New York Law Review

Tag: Hartford Fire Insurance

  • A.C. Legnetto Constr., Inc. v. Hartford Fire Ins. Co., 92 N.Y.2d 275 (1998): Statute of Limitations on Municipal Construction Bonds

    A.C. Legnetto Constr., Inc. v. Hartford Fire Ins. Co., 92 N.Y.2d 275 (1998)

    When a municipal construction bond is mandated by State Finance Law § 137, the statute of limitations period prescribed in that law governs actions on the bond, unless the bond itself provides a longer limitations period.

    Summary

    A.C. Legnetto Construction, Inc. sued Hartford Fire Insurance Company to recover payment for work done on a City of Syracuse elementary school renovation project. Hartford argued the suit was time-barred by the one-year statute of limitations in State Finance Law § 137. The Court of Appeals affirmed dismissal of the suit, holding that because State Finance Law § 137 mandates payment bonds on municipal projects, the statutory limitations period applies unless the bond explicitly provides a longer period, regardless of whether the bond contains additional, non-statutory provisions.

    Facts

    A.C. Legnetto Construction, Inc. (Legnetto) subcontracted with Lawman Construction Co., Inc. to perform landscaping work on a City of Syracuse elementary school renovation project. Lawman was required by its contract with the City to furnish a bond, and did so through Hartford Fire Insurance Company (Hartford). Legnetto completed work by July 30, 1994, and presented a final invoice on June 2, 1994. Lawman failed to pay Legnetto the full amount due. Legnetto commenced an action against Hartford on April 12, 1996, at least 20 months after payment was due.

    Procedural History

    Hartford moved for summary judgment, arguing the claim was barred by the one-year statute of limitations in State Finance Law § 137(4)(b). The trial court granted the motion. The Appellate Division affirmed, holding that because the bond was required by Section 137, and lacked a provision extending the limitations period, the one-year statutory period applied. Two justices dissented, arguing the bond was a common-law bond subject to a six-year limitations period. Legnetto appealed to the Court of Appeals.

    Issue(s)

    1. Whether the one-year statute of limitations in State Finance Law § 137(4)(b) applies to an action on a municipal construction bond that was required by the statute but does not explicitly reference it and contains additional provisions not mandated by the statute.

    Holding

    1. Yes, because State Finance Law § 137 mandates that municipalities furnish payment bonds on all public works projects; therefore, the statutory limitations period applies unless the bond explicitly provides a longer period.

    Court’s Reasoning

    The Court reasoned that State Finance Law § 137 now mandates payment bonds on municipal public works projects. Because Lawman was required by the statute to furnish a bond, and the bond in question was the only one furnished, it “must be deemed to have been furnished to satisfy the statutory requirement.” State Finance Law § 137(4)(b) states that “no action on a payment bond furnished pursuant to this section shall be commenced after the expiration of one year from the date on which final payment under the claimant’s subcontract became due.” The Court stated that the bond must be deemed ipso facto to have been furnished pursuant to the statute, and its provisions must govern, “to the extent that they are not superseded by more liberal provisions in the bond.” The Court distinguished prior case law concerning “common-law” versus “statutory” bonds, noting that this distinction was relevant when the statute was permissive, not mandatory. The Court reasoned that because municipalities are now required to bond all substantial construction projects, the distinction has lost its meaning. “At least where, as here, there is but one bond, that bond must, of necessity, be the one that is required by State Finance Law § 137; otherwise, the municipal contract would have violated the State Finance Law.” Thus, the provisions of State Finance Law § 137 must apply. The Court emphasized the importance of the statutory scheme, stating, “Once municipalities were required to bond all substantial construction projects, the distinction lost its meaning and effect.”

  • New Amsterdam Jewelry, Inc. v. Hartford Fire Ins. Co., 63 N.Y.2d 1018 (1984): Establishing Entrustment for Insurance Exclusion

    New Amsterdam Jewelry, Inc. v. Hartford Fire Ins. Co., 63 N.Y.2d 1018 (1984)

    An insurer bears the burden of proving that a loss falls within a policy exclusion for dishonest acts by individuals to whom insured property was delivered or entrusted; mere employment by the consignee is insufficient to establish entrustment.

    Summary

    New Amsterdam Jewelry, Inc. sued Hartford Fire Insurance Co. to recover for the loss of diamonds under an all-risk policy. The policy excluded coverage for losses caused by dishonest acts of those to whom the property was delivered or entrusted. The diamonds were stolen by Sergio, an employee of International Diamond & Gem, the buyer. The New York Court of Appeals held that Hartford failed to prove the diamonds were entrusted to Sergio, merely showing his employment was insufficient. Therefore, the exclusion did not apply, and New Amsterdam could recover under the policy.

    Facts

    New Amsterdam Jewelry, Inc. (plaintiff) possessed an all-risk insurance policy issued by Hartford Fire Insurance Co. (defendant). The policy excluded losses from dishonest acts by employees or those to whom the insured property was delivered or entrusted. Sergio, a buyer for International Diamond & Gem, contacted New Amsterdam. After confirming Sergio’s employment, New Amsterdam shipped diamonds worth $102,428.50 to International. Postal receipts confirmed delivery to International. The diamonds were stolen by Sergio. New Amsterdam filed a claim, which Hartford rejected based on the policy’s exclusion.

    Procedural History

    New Amsterdam sued Hartford in the Supreme Court, New York County. The Supreme Court granted summary judgment for New Amsterdam. The Appellate Division reversed, holding the exclusion applied because the diamonds were no longer in the insured’s possession. The dissent argued that the stipulated facts did not demonstrate International entrusted the diamonds to Sergio. New Amsterdam appealed to the New York Court of Appeals.

    Issue(s)

    Whether the insurer, Hartford Fire Insurance Co., met its burden of proving that the loss of diamonds fell within the policy exclusion for dishonest acts “on the part of any person to whom the property hereby insured may be delivered or entrusted” when the diamonds were stolen by an employee of the consignee.

    Holding

    No, because the insurer failed to establish that the diamonds were delivered or entrusted to Sergio, the employee who stole them; his employment with the consignee, International Diamond & Gem, was insufficient to prove entrustment.

    Court’s Reasoning

    The Court of Appeals emphasized that the insurer bears the burden of proving that a loss falls within a policy exclusion, citing International Paper Co. v Continental Cas. Co., 35 NY2d 322, 327. The court focused on the policy language, which excluded losses resulting from dishonest acts “on the part of any person to whom the property hereby insured may be delivered or entrusted.” The court found the stipulation that Sergio was an employee of International insufficient to establish delivery or entrustment to him. The court noted, “Nor should it be inferred from the fact that Sergio was an employee of International that the diamonds were delivered or entrusted to him by International, in the face of the stipulated fact that they were stolen by Sergio, whether before or after or without entrustment to him we are not told.” The court distinguished the case from Abrams v Great Amer. Ins. Co., 269 NY 90 and David R. Balogh, Inc. v Pennsylvania Millers Mut. Fire Ins. Co., 307 F2d 894, where entrustment was established. The court also cited Glick v Excess Ins. Co., 14 NY2d 635, noting that even giving an employee a key to the store and the combination to the safe did not establish entrustment as a matter of law. The court concluded that the insurer failed to meet its burden of proving entrustment, thus the exclusion did not apply, and the insured could recover under the policy. The state of mind of the insured is relevant to determining entrustment, but only once some evidence of delivery or entrustment exists, which was lacking here.