Affirming New York’s long-standing enforcement of insurance policy suit-limitation provisions, the Second Department upheld the dismissal of a group of Lloyd’s of London insurers from a lawsuit seeking payment for damages due to a fire loss at a Long Island restaurant.

On January 13, 2008, a fire occurred at the Bayville Lobster House, a property insured by the London syndicates. The insured submitted a claim that was denied because the policy had been cancelled weeks prior to the fire due to late payment of the policy premium.

In December 2010, the insured filed a Summons in the Supreme Court, Suffolk County naming its insurers, insurance broker and premium financing company but never filed a Complaint. The Summons was dismissed for lack of prosecution. Then in January 2014, the insured filed a Complaint in Nassau County against the same parties. The insured alleged that the insurer breached the insurance contract for failure to pay and that the broker and finance company were negligent in not timely processing the premium payment.
The policy contained a suit-limitation clause requiring that actions under the policy must be brought within two years from the date of loss and, based on the timing of the filing, the insurer filed a motion to dismiss on that basis. The broker and finance company also filed motions to dismiss, albeit on different grounds: that the claim was time-barred under CPLR 205(a) for lack of prosecution of the prior action. The motion judge dismissed the action as to all defendants on the latter basis but did not address the insurer’s argument.

On appeal, the Second Department panel upheld the insurer’s dismissal on the grounds that both the initial Summons filed nearly three years after the fire and the Complaint filed six years after the loss were initiated well beyond the policy-mandated two-year limit. The Appellate Division reversed the trial court order as to the other defendants, concluding that the six-month savings period in CPLR 205(a) is not a limitation but a tolling provision, which has no application where the statute of limitations as to those defendants had not expired at the time the second action was commenced.

Suit-limitation provisions like the one in the insurer’s policy are considered reasonable and enforceable by New York courts, superseding statutory limits when agreed to by contracting parties. The Appellate Division correctly followed precedent in upholding the insurer’s dismissal. Michael Savett of Clark & Fox represented the insurers in the action.