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NATIONWIDE INS. v. SCHWARTZ
Factual and Procedural Background
Plaintiff Nationwide Mutual Insurance Company, as subrogee of its insureds including Rita Bruskin, instituted an action to recover additional personal injury protection benefits (APIP) totaling $5,447.35 paid from November 21, 1991, until July 29, 1992. The underlying automobile accident occurred on December 20, 1987. A timely action was initially commenced against defendants Jeffrey and Rose Schwartz, and on January 19, 1993, Rita Bruskin signed a release settling that suit for $150,000, none of which was paid to the plaintiff. Defendants moved to dismiss the complaint pursuant to CPLR 3211(a)(5), arguing the action was barred by the Statute of Limitations. The Nassau County District Court denied the motion, finding plaintiff's subrogation rights accrued upon payment of the loss and that the APIP payments were made within three years of commencement of the action. The present appeal arises from that denial of the motion to dismiss.
Legal Issues Presented
- Whether the plaintiff's subrogation claim to recover APIP benefits was barred by the Statute of Limitations.
- Whether the release signed by the insured impaired the plaintiff's subrogation rights.
- Whether an action may be maintained against defendant Liberty Mutual Insurance Company absent a judgment against its insureds.
- Whether an exception to the common-law doctrine of subrogation applies to APIP claims.
Arguments of the Parties
Appellants' Arguments
- The defendants argued that the plaintiff's action was barred by the Statute of Limitations, warranting dismissal under CPLR 3211(a)(5).
- They conceded that the release signed by the insured did not impair the plaintiff's subrogation rights.
- They contended that there was no basis for commencing an action against Liberty Mutual Insurance Company without a judgment against its insureds.
Respondent's Arguments
- Plaintiff contended that its subrogation rights accrued upon payment of the loss and that the APIP payments were made within three years of the commencement of the action, thus the claim was timely.
- Plaintiff urged that an exception to the common-law doctrine of subrogation should apply to APIP claims.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Fowler v Pebble Hill Bldg. Corp., 120 A.D.2d 486 | Release by insured does not impair insurer's subrogation rights. | Supported the court's finding that the release did not affect plaintiff's subrogation rights. |
| Aetna Cas. Sur. Co. v Jackowe, 96 A.D.2d 37 | Same as above regarding release and subrogation rights. | Reinforced that the release did not impair subrogation rights. |
| Government Empls. Ins. Co. v Jacobson, 98 A.D.2d 811 | Same principle on release and subrogation rights. | Further supported the court's position on release effect. |
| Winkelmann v Excelsior Ins. Co., 85 N.Y.2d 577 | Insurer's subrogation rights accrue upon payment of the loss. | Established the accrual date of subrogation rights relevant to the Statute of Limitations. |
| Federal Ins. Co. v Andersen Co., 75 N.Y.2d 366 | Subrogation rights are derivative and limited to insured's rights; insurer subject to same defenses. | Confirmed that insurer's claim is subject to same Statute of Limitations as insured's claim. |
| Seven Sixty Travel v American Motorists Ins. Co., 98 Misc.2d 509 | Statute of Limitations applies equally to insurer's subrogation claims as to insured's claims. | Applied to determine the timeliness of plaintiff's claim under the three-year tort limitation. |
| Matter of MVAIC v Aetna Cas. Sur. Co., 89 N.Y.2d 214 | Three-year Statute of Limitations applies to recovery of first-party benefits under CPLR 214(2). | Distinguished from the instant case as it involved statutorily created rights, not common-law subrogation. |
Court's Reasoning and Analysis
The court began by acknowledging that the release signed by the insured did not impair the plaintiff's subrogation rights, consistent with precedent. It then addressed the scope of the plaintiff's claims, noting that while the plaintiff may maintain a direct action against the insured defendants for APIP benefits paid, there is no statutory or common-law authority to sustain an action against Liberty Mutual Insurance Company absent a judgment against its insureds, requiring dismissal of the action against Liberty Mutual.
Regarding the timeliness of the claim, the court emphasized the well-settled principle that an insurer's subrogation rights accrue upon payment of the loss and are derivative of the insured's rights. Consequently, the insurer is subject to the same defenses, including the Statute of Limitations, which here is a three-year tort limitation measured from the date of the accident. Since the plaintiff's action was commenced nearly six years after the accident date, it was untimely and subject to dismissal against Jeffrey and Rose Schwartz.
The court rejected the plaintiff's argument for an exception to the common-law subrogation doctrine as applied to APIP claims, finding no basis on the record to depart from established legal principles. The court also distinguished the recent Court of Appeals decision in Matter of MVAIC v Aetna Cas. Sur. Co., explaining that it involved statutorily created rights and obligations, unlike the common-law subrogation claim in the instant case, and thus did not alter the outcome.
Holding and Implications
The court reversed the order denying the motion to dismiss and dismissed the complaint against all appellants.
The direct consequence of this decision is that the plaintiff's subrogation claim for APIP benefits against Jeffrey and Rose Schwartz is barred by the Statute of Limitations, and the claim against Liberty Mutual Insurance Company is dismissed for lack of statutory authority absent a judgment against its insureds. The court did not establish any new precedent but reaffirmed established principles governing insurer subrogation rights and the applicable Statute of Limitations.
MEMORANDUM.
Order unanimously reversed, without costs, and complaint dismissed as to appellants.
Plaintiff instituted this action to recover additional personal injury protection benefits (hereinafter APIP) paid to its insureds from November 21, 1991 until July 29, 1992, for a total sum of $5,447.35. The subrogation agreement executed by plaintiff's insured Rita Bruskin on November 25, 1991 indicates that the automobile accident upon which the claim for extended economic benefits was based occurred on December 20, 1987. An apparently timely action was commenced against the defendants Jeffrey and Rose Schwartz. The record shows that on January 19, 1993, Rita Bruskin signed a release settling that suit for $150,000, no payments of which were made to plaintiff. Defendants moved to dismiss pursuant to CPLR 3211 (a) (5) on the ground, inter alia, that plaintiff's action was barred by the Statute of Limitations. The court denied the motion, finding that plaintiff's subrogation rights accrued upon payment of the loss and that the APIP payments were made within three years of the commencement of the action. For the reasons set forth herein, the order is reversed and the complaint is dismissed.
We note initially that the release signed by plaintiff's insured did not impair plaintiff's subrogation rights, as defendants concede in their brief on appeal ( see, Fowler v Pebble Hill Bldg. Corp., 120 A.D.2d 486; Aetna Cas. Sur. Co. v Jackowe, 96 A.D.2d 37; see also, Government Empls. Ins. Co. v Jacobson, 98 A.D.2d 811). However, while plaintiff, as subrogee of its insured, may maintain a direct action to recover APIP benefits paid to its insureds against defendants Jeffrey Schwartz and Rose Schwartz, there is no statutory or common-law authority for the commencement of an action against the defendant insurer Liberty Mutual Insurance Co. in the absence of a judgment obtained against defendant Liberty's insureds ( see, Insurance Law ยง 3420). Accordingly the action against defendant Liberty Mutual Insurance Co. must be dismissed. Plaintiff's action against defendants Jeffrey Schwartz and Rose Schwartz must also be dismissed as time barred by the Statute of Limitations.
It is well settled that an insurer's subrogation rights accrue upon payment of the loss ( Winkelmann v Excelsior Ins. Co., 85 N.Y.2d 577, 582; Federal Ins. Co. v Andersen Co., 75 N.Y.2d 366, 372). It is further equally well established that the subrogation rights of an insurer are derivative and limited to such rights as the insured would have had against a third party for its default or wrongdoing ( Federal Ins. Co. v Andersen Co., supra, at 372; Winkelmann v Excelsior Ins. Co., supra, at 582). Thus, the insurer is subject to whatever defenses the third party might have asserted against its insured including the same Statute of Limitations ( Seven Sixty Travel v American Motorists Ins. Co., 98 Misc.2d 509). Plaintiff's claim for APIP benefits paid to its insured clearly falls under the principle of subrogation. As such, plaintiff's subrogation rights are subject to the same three-year tort Statute of Limitations, measured from the date of the accident, as though the cause of action had been brought by its insured ( see, Seven Sixty Travel v American Motorists Ins. Co., supra). Accordingly, plaintiff's action, which was commenced nearly six years after the date of the accident, was untimely and should have been dismissed against defendants Jeffrey Schwartz and Rose Schwartz on this ground.
Plaintiff urges on appeal that an exception to the common-law doctrine of subrogation should be made as it applies to APIPs. However, we find no basis upon the present record to depart from the well-settled principles of law enunciated in the aforementioned cases which are governing here.
The recent Court of Appeals decision Matter of MVAIC v Aetna Cas. Sur. Co. ( 89 N.Y.2d 214), in which it was held that the three-year Statute of Limitations period of CPLR 214 (2) applied to a cause of action to recover payment of first-party benefits by MVAIC against the insurer of a vehicle who denied no-fault coverage, measured from the initial date of payment to claimants, does not warrant a different result than that reached herein. That case involved statutorily created obligations and rights and is distinguishable from plaintiff's cause of action in the instant case which is clearly in the nature of common-law subrogation.
DiPAOLA, P.J., STARK and INGRASSIA, JJ., concur.
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