Medical Facilities, Inc. v. Pryke, 62 N.Y.2d 716 (1984)
An insurer cannot enforce a shortened limitations period for commencing suit if the insurance policy fails to include the statutorily mandated language or any reference to such a period.
Summary
Medical Facilities, Inc. sued John William Pryke’s underwriters to recover for business interruption and rent loss under a fire insurance policy. The fire occurred six years and three days before the suit was filed. The insurance policy lacked the standard language mandated by New York Insurance Law § 168(5) regarding a shortened limitations period. Pryke argued the suit was untimely. The court held that because the policy omitted the required language, the standard six-year statute of limitations for contract actions applied, making the suit timely. Actual notice of a shortened period, even if provided, does not cure the defect of omitting it from the policy itself.
Facts
Medical Facilities, Inc. operated a health care facility covered by a fire insurance policy issued by underwriters represented by John William Pryke. A fire occurred at the facility. Medical Facilities, Inc. filed a claim for business interruption and rent loss under the policy. Six years and three days after the fire, Medical Facilities, Inc. commenced a lawsuit to recover under the policy.
Procedural History
The trial court denied Pryke’s motion to dismiss the complaint as untimely. Pryke appealed. The Appellate Division affirmed the trial court’s decision. Pryke then appealed to the New York Court of Appeals. The Court of Appeals affirmed the Appellate Division’s order.
Issue(s)
1. Whether an insurer can enforce a shortened statute of limitations in an insurance policy when the policy does not contain the language mandated by New York Insurance Law § 168(5) or any reference to a shortened limitations period.
Holding
1. No, because an insurer who issues a policy omitting reference to the shortened limitations period, in violation of statutory mandate, cannot claim the benefit of its own omission, for an insured would otherwise have no notice that his time to commence suit was different from that provided by law for any contract action.
Court’s Reasoning
The court reasoned that because the insurance policy did not include the “165 lines” required by Insurance Law § 168(5), or any reference to a shortened statute of limitations, the general six-year statute of limitations for breach of contract actions under CPLR 213(2) applied. The court emphasized that an insurer cannot benefit from its own failure to comply with the statutory mandate to include the shortened limitations period in the policy. The court stated that without such notice, an insured would not be aware that the time to commence a lawsuit was different from the standard contractual period. The court rejected the argument that actual notice of a shortened limitations period, allegedly given within two years of the fire, could cure the defect of omitting the shortened period from the contract itself, stating that “even actual notice would not have cured the insurer’s failure to make a shortened limitations period part of the insurance contract.” The court clarified the accrual date for a cause of action against an insurer: “A cause of action against an insurer will accrue on the date of the fire if the policy so provides (Proc v Home Ins. Co., 17 NY2d 239), but in the absence of any provision regarding accrual in the contract of insurance the Statute of Limitations for breach of contract generally begins to run upon breach.” Since the policy required claims to be paid within 30 days of proof of loss and the lawsuit was filed six years and three days after the fire, the lawsuit was timely.