Court upholds suit limits clause in coverage dispute
Farage v. Associated Insurance Management Corp., et al., 2021 NY Slip Op. 50653(U), 2021 WL 2908692 (Sup. Ct., N.Y. Cnty. July 2, 2021)
This case involved first-party property insurance coverage for fire damage to an apartment building located in Staten Island, New York. When her $1.3 million demand for replacement cost coverage was denied, the plaintiff commenced suit against several insurers for breach of contract, and against a number of insurance brokers for negligence in securing coverage. Certain insurers filed a pre-answer motion to dismiss on the grounds that the action was untimely under the two-year contractual limitations period in the policy, and the plaintiff failed to provide notice of her intent to seek replacement cost coverage within 180 days of the loss. Several brokers moved to dismiss the complaint as well.
By decision dated July 2, 2021, Judge Arthur Engoron dismissed the complaint in its entirety. In connection with the claims against the insurers, the court found that the plaintiff, who filed the action six years after the fire, violated the policy’s two-year suit limits clause. The broker’s motions were deemed moot as no coverage would have been available due to the plaintiff’s delay. Plaintiff’s motion to amend to add a party was also denied.
This decision is significant in that the court distinguished the New York Court of Appeals decision in Executive Plaza, LLC v. Peerless Ins. Co., 22 N.Y.3d 511 (2014). In that case, the court found that the insurance policy’s two-year suit limitation provision was unenforceable where the damaged property could not reasonably have been replaced within the contractual two-year period. The plaintiff in Farage made the same argument, but the court held that she failed to demonstrate that she attempted to repair the property within the two-year period, and she did nothing to protect her rights as the contractual limitations period expired.
As an additional basis to dismiss the complaint, the court highlighted the fact that the plaintiff failed to demonstrate that she notified her insurer that she intended to submit a replacement cost coverage claim within 180-days after the loss, as required by the policy to qualify for that coverage. The court observed that the plaintiff did not submit an invoice from her contractor until almost six years after the fire.
Partners Kevin F. Buckley and Jodi S. Tesser represented Tower Insurance Company of New York, AmTrust Financial Services, Inc., AmTrust North America, Tower Risk Management, Tower Group, Inc., Tower Group Companies and CastlePoint Insurance Company.
You can read the decision here.