Portfolio v. Standard Fire Ins. Co., 67 N.Y.2d 874 (1986)

A contractual limitations period in an insurance policy is enforceable, but if the policy’s limitation is explicitly restricted to actions within a specific jurisdiction, the forum’s general statute of limitations applies to actions brought outside that jurisdiction.

Summary

Portfolio, as assignee of Puritan Industries, sued Standard Fire Insurance to recover for a theft loss under two insurance policies. The first policy (all-risk) limited suits to two years for actions in Massachusetts, while the second (comprehensive) had a similar two-year limit but without geographical restriction. An initial suit was dismissed for defective service. This action, filed after two years but within six months of the dismissal, was challenged as time-barred. The court held that the comprehensive policy’s two-year limit applied, barring that claim. However, the all-risk policy’s limit applied only to Massachusetts suits; thus, New York’s six-year statute of limitations governed, allowing that claim. The case clarifies the importance of the specific language of contractual limitations periods in insurance policies.

Facts

Puritan Industries, Inc., a New York corporation, purchased two insurance policies from Standard Fire Insurance in 1978. The policies were sold and delivered in Massachusetts. One was an all-risk policy for $1,265,000, and the other was a “Comprehensive Dishonesty, Disappearance and Destruction Policy” for $25,000. Both policies were later assigned to Portfolio. In June 1980, Puritan notified Standard Fire of a theft loss that occurred in March 1979. Negotiations for reimbursement failed.

Procedural History

Portfolio sued Standard Fire in New York in November 1980, but the action was dismissed due to defective service. In October 1982, Portfolio filed a second suit, identical to the first, asserting claims under both policies. Standard Fire moved to dismiss, arguing the statute of limitations had expired. Special Term dismissed the claim under the comprehensive policy but denied the motion regarding the all-risk policy. The Appellate Division modified, dismissing the entire complaint. Portfolio appealed to the New York Court of Appeals.

Issue(s)

1. Whether the contractual two-year limitation period in the insurance policies bars Portfolio’s claim, considering that the initial action was dismissed for lack of personal jurisdiction and the present action was commenced more than two years after the loss but within six months of the prior dismissal.
2. Whether CPLR 202 allows the New York resident-assignee to benefit from New York’s six-year statute of limitations for contracts, overriding the two-year contractual limitation in the policies.

Holding

1. No, because the dismissal for lack of personal jurisdiction does not allow for the extension of the statute of limitations under CPLR 205; however, the all-risk policy’s limitation applied only to suits in Massachusetts.
2. Yes, because the all-risk policy limited the two-year period only to actions brought in Massachusetts; therefore, New York’s six-year statute applies to actions brought in New York.

Court’s Reasoning

The court addressed the enforceability of contractual limitations periods in insurance policies. The court acknowledged that CPLR 205 doesn’t apply when the initial action is dismissed for lack of personal jurisdiction (citing Markoff v South Nassau Community Hosp., 61 NY2d 283). Regarding the choice of law, the court noted that Portfolio, as assignee, had the same rights as its assignor, Puritan, a New York resident (citing United States Fid. & Guar. Co. v Smith Co., 46 NY2d 498). Therefore, Portfolio could invoke New York’s statute of limitations if it were longer than the limitations period in Massachusetts. The court distinguished between the two insurance policies based on their specific language. The comprehensive policy’s two-year limitation applied regardless of where the suit was brought. The court stated, “In this case the comprehensive policy established a contractual limitation applicable to actions in Massachusetts and elsewhere which bound the contracting parties. It did not violate the law or public policy of either New York (see Bargaintown, D.C. v Bellefonte Ins. Co., 54 NY2d 700; Proc v Home Ins. Co., 17 NY2d 239) or Massachusetts.” However, the all-risk policy’s limitation was explicitly restricted to actions within Massachusetts. Thus, the court reasoned that “the provisions of the all risk policy, however, limited the period for suit only for actions instituted within the Commonwealth of Massachusetts. Accordingly, an action lawfully instituted in New York by a New York resident is governed by this State’s six-year statute.” The court modified the Appellate Division’s order, reinstating the causes of action under the all-risk policy, emphasizing the importance of the specific language defining the scope of contractual limitations periods.