Continental Insurance v. Right

In a proceeding pursuant to CPLR article 75 to permanently stay arbitration, the appeal is from a judgment of the Supreme Court, Nassau County (Bucaria, J.), entered April 21, 1997, which granted the petition. [819] Ordered that the judgment is reversed, on the law, with costs, the petition is denied, and the proceeding is dismissed on the merits. On June 30, 1989, a car driven by Paul Strohrmann collided with a car driven by Paul Oliva. Danielle Richt, a passenger in Strohrmann’s car, was injured in the collision. Strohrmann’s insurance policy had a limit of $10,000/$20,000, and Oliva’s insurance policy had a limit of $250,000/$300,000. Richt, who was 14 years old at the time of the accident, was covered by her parent’s insurance policy with the petitioner, Continental Insurance Company (hereinafter Continental). That policy included uninsured/underinsured motorist coverage with a limit of $500,000. Richt sued Strohrmann and Oliva for negligence, and on September 17, 1996, the jury returned a verdict finding Strohrmann 100% at fault in the happening of the accident. On October 8, 1996, Richt filed a demand for arbitration seeking benefits under the uninsured/underinsured motorist provision of Continental’s insurance policy, and Continental commenced this proceeding pursuant to CPLR article 75 to permanently stay the arbitration. The Supreme Court granted the petition and stayed the arbitration, finding that Richt’s arbitration demand was barred by the Statute of Limitations. Generally, a demand for arbitration is subject to a six-year Statute of Limitation (see, CPLR 213), which begins to run “when all of the facts necessary to the cause of action have occurred so that the party would be entitled to obtain relief in court” (Aetna Life & Cas. Co. v Nelson, 67 NY2d 169, 175). Stated another way, “a claimant’s cause of action does not accrue until it possesses the legal right to be paid and to enforce its right to payment in court” (City of New York v State of New York, 40 NY2d 659, 668). With regard to an underinsurance claim, Insurance Law § 3420 (f) (former [2]) states, in pertinent part, “[a]s a condition precedent to the obligation of the insurer to pay under the supplementary uninsured/underinsured motorist insurance coverage, the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgment or settlement” (see also, S’Dao v National Grange Mut. Ins. Co., 87 NY2d 853; Matter of Federal Ins. Co. v Watnick, 80 NY2d 539; Matter of Travelers Ins. [Torres], 245 AD2d 82; Andriaccio v Borg & Borg, 198 AD2d 253; Westchester Fire Ins. Co. v Imperiale, 157 Misc 2d 721). Thus, Richt’s right to payment under the underinsurance coverage with Continental did not accrue until after payment [820] of the policy limits of the underinsured vehicle, which did not occur until after a judgment was obtained against Strohrmann. Therefore, Richt’s demand for arbitration on October 8, 1996, was not barred by the Statute of Limitations. Although the dissent correctly notes that “[t]he facts necessary for determination of an underinsured motorist claim, as with an uninsured motorist claim, are [generally] those existing on the date of the accident, that is, the insurance coverage available to each vehicle or injured party, the fault of the motorists in the happening of the accident and the damages suffered” (infra, at 821), this does not address the central question, which is when the cause of action accrues and the Statute of Limitations begins to run. Unlike an uninsured motorist situation, which does not contain an exhaustion requirement such as that contained in Insurance Law § 3420 (f) (former [2]), an insured’s right to payment pursuant to an underinsurance claim does not accrue until after the underinsured motorist’s insurance has been exhausted by payment. The dissent also correctly states that “[a] statutory condition precedent * * * is not the same as a statutory stay of a Statute of Limitations”. (Infra, at 821.) However, when the condition precedent creates the right to payment, and without its satisfaction no right to payment exists, then the condition precedent necessarily determines when the cause of action accrues and, ipso facto, when the Statute of Limitations begins to run (see, e.g., City of New York v State of New York, supra). With regard to an underinsured motorist claim, the insured’s right to payment does not accrue until the underinsured motorist’s insurance has been exhausted by payment. Therefore, that is when the insured’s cause of action accrues and when the Statute of Limitations begins to run. Miller, J. P., Pizzuto and Friedmann, JJ., concur.