63 N.Y.2d 227 (1984)

When a fire insurance policy contains a limitations period shorter than the statutory standard, the policy is enforceable as if it conformed to the statutory standard; however, if the policy contains no limitations period, the general contract statute of limitations applies.

Summary

1303 Webster Avenue Realty Corp. sued Great American Surplus Lines Insurance Company and Illinois Employers’ Insurance Company to recover under two fire insurance policies. The insurers moved to dismiss, arguing the suit was filed after the limitations period. The lower court denied the motion, but the Appellate Division reversed. The Court of Appeals considered whether the contractual limitations period in each policy barred the suit. It held that if a policy contains a limitations period (even an incorrect one), the statutory period is read into the contract. However, if a policy contains no limitations period, the general six-year contract statute of limitations applies because the insured lacks notice of a shortened period.

Facts

1303 Webster Avenue Realty Corp. (plaintiff) held two fire insurance policies, one from Great American Surplus Lines Insurance Company and another from Illinois Employers’ Insurance Company. After suffering a loss, the plaintiff filed suit to recover under both policies. The insurers moved to dismiss, contending that the lawsuit was filed after the contractual limitations period for bringing such claims. The policy issued by Illinois Employers’ Insurance Company of Wausau contained a one-year limitations period.

Procedural History

The Supreme Court, Special Term, denied the insurers’ motion to dismiss, reasoning that the policies contained a one-year limitations period, which was non-compliant with the statutory two-year requirement, thus waiving the benefit of the shorter limitations period. The Appellate Division reversed, dismissing the complaint, holding that the policies were enforceable as if they contained the two-year limitations period. The plaintiff appealed to the Court of Appeals.

Issue(s)

1. Whether a fire insurance policy containing a limitations period shorter than the two-year period prescribed by statute is enforceable as if it conformed to the statutory standard.

2. Whether the general six-year statute of limitations for contract actions applies if the insurance policy lacks any reference to a limitations period.

Holding

1. Yes, because where a policy of fire insurance provides for a shorter period of limitations than permitted by statute, the policy is enforceable as if it conformed with the statutory standard.

2. Yes, because in the absence of any provision in the policy as to the limitations period for commencing suit, the insured has no notice that there is a shortened statute of limitations and is thus entitled to rely on the general six-year provision for contract actions.

Court’s Reasoning

The Court of Appeals reasoned that when a policy contains a limitations period, even if it’s shorter than the statutory period, the policy is still enforceable, but the statutory period is read into the contract. The inclusion of any express limitations period precludes a determination that the insurer intended to waive the statutory limitations period. The court cited Insurance Law § 143(1) and Bersani v General Acc. Fire & Life Assur. Corp., 36 N.Y.2d 457 (1975). However, if the policy contains no limitations period whatsoever, the insured has no notice of a shortened period and can rely on the general six-year statute of limitations for contracts. The court relied on Medical Facilities v Pryke, 62 N.Y.2d 716 (1984), noting that “in the absence of any provision in the policy as to the limitations period for commencing suit, the insured has no notice that there is a shortened Statute of Limitations and is thus entitled to rely on the general six-year provision for contract actions.” Therefore, the Court held that the action against Illinois Employers’ Insurance Company was time-barred because the policy contained a one-year limitations period. As to Great American, because the plaintiff raised a factual question as to whether that policy contained any limitations period, the motion to dismiss was denied.