New York Law Review

Tag: McDermott v. City of New York

  • McDermott v. City of New York, 50 N.Y.2d 211 (1980): Statute of Limitations for Indemnification Claims

    McDermott v. City of New York, 50 N.Y.2d 211 (1980)

    An indemnification claim’s statute of limitations accrues when the party seeking indemnity suffers a loss, typically upon payment to the injured party, regardless of the underlying breach of duty.

    Summary

    Joseph McDermott, a sanitation worker, sued New York City after his arm was severed by a sanitation truck’s hopper. The city then filed a third-party claim against Heil Company, the truck’s manufacturer, seeking indemnification, alleging the injury was due to Heil’s breach of duty in providing an unfit and dangerous product. The trial court dismissed the third-party complaint as time-barred under the Uniform Commercial Code’s (UCC) four-year statute of limitations for breach of warranty, measured from the truck’s delivery date. The Court of Appeals reversed, holding that the indemnification claim accrued only when the city made payment to McDermott, making the action timely.

    Facts

    On February 5, 1969, New York City received a sanitation truck manufactured by Heil Company. On February 24, 1969, while using the truck, Joseph McDermott’s arm was severed by the hopper mechanism. McDermott and a coworker testified they did not activate the hopper, which was designed to activate only when a button was pressed. The City settled with McDermott for $150,000.

    Procedural History

    McDermott sued the City in 1969. In June 1975, the City brought a third-party action against Heil Company. The trial court dismissed the third-party complaint as time-barred under the UCC’s statute of limitations. The Appellate Division affirmed. The City appealed to the New York Court of Appeals.

    Issue(s)

    Whether the statute of limitations for an indemnification claim against a product manufacturer begins to run from the date of the product’s delivery or from the date the indemnitee (here, the City) makes payment to the injured party.

    Holding

    No, because an indemnification claim accrues when the party seeking indemnification suffers a loss, which occurs when payment is made to the injured party, making the City’s claim timely.

    Court’s Reasoning

    The Court of Appeals emphasized the distinction between contribution and indemnification. Contribution involves proportional reimbursement between joint tortfeasors, while indemnification, rooted in equity and contract (express or implied), seeks full reimbursement. The court stated: “The right to indemnity, as distinguished from contribution, is not dependent upon the legislative will. It springs from a contract, express or implied, and full, not partial, reimbursement is sought”.

    Implied indemnification is based on fairness, preventing unjust enrichment. The court reasoned that it is fundamentally unfair if “[a] person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity”.

    Because the indemnification action is quasi-contractual, the contract statute of limitations (six years in New York) applies. The cause of action accrues upon payment by the party seeking indemnity. The court stated, “Because the indemnity claim is a separate substantive cause of action, independent of the underlying wrong, this accrual rule remains the same, whatever the underlying breach of duty for which indemnification is sought.”

    The court rejected Heil’s argument that the indemnification claim, based on a defective product, should be treated differently. The court reasoned that recent developments in products liability law had eroded the theoretical underpinnings of earlier cases that refused to allow indemnification actions based on breach of warranty. The court also held that the City’s settlement with the plaintiff did not preclude the indemnity action under General Obligations Law § 15-108, as that section applies only to contribution claims.

    Finally, the Court found sufficient evidence to establish a prima facie case of products liability, based on testimony suggesting the hopper mechanism self-activated, allowing the fact finder to infer a defect existed at the time of delivery.