New York Law Review

Tag: Aetna Cas. & Sur. Co.

  • Itri Brick & Concrete Corp. v. Aetna Cas. & Sur. Co., 89 N.Y.2d 786 (1997): Enforceability of Indemnification Agreements When General Contractor is Negligent

    Itri Brick & Concrete Corp. v. Aetna Cas. & Sur. Co., 89 N.Y.2d 786 (1997)

    Under General Obligations Law § 5-322.1, an indemnification agreement in a construction contract that purports to indemnify a general contractor for its own negligence is void and unenforceable, especially when the agreement contemplates full indemnification regardless of the contractor’s negligence.

    Summary

    These consolidated appeals address whether a general contractor can enforce an indemnification agreement against a subcontractor when the general contractor is partially negligent. The Court of Appeals held that because the agreements in both cases contemplated full indemnification, rather than partial, they are unenforceable under General Obligations Law § 5-322.1. The statute prohibits agreements that indemnify a promisee (general contractor) against liability for damages arising from their own negligence, even if the negligence is partial. This ruling reinforces the public policy against shifting responsibility for one’s own negligence in construction contracts.

    Facts

    Itri Brick: Kizmann, an employee of Itri Brick (subcontractor), sued MNT (general contractor) for injuries sustained at a construction project. MNT sought contractual indemnification from Itri. The personal injury action settled, stipulating MNT was 24.26% negligent and Itri was 75.24% negligent.

    Stottlar: Stottlar, an employee of Shopovick (subcontractor), sued Ginsburg (general contractor) for injuries sustained at a construction project. Ginsburg sought contractual indemnification from Shopovick. The jury found Ginsburg 35% negligent, Shopovick 50% negligent, and Stottlar 15% negligent.

    Procedural History

    Itri Brick: Supreme Court initially denied Itri and State Fund’s motion for summary judgment, granting judgment for Aetna, finding the indemnification agreement void under GOL § 5-322.1. After the settlement, the court adhered to its decision. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.

    Stottlar: Supreme Court ruled the indemnification agreement unenforceable under GOL § 5-322.1. The Appellate Division reversed, holding CNA liable to the extent the indemnification required indemnification caused by negligence of a party other than Ginsburg. The Court of Appeals granted CNA leave to appeal.

    Issue(s)

    1. Whether an indemnification agreement between a general contractor and a subcontractor is enforceable when the general contractor is found partially negligent.

    2. Whether General Obligations Law § 5-322.1 bars enforcement of indemnification agreements altogether, or merely bars enforcement to the extent they require indemnification for the general contractor’s negligence.

    Holding

    1. No, because the agreements contemplated full indemnification, and General Obligations Law § 5-322.1 renders such agreements void and unenforceable when the general contractor is negligent.

    2. The statute applies to the indemnification agreements in their entirety because the general contractor/promisee was found to have been negligent, and the agreements did not limit the subcontractor’s obligation to only their own negligence.

    Court’s Reasoning

    The Court reasoned that the indemnification agreements in both cases contemplated a complete shifting of liability from the general contractor to the subcontractor. This violates the intent of General Obligations Law § 5-322.1, which aims to prevent subcontractors from being coerced into assuming liability for the negligence of others. The Court emphasized that the statute prohibits indemnity agreements where owners or contractors seek to pass along risks for their own negligent actions, even if the accident was only partly caused by their negligence. The Court rejected the argument that only the portion of liability attributable to the general contractor’s negligence is unenforceable. Because the agreements explicitly provided for complete indemnification, and the general contractors were found negligent, the entire agreement is unenforceable. The court clarified, quoting the statute, that the law deems unenforceable any agreement “purporting to indemnify or hold harmless the promisee against liability for damage…caused by or resulting from the negligence of the promisee.” The Court further clarified that the statutory language allowing indemnification for damages caused by a “party other than the promisee” refers to negligence of third parties, not the subcontractor’s own negligence. As the court pointed out, “[w]e conclude that the statute applies to the indemnification agreements in their entirety where, as here, the general contractor /promisee is actually found to have been negligent.”

  • Motor Vehicle Accident Indemnification Corp. v. Aetna Cas. & Sur. Co., 89 N.Y.2d 214 (1996): Statute of Limitations for MVAIC Reimbursement Claims

    Motor Vehicle Accident Indemnification Corp. v. Aetna Cas. & Sur. Co., 89 N.Y.2d 214 (1996)

    When the Motor Vehicle Accident Indemnification Corporation (MVAIC) seeks reimbursement from an insurer for no-fault benefits paid due to the insurer’s wrongful denial of coverage, the applicable statute of limitations is three years, commencing from the date of the initial payment to the claimant.

    Summary

    This case addresses the statute of limitations applicable to MVAIC’s claims for reimbursement against an insurer who denied no-fault coverage. MVAIC paid benefits to injured parties after Aetna denied coverage, asserting policy cancellation. MVAIC then sought reimbursement from Aetna via arbitration more than three years after the accident but within three years of the final benefit payment. The Court of Appeals held that a three-year statute of limitations applied, beginning from the date of MVAIC’s first payment to the claimants, not the date of last payment or the accident date. Because the arbitration demand was made more than three years after the initial payment, the claim was time-barred, however, the court upheld the arbitration award because the arbitrator’s decision was not arbitrary or capricious.

    Facts

    On February 10, 1989, two passengers were injured in a car accident in New York City.
    The host vehicle was insured by Aetna.
    Aetna denied the passengers’ no-fault benefit claims, asserting the policy had been cancelled prior to the accident.
    The passengers then filed claims with MVAIC.
    MVAIC made payments to the passengers between August 1989 and November 1991.
    On October 20, 1992, MVAIC initiated arbitration against Aetna to recover the payments.
    Aetna, in its amended contentions, argued the claim was time-barred because it was filed more than three years after the accident.

    Procedural History

    MVAIC initiated compulsory arbitration proceedings against Aetna.
    The arbitrator ruled in favor of MVAIC, ordering full reimbursement.
    MVAIC sought to confirm the arbitration award in Supreme Court.
    Aetna opposed, seeking vacatur of the award, arguing the statute of limitations had expired.
    Supreme Court confirmed the award, concluding the arbitrator rejected Aetna’s timeliness argument and that the claim was timely because it was filed within three years of MVAIC’s final payment.
    The Appellate Division affirmed.
    The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the applicable statute of limitations for MVAIC’s claim against Aetna for reimbursement of no-fault benefits is three years or six years?
    If the three-year statute of limitations applies, when does the limitations period begin to run: from the date of the accident, the date of first payment by MVAIC, or the date of last payment by MVAIC?
    What is the effect of Aetna raising the statute of limitations defense in arbitration, instead of seeking a stay in court, on its ability to challenge the arbitration award?

    Holding

    Yes, the applicable statute of limitations is three years because MVAIC’s right to recover is created by statute.
    The limitations period begins to run from the date of the initial payment because that is when all facts necessary for the cause of action exist.
    Although the arbitration award entailed an erroneous application of the Statute of Limitations, it will not be overturned because the arbitrator’s decision was not arbitrary and capricious.

    Court’s Reasoning

    The court applied the reasoning in Aetna Life & Cas. Co. v. Nelson, distinguishing between claims that codify common-law liability and those that would not exist but for the statute. MVAIC’s obligation to pay and its right to reimbursement are purely statutory, arising from the no-fault scheme. “the No-Fault Law does not codify common-law principles; it creates new and independent statutory rights and obligations in order to provide a more efficient means for adjusting financial responsibilities arising out of automobile accidents”.
    The cause of action accrues when all facts necessary for the cause of action exist, which is when MVAIC makes its first payment. The No-Fault Law grants MVAIC a statutory right to recover the amount paid from the insurer of another covered person.
    The court noted the legislative policy favoring prompt disposition of claims under the No-Fault Law.
    While Aetna could have sought a stay of arbitration based on the statute of limitations, it instead submitted the issue to the arbitrator. In compulsory arbitration, the arbitrator’s decision is subject to judicial review for being arbitrary and capricious. Here, the limitations period and accrual date were unsettled, so the arbitrator’s decision, while erroneous, was not arbitrary and capricious.