Coverage Denial as a Single Breach: Second Department Fixes Accrual at Disclaimer Date and Rejects Continuing‑Wrong Tolling for Excess Workers’ Compensation Policies

Introduction

In New York Bus Operators Compensation Trust v. American Home Assurance Co. (2025 NY Slip Op 04576), the Appellate Division, Second Department, affirmed dismissal of a coverage suit brought by a self-insurance trust against its excess insurer. The case arises from a school bus driver’s 1999 workplace injury, which later resulted in long-term workers’ compensation benefits exceeding the trust’s self-insured retention (SIR). After a Third-Party Administrator (TPA) notified the excess carrier of the claim in 2012, the carrier denied coverage for late notice. The trust did not learn of the denial until 2016 and sued the insurer in 2020 for declaratory and contract relief.

The court addressed three core issues:

When the six-year statute of limitations accrues for a breach-of-insurance-contract claim premised on a denial of coverage;
Whether the continuing-wrong doctrine can toll the limitations period in the context of ongoing workers’ compensation indemnity obligations;
Whether a declaratory judgment claim duplicating a breach-of-contract claim may be maintained.

The decision also reiterates important procedural guardrails: pre-answer summary judgment is improper, and a motion to dismiss should not be converted to summary judgment without the statutory prerequisites.

Summary of the Judgment

The appeal from a March 3, 2021 order was dismissed as superseded by a June 9, 2021 order made upon reargument.
The June 9, 2021 order was affirmed insofar as appealed from.
Key holdings:
- A declaratory judgment cause of action duplicating a breach-of-contract claim is unnecessary and was properly dismissed.
- The breach-of-contract claim was time-barred. The six-year limitations period (CPLR 213[2]) began to run at the latest on May 18, 2012—the date the insurer disclaimed coverage—regardless of the insured’s later discovery of the denial.
- The continuing-wrong doctrine does not toll the statute where the insurer’s denial is a single wrong with continuing effects.
- Attempts to recast the insurer’s obligations as a separate common-law duty or to invoke waiver/estoppel failed on the record presented.
- The insured’s pre-answer cross-motion for summary judgment was procedurally improper and properly denied; the record did not warrant conversion of the CPLR 3211 motion to summary judgment under CPLR 3211(c).
Costs were awarded to the insurer (respondent).

Factual and Procedural Background

The plaintiff, New York Bus Operators Compensation Trust (NYBOCT), is a group self-insurance trust created in the early 1990s to cover its members’ workers’ compensation obligations. To hedge its exposure, NYBOCT purchased an excess-of-loss policy from American Home Assurance Co. for the period January 1, 1999 to January 1, 2001. The policy required prompt written notice of claims that might implicate the excess layer or involve disability likely to exceed one year; the SIR was $150,000.

A member’s employee was injured in 1999, and later classified with a permanent partial disability extending beyond one year by July 13, 2006. NYBOCT’s payments exceeded the SIR by January 2007. The claim was first reported to American Home by NYBOCT’s TPA (Gallagher Bassett Services, Inc.) on February 27, 2012. The insurer denied coverage by letter dated May 18, 2012, citing late notice. NYBOCT asserted it only learned of the claim and denial on August 17, 2016 during a claims meeting. NYBOCT sued its brokers/TPAs in 2017 (in related litigation) and sued the insurer in September 2020 for declaratory relief and damages for breach of the policy.

The Supreme Court (Suffolk County) granted American Home’s CPLR 3211 motion to dismiss and denied NYBOCT’s pre-answer cross-motion for summary judgment. Upon reargument, the court adhered to its determinations. NYBOCT appealed; the Second Department affirmed.

Detailed Analysis

1) Accrual of Contract Claim: The Clock Starts at Disclaimer

The Second Department reaffirmed that a breach-of-contract claim accrues at the time of breach—even if damages occur later and even if the plaintiff is unaware of the breach. In insurance-coverage disputes alleging an improper disclaimer, absent clear contractual language to the contrary, the limitations period runs from the date of the insurer’s disclaimer.

Applying that rule, the court held that NYBOCT’s contract claim accrued no later than May 18, 2012 (the date of American Home’s denial). Suit filed in 2020 was therefore outside the six-year window of CPLR 213(2).

Notably, the court’s analysis fixes accrual at the date of denial despite the insured’s assertion that it did not actually learn of the denial until 2016. New York does not apply a “discovery rule” to ordinary contract claims; ignorance of the breach does not delay accrual. The decision underscores the importance of tracking denials in complex claims ecosystems involving TPAs and brokers because the statute can run without the named insured’s actual awareness.

2) Continuing-Wrong Doctrine Rejected

NYBOCT argued for tolling on the theory that the excess insurer’s obligation to indemnify was ongoing as benefits continued to be paid in excess of the SIR. The court rejected this, characterizing the denial as a single wrong with continuing effects, not a series of discrete, actionable wrongs. Thus, no continuing-wrong tolling applied.

This is a significant clarification in the workers’ compensation excess context, where underlying indemnity payments can persist for years or decades. The court draws a clear line: once an insurer issues a coverage denial, the breach is complete. Ongoing payments by the insured above the SIR do not refresh or re-start the statute.

3) No End-Run via Separate “Common-Law Duty” or Estoppel/Waiver

The court rejected NYBOCT’s attempt to frame the insurer’s obligations as a free-standing common-law duty premised on alleged deficiencies in notice (i.e., that American Home failed to provide the Trust with its own notice of disclaimer). The insurer’s duty to indemnify arose solely from the policy, not from extra-contractual or vicarious-liability theories. Re-labeling the claim could not avoid the statute of limitations.

Likewise, arguments that American Home should be estopped from relying on its disclaimer, or that it had waived the right to rely on the denial, were rejected. On the pleadings and submissions, no equitable basis existed to override the time bar.

4) Declaratory Judgment Claim Dismissed as Duplicative

The court affirmed dismissal of the declaratory judgment cause of action as duplicative of the breach-of-contract claim. Where the declaration sought would merely determine rights under the contract and overlaps completely with a damages claim for breach of the same contract, declaratory relief is unnecessary and duplicative.

5) Procedural Guardrails: No Pre-Answer Summary Judgment; No Conversion

NYBOCT’s pre-answer cross-motion for summary judgment was procedurally improper because issue had not yet been joined (CPLR 3212[a]).
The record did not justify converting the 3211 motion to a summary judgment motion under CPLR 3211(c); among other things, the necessary notice and circumstances for conversion were lacking.

Precedents Cited and How They Informed the Decision

Leon v Martinez (84 NY2d 83): Sets the standard on a CPLR 3211 motion to dismiss—accepting the complaint’s allegations as true and giving plaintiff every favorable inference. The court used this lens yet still found dismissal appropriate on duplicativeness and limitations grounds.
City of Rochester v Chiarella (65 NY2d 92): Reaffirms that summary judgment before joinder of issue is generally improper. Anchored the ruling denying NYBOCT’s pre-answer cross-motion for summary judgment.
CPLR 3211(c); Mihlovan v Grozavu (72 NY2d 506); Hutchinson v Kings County Hosp. Ctr. (139 AD3d 673): Clarify when a motion to dismiss may be converted to summary judgment. Conversion was not warranted here.
Pacella v Town of Newburgh Volunteer Ambulance Corps., Inc. (164 AD3d 809); James v Alderton Dock Yards (256 NY 298); Dolce-Richard v NYC Health & Hosps. Corp. (149 AD3d 903): Establish that a declaratory judgment claim duplicating a breach-of-contract claim should be dismissed as unnecessary. Guided dismissal of NYBOCT’s first cause of action.
CPLR 213(2); Ely-Cruikshank Co. v Bank of Montreal (81 NY2d 399); Statharos v Statharos (219 AD3d 651); Houtenbos v Fordune Assn., Inc. (200 AD3d 662): Fix accrual of breach-of-contract claims at the moment of breach, not discovery, even if damages accrue later. The centerpiece for the statute-of-limitations analysis.
Anderson v Allstate Ins. Co. (171 AD3d 1331); Mercedes-Benz Fin. Servs. USA, LLC v Allstate Ins. Co. (162 AD3d 1183): Specific to insurance, these cases provide that, absent contrary contract language, the limitations period for an improper-disclaimer claim starts on the date of disclaimer. Adopted to fix the accrual date at May 18, 2012.
Matter of Salomon v Town of Wallkill (174 AD3d 720); Henry v Bank of Am. (147 AD3d 599): Explain the continuing-wrong doctrine and why a single wrong with continuing effects does not toll the statute. Applied to reject NYBOCT’s tolling theory.
Curreri v Heritage Prop. Inv. Trust, Inc. (48 AD3d 505): Used to reinforce that the duty to indemnify was grounded in the contract, not in vicarious or extra-contractual duties.
Provencal, LLC v Tower Ins. Co. of N.Y. (138 AD3d 732): Supports rejection of waiver/estoppel arguments used to sidestep a clear disclaimer and time bar.
Collins-Genova v Louros (204 AD3d 748); Hershman v Bank of N.Y. Mellon (219 AD3d 812); Morrow v Vibration Mountings & Controls, Inc. (223 AD3d 736); Klein v Deutsch (193 AD3d 707): Outline the burden-shifting framework on a motion to dismiss under CPLR 3211(a)(5) based on the statute of limitations. The insurer met its prima facie burden; the insured did not raise an applicable toll or exception.

Legal Reasoning: Why the Court Reached This Result

The Second Department applied settled New York principles:

New York’s contract law fixes accrual at breach, not discovery. The insurer’s denial—regardless of the insured’s later awareness—constitutes the breach.
In coverage litigation, an improper disclaimer is a singular event. Unlike installment contracts (where each missed payment can be a new breach), a coverage denial does not create a sequence of independently actionable breaches as additional expenses are incurred.
Doctrines such as continuing wrong, waiver, and equitable estoppel are narrowly applied. Absent misleading conduct after the denial or an insurer’s affirmative behavior inducing delay, these doctrines do not extend the statutory period.
Declaratory relief is not a separate pathway when it seeks the same determination and relief as a contract claim. Courts avoid redundant declaratory counts when a breach claim fully addresses the dispute.
Procedure matters: summary judgment requires joinder of issue; conversion of motions under CPLR 3211(c) requires appropriate notice and context, which were lacking.

Impact and Practical Implications

The decision’s implications are particularly salient for self-insured groups, risk managers, TPAs, and excess insurers in the workers’ compensation arena:

Accrual Certainty: The six-year clock for breach-of-insurance-contract claims premised on a denial starts on the date of the insurer’s disclaimer, absent contrary policy language. Risk managers should calendar that date immediately.
No “Continuing Benefits” Toll: Ongoing workers’ compensation payments above an SIR do not toll or reset the limitations period after a denial. Coverage litigation strategies must factor this early accrual.
TPA/Broker Ecosystems: Where claims handling is delegated, denials may be issued to TPAs. This case signals that the statute can run regardless of the named insured’s actual knowledge. Governance structures should mandate prompt transmission of denials to the insured and require logging and escalation protocols.
Contract Drafting: Consider endorsements requiring the insurer to send notices of disclaimer to multiple designated recipients (named insured, trust administrators, counsel) and requiring TPAs to forward carrier correspondence within strict timeframes.
Litigation Posture: Avoid filing pre-answer summary judgment motions unless issue is joined or the parties clearly chart a summary-judgment course; be cautious in urging conversion of CPLR 3211 motions absent clear notice and a fully developed record.
Pleading Strategy: Do not assume that adding declaratory judgment counts will preserve or extend time for contract claims; courts will dismiss duplicative declaratory counts.
Equitable Theories: Waiver and estoppel require concrete, post-denial conduct or clear misrepresentations; mere passage of time or administrative confusion will not do.

Complex Concepts Simplified

Self-Insured Retention (SIR): The amount the insured must pay on a claim before excess insurance responds. Here, $150,000.
Excess-of-Loss Policy: Insurance that pays losses above the SIR up to specified limits; it does not handle the first layer of loss.
Denial/Disclaimer of Coverage: The insurer’s written refusal to cover a claim, often citing policy conditions (e.g., late notice). This denial is treated as the breach that triggers the statute of limitations.
Statute of Limitations (CPLR 213[2]): In New York, a six-year deadline applies to breach-of-contract claims, measured from the breach (not from discovery).
Continuing-Wrong Doctrine: A limited tolling principle that applies when a series of distinct wrongs occur over time. It does not apply to a single wrong that has ongoing effects (e.g., a one-time coverage denial).
Declaratory Judgment vs. Breach of Contract: A declaration determines rights and obligations under a contract; a breach claim seeks damages for violating those rights. If both seek the same result, the declaratory claim can be dismissed as duplicative.
Joinder of Issue: Occurs when a defendant answers the complaint or otherwise joins the factual/legal issues, a prerequisite to summary judgment (with limited exceptions).
CPLR 3211(c) Conversion: A court may convert a motion to dismiss into one for summary judgment only with appropriate notice and when the record is sufficiently developed.

Conclusion

The Second Department’s decision solidifies a clear, administrable rule for coverage litigation in New York: When an insurer disclaims coverage, the insured’s six-year period to sue for breach begins on the date of the disclaimer, regardless of the insured’s later discovery. The court decisively rejects efforts to toll that period based on the continuing nature of workers’ compensation payments, and it forecloses end-runs via duplicative declaratory claims or rebranding the contractual duty as a common-law obligation.

Procedurally, the case is a reminder that timing and form matter: pre-answer summary judgment is improper; declaratory counts that add nothing new will be dismissed; and conversion of motions requires strict adherence to CPLR standards. Substantively, the ruling urges insureds—especially self-insured trusts reliant on TPAs—to build robust notice pipelines and docketing practices to ensure timely action when coverage is denied. For insurers, the decision offers predictability and reinforces that a single denial fixes the accrual date, fostering finality in long-tail claims.