New York Law Review

Tag: Accrual of Claim

  • Hahn Automotive Warehouse, Inc. v. American Zurich Ins. Co., 21 N.Y.3d 765 (2013): Statute of Limitations on Contract Claims Accrues When Right to Demand Payment Arises

    Hahn Automotive Warehouse, Inc. v. American Zurich Ins. Co., 21 N.Y.3d 765 (2013)

    In a breach of contract claim for payment of money owed, the statute of limitations begins to run when the party has the legal right to demand payment, not necessarily when the demand is actually made.

    Summary

    Hahn Automotive sued American Zurich Insurance, seeking a declaration that Zurich’s claims for unpaid insurance premiums were time-barred by the statute of limitations. Zurich counterclaimed for breach of contract, arguing the statute of limitations began when it invoiced Hahn for the unpaid amounts. The New York Court of Appeals held that the statute of limitations began to run when Zurich had the contractual right to demand payment, regardless of when it actually sent the invoices. This prevents a party from indefinitely extending the statute of limitations by delaying billing. The court affirmed the lower court’s ruling, finding some of Zurich’s claims were indeed time-barred.

    Facts

    Hahn Automotive obtained various insurance policies from Zurich between 1992 and 2003, including general liability, automotive liability, and workers’ compensation. These policies fell into four categories: retrospective premium agreements, adjustable deductible policies, deductible policies, and claim services contracts. Under the retrospective premium and adjustable deductible policies, Zurich was required to recalculate premiums based on actual claims experience. For deductible policies, Zurich would pay claims and then seek reimbursement from Hahn. Zurich performed an internal audit in 2005 and discovered it had not billed Hahn for certain deductibles and adjustments. Zurich issued invoices to Hahn in April 2005, March 2006, and March 2006, which Hahn did not pay.

    Procedural History

    Hahn sued Zurich, seeking a declaration that claims for debts arising more than six years before the suit were time-barred. Zurich counterclaimed for breach of contract. The Supreme Court granted partial summary judgment to Hahn, finding that the statute of limitations ran from when Zurich had the right to demand payment. The Appellate Division modified, dismissing some of Hahn’s claims but agreeing that Zurich’s counterclaims for debts arising more than six years prior were time-barred. Zurich appealed to the New York Court of Appeals.

    Issue(s)

    Whether the six-year statute of limitations for Zurich’s breach of contract counterclaims began to run when Zurich possessed the legal right to demand payment from Hahn, or when Zurich actually issued invoices to Hahn?

    Holding

    Yes, the statute of limitations on Zurich’s counterclaims began to run when Zurich had the contractual right to demand payment from Hahn because in contract actions, a claim generally accrues at the time of the breach, which in this case is when Zurich had the right to demand payment.

    Court’s Reasoning

    The Court of Appeals applied CPLR 213(2), which governs the six-year statute of limitations for breach of contract claims. The court stated, “[A] claim generally accrues at the time of the breach.” The court reasoned that a cause of action accrues “when all of the facts necessary to the cause of action have occurred so that the party would be entitled to obtain relief in court.” The court also relied on Appellate Division precedent, which held that “where the claim is for payment of a sum of money allegedly owed pursuant to a contract, the cause of action accrues when the [party making the claim] possesses a legal right to demand payment.” To hold otherwise would allow Zurich to extend the statute of limitations indefinitely by simply failing to make a demand. The Court distinguished this case from cases where the right to payment is expressly conditioned on a specific event, noting that Zurich could not point to any contract language unambiguously conditioning its right to payment on its own demand. The court stated, “[T]he contracts contain specific references to the applicable time periods when Zurich was entitled to calculate adjustments and bill Hahn for the amounts owed. Such provisions contradict the open-ended arrangement now proposed by Zurich.”

  • Matter of New York Civil Liberties Union v. New York State Department of Corrections and Community Supervision, 37 N.Y.3d 195 (2021): Statute of Limitations for Constitutional Claims Against Government

    Matter of New York Civil Liberties Union v. New York State Department of Corrections and Community Supervision, 37 N.Y.3d 195 (2021)

    A claim accrues for statute of limitations purposes when a party suffers a concrete and redressable injury, which, in the context of challenges to government action, typically occurs when the action directly affects the party bringing suit, not merely upon the initial governmental approval of the action.

    Summary

    This case addresses when the statute of limitations begins to run for constitutional claims challenging government contracts. The New York Civil Liberties Union (NYCLU) sued the Department of Corrections and Community Supervision (DOCS) alleging that contracts with MCI for inmate calling services violated inmates’ and their families’ rights. The Court of Appeals held that the statute of limitations began to run when the allegedly unconstitutional rates were actually charged, not when the contract was initially approved. This decision emphasizes that a cause of action accrues when the plaintiff experiences a concrete injury, providing clarity on the accrual of claims against government entities.

    Facts

    DOCS entered into contracts with MCI (later Verizon) for inmate calling services. The NYCLU, representing inmates and their families, challenged these contracts, arguing that the calling rates were excessively high and unconstitutional. The NYCLU asserted these rates infringed upon the rights of inmates and their families to communicate. The Comptroller approved the DOCS-MCI contract and subsequent amendments. The NYCLU filed suit, alleging the rates were unconscionable and violated constitutional rights.

    Procedural History

    The Supreme Court initially dismissed the petition as time-barred, finding the statute of limitations began running from the Comptroller’s approval of the contract. The Appellate Division affirmed this decision. The New York Court of Appeals reversed, holding that the statute of limitations began to run when the allegedly unconstitutional rates were actually charged to inmates and their families, not merely upon the contract’s approval.

    Issue(s)

    Whether the statute of limitations for challenging the constitutionality of government contracts begins to run upon the contract’s approval or when the allegedly unlawful actions (e.g., excessive charges) occur.

    Holding

    No, because the statute of limitations begins to run when the plaintiff suffers a concrete injury as a result of the government action, which in this case, was the actual charging of the allegedly unconstitutional rates. The cause of action accrues when the petitioners experienced a “concrete and redressable injury.”

    Court’s Reasoning

    The Court of Appeals reasoned that a cause of action accrues when a plaintiff suffers a concrete and redressable injury. In the context of challenges to government action, this injury typically occurs when the action directly affects the party bringing suit. The Court distinguished between the initial approval of a contract and the subsequent implementation of its terms. The Court emphasized that it was the actual charging of allegedly excessive rates that caused injury to the inmates and their families, not the mere approval of the contract. The court noted the importance of avoiding a situation where constitutional claims are time-barred before the affected parties could reasonably know of their existence. As Justice Smith stated in his concurrence, "I have trouble accepting the idea that agencies can extinguish constitutional rights so easily." The decision aligns with principles of fairness and due process, ensuring that individuals have a reasonable opportunity to challenge government actions that directly harm them. This approach is particularly relevant when dealing with parties who may lack immediate access to information about government contracts. The court differentiated this case from situations involving direct challenges to the validity of a statute or regulation, where the act of enactment itself can constitute the injury. Here, the injury stemmed from the application of the contract terms. The court distinguished prior cases, explaining that the focus should be on when the actual injury occurred, not when the government action was authorized. The practical implication of this decision is that it provides a more reasonable timeframe for individuals to bring claims against government entities based on the implementation of contracts or policies.

  • C.S.A. Contracting Corp. v. New York City School Construction Authority, 5 N.Y.3d 189 (2005): Accrual of Claims in Public Works Contracts

    5 N.Y.3d 189 (2005)

    A contractor’s claim against the New York City School Construction Authority accrues when its damages are ascertainable, typically upon substantial completion of work or submission of a detailed invoice, not when payment is denied, unless the Legislature amends the Public Authorities Law similarly to the Education Law.

    Summary

    C.S.A. Contracting Corp. sued the New York City School Construction Authority (SCA) for breach of contract, seeking payment for asbestos abatement work. The Court of Appeals affirmed the dismissal of the case because C.S.A. failed to file a notice of claim within three months of the claim’s accrual, as required by Public Authorities Law § 1744(2). The court held that the claim accrued when the work was substantially completed and a detailed invoice was submitted, not when the SCA denied payment. The Court declined to extend the Education Law’s later accrual date (date of payment denial) to cases involving the SCA, stating that such a change must come from the legislature.

    Facts

    In 1993, C.S.A. Contracting Corp. contracted with the New York City School Construction Authority (SCA) for asbestos abatement work at various schools. On December 3, 1993, C.S.A. submitted a payment request of $151,994.96 for extra work at PS 29 in Staten Island. The SCA approved the request in February 1994 but, in April 1994, refused payment, alleging overcharges on a separate project at Bushwick High School. C.S.A. contended it filed a notice of claim in May 1994 and later a notice of dispute on June 30, 1994. A formal notice of claim for $595,850 was filed September 21, 1994, covering work at PS 29, additional costs for work above 14 feet, and wet cleaning/encapsulation expenses.

    Procedural History

    C.S.A. commenced a breach of contract action in April 1995. The SCA asserted C.S.A.’s failure to properly serve a timely notice of claim as an affirmative defense and counterclaimed for overpayment at Bushwick High School. At trial, C.S.A. lacked documentary evidence of the May 1994 notice. The Supreme Court dismissed the complaint due to C.S.A.’s failure to submit a timely notice of claim, and severed the SCA’s counterclaim. The Appellate Division affirmed. The Court of Appeals granted leave to appeal and affirmed the dismissal.

    Issue(s)

    Whether C.S.A.’s notice of claim was timely filed pursuant to Public Authorities Law § 1744(2), requiring it to be presented within three months after the accrual of the claim.

    Holding

    No, because C.S.A.’s claim accrued when its damages were ascertainable, which was upon substantial completion of the work and submission of a detailed invoice in December 1993, and the notice of claim was not filed within three months of that date.

    Court’s Reasoning

    Public Authorities Law § 1744(2) requires a detailed written notice of claim within three months of accrual as a condition precedent to an action against the SCA. The Court relied on the precedent set in Matter of Board of Educ. of Enlarged Ogdensburg City School Dist. [Wager Constr. Corp.], 37 NY2d 283, 290 (1975), stating, “it generally has been recognized that damages are ascertainable once the work is substantially completed or a detailed invoice of the work performed is submitted”. The Court found C.S.A.’s work was completed, and a detailed invoice submitted, before December 1993. The Court rejected C.S.A.’s argument that the claim accrued only when the SCA denied payment in April 1994, noting that while the Legislature amended Education Law § 3813(1) to reflect this rule for school districts, it did not similarly amend Public Authorities Law § 1744(2). Therefore, the Wager ruling stands for Public Authorities Law cases, absent legislative action.

    Judge R.S. Smith concurred, expressing his view that the Wager decision was based on “questionable logic” and has led to “unfortunate results,” as it requires a contractor to submit a claim before there is any reason to expect litigation. He pointed out that the Legislature addressed this issue in Education Law § 3813(1) but has not done so in Public Authorities Law § 1744(2). Judge Smith argued, “The courts’ interpretation… makes no sense”.

  • Drago v. State, 42 N.Y.2d 887 (1977): Accrual of Abuse of Process Claim

    Drago v. State, 42 N.Y.2d 887 (1977)

    A cause of action for abuse of process accrues when the improper process is used, not necessarily upon the termination of the underlying action.

    Summary

    This case addresses the timeliness of an abuse of process claim against the State of New York. Drago filed a claim alleging abuse of process, arguing that his notice of intention to file the claim was timely because it was filed within 90 days of the dismissal of indictments against him. The Court of Appeals held that the accrual of a cause of action for abuse of process does not require the termination of the underlying action in the claimant’s favor. Because Drago’s notice was filed well after the alleged abuse of process occurred, the claim was deemed untimely.

    Facts

    Claimant Drago was subject to indictments, the dismissal of which he argued triggered the accrual of his abuse of process claim. He contended his notice of intention to file the claim was timely because it was filed within 90 days of the indictments’ dismissal. The underlying facts constituting the alleged abuse of process are not detailed in the brief opinion but are presumed to have occurred before the dismissal of the indictments.

    Procedural History

    The case reached the Court of Appeals after proceedings in lower courts. The Appellate Division’s order was modified. The Court of Appeals dismissed Drago’s cause of action for abuse of process, finding it untimely. The specific rulings of the lower courts are not detailed in this Court of Appeals memorandum.

    Issue(s)

    Whether the accrual of a cause of action for abuse of process is dependent on the termination of the action in the claimant’s favor, specifically, whether the 90-day period to file a notice of intention to sue the State for abuse of process begins upon dismissal of the indictments against the claimant.

    Holding

    No, because the accrual of a cause of action for abuse of process does not require the termination of an action in the claimant’s favor. The claim accrues when the alleged abuse of process occurs.

    Court’s Reasoning

    The Court of Appeals based its decision on the established principle that an abuse of process claim accrues when the process is improperly used, not when the underlying action terminates. The court cited Keller v. Butler, 246 N.Y. 249, to support this principle. The court reasoned that Drago’s notice of intention was untimely because it was filed more than 90 days after the alleged abuse of process occurred, regardless of the subsequent dismissal of the indictments. The Court made a simple application of the statute of limitations in Court of Claims Act Section 10(3). There were no dissenting or concurring opinions mentioned.

  • Bay Ridge Air Rights, Inc. v. State, 44 N.Y.2d 49 (1978): Accrual of Claim for Apportionment of Damages Against the State

    Bay Ridge Air Rights, Inc. v. State, 44 N.Y.2d 49 (1978)

    A claim for apportionment of damages (contribution) against the State generally accrues when the party seeking apportionment makes payment to the injured party, not when the underlying injury occurs or when the action is brought against the party seeking contribution.

    Summary

    Bay Ridge Air Rights, Inc. (Bay Ridge) was sued in federal court for negligently hiring a custodian who killed a tenant. Bay Ridge sought to bring a claim against the State of New York, alleging the State was responsible for the custodian’s premature release from psychiatric care. The New York Court of Appeals addressed when such a claim for apportionment of damages accrues for the purpose of filing a claim against the State. The Court held that the claim accrues when the party seeking apportionment (Bay Ridge) makes payment to the injured party (the tenant’s estate), aligning the accrual rule with that for indemnification claims. This means Bay Ridge’s claim was premature because no judgment had been entered or paid. The court acknowledged the potential prejudice to the State due to delayed notice but stated that legislative action is required to change the accrual rule.

    Facts

    A custodian employed by Bay Ridge killed a tenant on July 2, 1972.
    The tenant’s estate sued Bay Ridge in federal court on April 1, 1974, alleging negligent hiring, because the custodian had been under psychiatric care in state hospitals.
    Bay Ridge notified the Attorney General in December 1974 of its intent to seek apportionment of damages from the State if there was a recovery in the federal action.
    Bay Ridge’s third-party complaint against the State was dismissed by the federal court for lack of jurisdiction.</n

    Procedural History

    Bay Ridge served a notice of intention to file a claim and a proposed claim on the State on June 3, 1975.
    The State moved to dismiss the claim for untimeliness under Section 10 of the Court of Claims Act.
    The Court of Claims granted the State’s motion, holding that the cause of action accrued on the date of the killing.
    The Appellate Division modified the dismissal, holding that the claim accrues when there is a recovery against the party seeking apportionment, dismissing the claim without prejudice to refiling if a claim accrues.

    Issue(s)

    Whether a claim for apportionment of damages under Dole v. Dow Chemical Co. and CPLR Article 14 accrues on the date of the underlying injury, the date action is brought against the party seeking contribution, or the date judgment or settlement is recovered.

    Holding

    No, because a claim for apportionment of damages, like a claim for indemnification, generally accrues when payment is made by the party seeking apportionment. Therefore, until Bay Ridge makes payment to the tenant’s estate, it need not serve notice of claim upon the State.

    Court’s Reasoning

    The Court reasoned that there’s insufficient support for the Court of Claims’ view that a claim for contribution accrues at the time of the underlying injury, because a defendant might lose their claim against the State if they are unaware of any right they have against the State before the applicable 90-day or 6-month time period expires.
    While the State argues that the onset of the main action should trigger the statutory time limitations, the court notes that there is nothing in Dole v. Dow Chem. Co. or CPLR article 14 that justifies distinguishing claims for apportionment from those for indemnity. The court stated, “It is not the role of the court, however, without benefit of legislative authority, to cut off abruptly a cause of action good until then under conventional law.”
    The court acknowledged the potential disadvantage to the State due to the delayed accrual date, but stated that the remedy lies with the Legislature, which could explore alternatives such as establishing an earlier accrual date, at least for notice of claim purposes. The court suggests allowing the State to be impleaded as a third party in the main action when the action is brought in the State courts, so that all claims could be tried in a single action.
    Under conventional principles, no judgment in the Federal action against Bay Ridge having been entered, let alone paid, its claim for indemnity and contribution has not yet accrued.

  • Bianchi v. Massachusetts Acc. Co., 159 A.D. 931 (1913): Accrual of Claim in Disability Insurance Policies

    Bianchi v. Massachusetts Acc. Co., 159 A.D. 931 (N.Y. App. Div. 1913)

    A cause of action under a disability insurance policy requiring a period of continuous disability before payment accrues only after the specified period of disability has been completed.

    Summary

    Bianchi sued Massachusetts Accident Co. to recover under a disability insurance policy for paralysis. The policy provided a lump-sum payment for permanent paralysis that rendered the insured unable to work, contingent upon the paralysis lasting 52 consecutive weeks. Bianchi sued before the 52-week period elapsed. The court held that the action was premature because no claim existed until the 52-week period was complete. The court distinguished this situation from cases where a claim exists but is not yet payable, emphasizing that in this case, the claim itself had not yet come into being when the suit was filed.

    Facts

    On July 5, 1905, Massachusetts Accident Co. issued a disability policy to Bianchi, insuring him against loss of life, limb, sight, or time. The policy included two relevant clauses: Clause G, which provided a lump-sum payment for permanent paralysis resulting in the loss of use of a hand and foot, contingent on the paralysis lasting 52 consecutive weeks and rendering the insured unable to work. Clause H provided a weekly indemnity for sickness that prevented the insured from working and confined him to the house. On November 12, 1905, Bianchi suffered a stroke causing paralysis. Two days later, Bianchi notified the company. The company canceled the policy and returned the premium. Bianchi filed a proof of loss claiming weekly benefits under Clause H. Bianchi then sued, seeking a lump-sum payment under the paralysis clause (Clause G).

    Procedural History

    Bianchi initially sought $650 based on 26 weeks of disability under clause H of the policy, but the complaint ultimately set forth a cause of action under clause G, seeking $2,500. The trial court refused the defendant’s request to limit the trial to the claim under clause H. The jury found in favor of Bianchi on all issues, and this was affirmed by the Appellate Division. The Court of Appeals reviewed exceptions related to the timing of the lawsuit under clause G.

    Issue(s)

    Whether a cause of action accrues under a disability insurance policy that requires a claimant to demonstrate a continuous period of disability (here, 52 weeks) before the claimant has completed the required period of disability.

    Holding

    No, because the policy language clearly requires the paralysis to exist for 52 consecutive weeks before a claim arises; therefore, the action was prematurely brought.

    Court’s Reasoning

    The court reasoned that under Clause G of the policy, the 52-week period of paralysis was a condition precedent to any claim arising. Because the lawsuit was initiated before the 52-week period had elapsed, no cause of action existed at the time the suit was filed. The court emphasized, “It is apparent, therefore, that the paralysis resulting in the loss of the usé of a hand and foot must exist for fifty-two consecutive weeks, otherwise there could be no recovery for any amount whatever, and no claim would accrue or exist until the expiration of the fifty-two weeks.” The court distinguished this case from situations where a claim exists but is not yet due, stating, “This case is, therefore, distinguishable from those cases in which a claim exists upon a contract, promissory note, bond, or for goods sold and delivered where the action is brought after the claim existed, but before it became due and payable. In such cases the action would be merely prematurely brought.” Because the claim itself did not exist at the time of filing suit, the general denial in the answer was sufficient to put the existence of the claim in issue. The court found that the trial court erred in not limiting the trial to the claim for weekly allowance under Clause H of the policy. Since the facts related to the Clause H claim were already presented and decided by the jury, the court offered the plaintiff the option to stipulate to a reduced judgment reflecting the amount owed under Clause H, less the returned premium, to avoid a new trial. The court stated: “All of the facts bearing upon this cause of action alleged in the complaint are identical with those embraced in the other claim which was submitted to the jury and passed upon by it. It would seem, therefore, that a new trial is unnecessary unless the plaintiff so elects.”