State Farm Mut. Auto. Ins. Co. v. Regional Transit Service, Inc.

• Decision Date: 12 December 1980
• Citation: 434 N.Y.S.2d 486,79 A.D.2d 858
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent, v. REGIONAL TRANSIT SERVICE, INC., Appellant.
• Court: New York Supreme Court — Appellate Division

Page 486

434 N.Y.S.2d 486

79 A.D.2d 858

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent, v. REGIONAL TRANSIT SERVICE, INC., Appellant.

Supreme Court, Appellate Division, Fourth Department.

Dec. 12, 1980.

Robert J. Hirsch by Laura Poyser, Rochester, for appellant.

Bayer & Smith by Michael Reddy, Rochester, for respondent.

Before DILLON, P. J., and CARDAMONE, SCHNEPP, DOERR and WITMER, JJ.

MEMORANDUM:

Respondent, Regional Transit Service, Inc. (RTS), appeals from an order of Special Term, Monroe County, which granted the application of petitioner, State Farm Mutual Automobile Insurance Company (State Farm) to stay arbitration permanently of RTS's claim for reimbursement from State Farm of first party benefits paid by RTS in connection with a vehicular accident between State Farm's insured and RTS's insured (Insurance Law, § 674).

On January 6, 1975 RTS's insured, Minerva Harris, while in the course of her employment as an RTS bus driver, was injured in an accident with William Flood, State Farm's insured, and she claimed no-fault benefits which were paid by RTS, the self-insurer of the risk, and its workmen's compensation carrier. The latter filed a lien against the proceeds of any settlement in Harris' pending third-party action (Matter of Granger v. Urda, 44 N.Y.2d 91, 404 N.Y.S.2d 319, 375 N.E.2d 380). Harris' subsequent settlement with State Farm was reduced by the amount of the workmen's compensation lien. RTS later reimbursed her following the holding of the Court of Appeals in Grello v. Daszykowski (44 N.Y.2d 894, 407 N.Y.S.2d 633, 379 N.E.2d 161), that an employee who receives both workmen's compensation and no-fault benefits for injuries from an accident while in his employer's vehicle may recover from the no-fault carrier any workmen's compensation benefits which were executed against by the workmen's compensation carrier. After this payment to Harris on December 15, 1978, RTS sought reimbursement from State Farm which had previously reimbursed RTS for other first party benefits paid to Harris. The controversy was submitted to mandatory arbitration where State Farm interposed the defense of the Statute of Limitations and later instituted this proceeding. At Special Term RTS argued that the six year Statute of Limitations for an action on a contractual obligation applied (CPLR 213, subd. 2). Special Term correctly ruled that the three year negligence period of limitation (CPLR 214, subd. 5) applies to a first party insurer's claim for reimbursement from the insurer of the other party involved in the accident pursuant to section 674 of the Insurance Law (Transamerica Insurance Co. v. Lumbermen's Casualty Insurance Co., 77 A.D.2d 5, 432 N.Y.S.2d 269 (decided October 9, 1980)). Section 674 of the Insurance Law vests the insurer liable for first party benefits only with the rights of its insured which are in the nature of subrogation and not indemnification (Transamerica Insurance Co. v. Lumbermen's Casualty Insurance Co., supra; Comment, New York Adopts No-Fault, 37 Alb.L.Rev. 662, 696-697). A first party insurer's rights are based on and derived from its insured's rights and no more: RTS had the same right to recover from State Farm the first party benefits RTS paid "if and to the extent that such other covered person would have been liable, but for the provisions of this article, to pay damages in an action at law." (Insurance Law, 674; Transamerica Insurance Co. v. Lumbermen's Casualty Insurance Co., supra; see also 11 NYCRR 65.10(a)). The right to recover is subject to the same defenses that an at-fault party could have asserted including the Statute of Limitations (Seven Sixty Travel v. American Motorists Ins. Co., 98 Misc.2d 509, 414 N.Y.S.2d 254, affd. 73 A.D.2d 761, 423 N.Y.S.2d 458; see also Williams v. Globe Indem. Co., 507 F.2d 837, 839, cert. den. 421 U.S. 948, 95 S.Ct. 1679, 44 L.Ed.2d 101).

RTS's contention, for the first time on this appeal, that the three year Statute of Limitations for an action "to recover upon a liability ... imposed by statute" under CPLR 214 (subd. 2) does not apply to a proceeding brought under section 674 of the Insurance Law, is also without merit. Under CPLR 214 (subd. 2) the test for a liability created by statute is whether the liability is one which did not exist at common law, or would not exist but for a statute (City of Buffalo v. Maggio, 27 A.D.2d 635, 275 N.Y.S.2d 698, affd. 21 N.Y.2d 1017, 291 N.Y.S.2d 1, 238 N.E.2d 494). Where a statute merely provides...