implicit in that holding is that the statute of limitations to be applied to a subrogation claim by an insurer is the same one which would be applied if the insured had brought the action directly. In an action based on subrogation, the subrogee is substituted for the subrogor Pro tanto.

Secondly, the principle authority relied on in New York Jurisprudence, viz., Bennett v. Cook, dealt with the rights of an endorser of a note to the collateral and not an insurance carrier suing as subrogee. This court is of the...