Opinion
13330/09.
Decided June 29, 2011.
This is an action seeking disability benefits for the plaintiff under an insurance policy between himself and the defendant. In his complaint, plaintiff asserts that he was injured on December 14, 2005 when he was involved in a motor vehicle accident on Van Siclen Street at or near its intersection with Avenue S in the County of Kings, City and State of New York. At the time of the accident, plaintiff worked as a driver for Fed Ex Home Delivery ("Fed Ex"). Plaintiff first applied for disability benefits from the defendant under his no-fault policy. In October, 2006, plaintiff was deemed totally disabled by Fed Ex' physicians. Following the expiration of this no-fault benefits, plaintiff applied for payment from the defendant under his secondary disability policy. It is uncontested that defendant denied plaintiff's claim for disability benefits. This action was commenced on May 21, 2009 by the filing of a summons and complaint.
By order dated January 10, 2011, this court denied defendant's motion for summary judgment due to defendant's failure to include a signed certification, pursuant to Court Rule 130-1.1(a) with its motion. Defendant Protective Insurance Company ("Protective") now moves, pursuant to CPLR § 2221, for leave to renew its prior motion for summary judgment. As the movant has now included the required certification, the instant motion to renew is granted.
Upon renewal, this court will first consider defendant Protective's motion seeking an order, pursuant to CPLR § 3025, for leave to amend its answer to include the affirmative defense of statute of limitations. It is well-settled that "a party may amend [its] pleading * * * at any time by leave of court" and that "[l]eave shall be freely given upon such terms as may be just." (CPLR § 3025 [b]; Fahey v. County of Ontario, 44 NY2d 934, 935; Hempstead Concrete Corp. v. Elite Assocs., 203 AD2d 521, 523[2d Dept. 1994]). Allowing such an amendment is committed "almost entirely to the court's discretion to be determined on a sui generis basis." (See, Leitner v. Jasa Hous. Mgmt. Servs. for the Aged, Inc. , 6 AD3d 667 [2d Dept. 2004]; Zeide v. National Cas. Co., 187 AD2d 576 [2d Dept. 1992]; Corsale v. Pantry Pride Supermarkets, 197 AD2d 659, 660 [2d Dept. 1993]; Hickey v. Hudson, 182 AD2d 801, 802 [2d Dept. 1992]). Where, as here, the opposing party fails to make a showing of operative prejudice; i.e., prejudice attributable to the mere omission to plead the defense in the original answer, the amendment may be allowed "during or even after trial" ( Murray v. City of New York, 43 NY2d 400, 405, citing Dittmar Explosives v. A.E. Ottaviano, Inc., 20 NY2d 498, 502; see, Breco Envtl. Contrs., Inc. v. Town of Smithtown, 307 AD2d 330 [2d Dept. 2003]; Grall v. Ba Mar, Inc., 233 AD2d 368 [2d Dept. 1996]). As the plaintiff has failed to prove, or to even assert, that he would be prejudiced by the proposed amendment, defendant Protective's motion, pursuant to CPLR § 3025, is granted. The supplemental summons and amended complaint annexed to the instant motion is deemed timely served.
Upon amendment of its answer and the inclusion of the affirmative defense of statute of limitations, defendant Protective now moves, pursuant to CPLR § 3212, for an order granting summary judgment and dismissing the complaint. It is well-settled that the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case ( See, Zuckerman v. City of New York, 49 NY2d 557, 562; Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395, 404). Failure to make such a showing necessitates denial of the motion.
CPLR § 3212(b) requires that for a court to grant summary judgment it must determine if the movant's papers justify holding, as a matter of law, "that the cause of action or defense has no merit." The evidence submitted in support of the movant must be viewed in the light most favorable to the non-movant ( see, Grivas v. Grivas, 113 AD2d 264, 269 [2d Dept. 1985]; Airco Alloys Division, Airco Inc. v. Niagara Mohawk Power Corp., 76 AD2d 68 [4th Dept. 1980]; Parvi v. Kingston, 41 NY2d 553, 557.
Defendant Protective asserts that the instant complaint must be dismissed based on documentary evidence, pursuant to CPLR § 3211(a)(1), (5), because the plaintiff has failed to commence this action within the contractual time period. A complaint which is facially sufficient may be dismissed if there exists documentary evidence which conclusively contradicts the claims (See, Smuckler v. Mercy College, et al, 244 AD2d 349 [2d Dept. 1997]). In support of its motion, defendant Protective submits, inter alia, the pleadings, the prior motion and responsive papers, a certified copy of the subject insurance policy, its proposed amended answer and a copy of the Note of Issue filed on April 5, 2010.
A review of the subject insurance policy reveals that, paragraph 11 of the General Provisions states:
"Written proof of loss must be furnished to us within ninety (90) days after the date of loss for which claim is made."
Paragraph 13 thereof states:
"No lawsuit may be brought to recover on the Group Master Policy within sixty (60) days after written proof of loss has been given as required by this policy. No such lawsuit may be brought after two (2) years from the time written proof of loss is required to be given.
The movant asserts that, pursuant to the subject insurance policy, plaintiff was required to submit written proof of loss by March 14, 2006 and to commence a lawsuit by March 14, 2008. As aforestated, this action was commenced on May 21, 2009, more than fourteen (14) months after the expiration of the contractual time period.
In opposition to the instant motion, plaintiff does not dispute that the contractual time-period is two years, ninety days from the date of his accident, nor does plaintiff dispute that he failed to commence this action within the contractual time period. Instead, plaintiff asserts that the statute of limitations provision of the subject insurance policy is unconscionable and must be voided by this court.
It is well-settled that the determination of whether a contract, or a provision thereof, is unconscionable is a matter of law reserved for the court (See, Wilson Trading Corp. V. David Ferguson, Ltd., 23 NY2d 398). For a court to determine that a contract, or a contractual provision, is unconscionable, a court must determine that the agreement is so one-sided that it "shocks the conscience such that no person in his or her right mind would make it on the one hand, and no honest and fair person would accept it on the other" ( Kojovic v. Goldman , 35 AD3d 65 , 823 N.Y.S.2d 35 [1st Dept. 2006] citing Christian v. Christian, 42 NY2d 63, 365 N.E.2d 849, 396 N.Y.S.2d 817).
A finding of unconscionability usually requires both a showing that the contract was procedurally and substantively unconscionable when made (emphasis added) (See, Gillman v. Chase Manhattan Bank, N.A., 73 NY2d 1, 534 N.E.2d 824, 537 N.Y.S.2d 787). A contract is procedurally unconscionable when one of the parties lacked a meaningful choice in its execution. Misrepresentation of facts, high pressure sales tactics and unequal bargaining position have each been found to be examples of elements of a procedurally unconscionable contract (See, Matter of Friedman, 64 AD2d 70, 407 N.Y.S.2d 999 [2nd Dept 1978]). A contract is substantively unconscionable when the terms of the contract are unreasonably favorable to the other party ( Gillman, supra). Examples of elements of substantive unconscionability include contracts that contain inflated prices, unfair disclaimers of warranty and termination clauses (See, Matter of Friedman, supra). While a determination of unconscionability generally requires a court to find elements of both procedural and substantive unconscionability, a contract, or provision thereof, that is deemed to be outrageous on grounds of substantive unconscionability alone can also be stricken by the court ( See, Gillman, supra; State of New York v. Wolowitz, 96 AD2d 47).
In ruling whether a contract is procedurally unconscionable, a court may consider several factors such as the professional experience of the parties, the level of negotiations that occurred during the formation of the contract and the equality of the bargaining positions of the parties (See, Industralease Automated and Scientific Equipment Corporation v. R.M.E. Enterprises, Inc., et al, 58 Ad2d 482 [2d Dept. 1977]). In the instant action, it is uncontested that plaintiff is neither an attorney nor an experienced insurance professional; and that the subject insurance policy was a part of a pre-negotiated package of benefits he received through his employment with Fed Ex. Neither party asserts that plaintiff actually signed the subject insurance policy and affirmatively agreed to its terms.
In considering plaintiff's allegation of procedural unconscionability of the terms of the subject policy, this court must take into account plaintiff's lack of bargaining power in the formation of the agreement, whether each party had a reasonable opportunity to understand the terms of the contract (See, Gillman, supra). It is clear that plaintiff is neither a legal nor an insurance professional and that he had no opportunity to negotiate any of the terms of the subject policy. Thus, this court finds that, due to the overwhelmingly unequal bargaining power of the parties in the formation of the contract, the disputed contractual statute of limitations contained within the subject policy is procedurally unconscionable.
This court must also determine if the contractual statute of limitations is substantively unconscionable. In actions for breach of contract, the cause of action accrues, and the statute of limitations begins, from the time of the breach (See, McCoy v. Feinman, 99 NY2d 295; Fourth Ocean Putnam Corp. v. Interstate Wrecking Company, 66 NY2d 38; John J. Kasner Co. v. City of New York, 46 NY2d 544; Mainline Electric Corp. v. East Quogue Union Free School District , 46 AD3d 859 [2d Dept. 2007]; Henry Boeckmann, Jr. and Associates v. Board of Education, Hempstead Union Free School District No. 1. et al., 207 Ad2d 773 [2d Dept. 1994]).
Pursuant to the terms of subject policy, the defendant had no obligation to pay under plaintiff's secondary disability policy until after the March 1, 2008 expiration of the three-year no-fault benefit period. Until plaintiff actually demanded payment from the defendant and said demand was refused, plaintiff had no cause of action against the defendant for breach of contract. However, the terms of the subject policy require plaintiff to commence an action within two years, ninety days of the underlying accident, before the expiration of the no-fault benefit period. Thus, contrary to established New York law, the subject insurance policy requires plaintiff's contractual statute of limitations to begin to run before he had an enforceable cause of action (See, McCoy, supra; Fourth Ocean Putnam Corp., supra; Mainline Electric Corp., supra).
An examination of the facts as alleged by the parties reveals that, after the expiration of his no-fault benefits, plaintiff had less than two weeks to demand payment from the defendant, for that demand to be refused and for the plaintiff to commence an action for breach of contract. Following a demand from the plaintiff, it was the defendant who controlled when it would pay, or refuse to pay under this disability policy. Thus, the subject insurance policy gave defendant the opportunity to delay its refusal to pay until after the expiration of the contractual statute of limitations. Additionally, if, by the March 14, 2008 expiration of the contractual statute of limitations, plaintiff had not yet demanded payment and said demand had not yet been rejected by the defendant, plaintiff's contractual time to commence a lawsuit would have expired before the defendant ever breached its contractual obligations. Moreover, even if the refusal to pay were ultimately determined to be a breach of contract, the terms of the contractual statute of limitations would have eliminated the possibility that the defendant could be sued for the breach. Thus, this court finds that the disputed contractual statute of limitations is so unreasonably favorable to the defendant that said provision is substantively unconscionable.
In Day Op of North Nassau, Inc. d/b/a Ambulatory Surgery of North Nassau v. Viola, the Supreme Court of New York, Nassau County found that a contractual term was unconscionable where it allowed a defendant to benefit from its own breach (See, Day Op of North Nassau, Inc. d/b/a Ambulatory Surgery of North Nassau v. Viola, 2007 NY Slip Op. 51542U [Supreme Court, Nassau County, 2007]). Citing definitions and examples of unconscionability set forth in Gillman v. Chase Manhattan Bank, N.A. and State of New York v. Wolowitz, the Honorable Ira B. Warshawsky, J.S.C. ruled that a term of a shareholders' agreement which eliminated the shareholder's right to contest the forced sale of her shares, even if the sale resulted from the wrongful breach of contract by the corporation, was oppressive, unjust and unconscionable (See, Day Op of North Nassau, Inc. d/b/a Ambulatory Surgery of North Nassau, supra; Gillman v. Chase Manhattan Bank, N.A., supra, State of New York v. Wolowitz, supra). While the decision of the Supreme Court, Nassau County is not binding on the undersigned, this court similarly finds that, pursuant to the rules of law set forth by both the New York Court of Appeals and the Supreme Court, Appellate Divisions, the contractual statute of limitations of the subject insurance policy is both procedurally and substantively unconscionable. Where a contract, or a provision thereof, has been deemed unconscionable, it may be voided by this court (See, generally, King v. Fox , 7 NY3d 181 ). Thus, the contractual statute of limitations will not be enforced by this court. Accordingly, that portion of the defendant's motion which seeks summary judgment and dismissal of the complaint, pursuant to CPLR § 3212, § 3211(a)(1), (5) is denied.
Defendant also moves, pursuant to CPLR § 3212, § 3211(a)(7), for summary judgment and dismissal of the complaint for plaintiff's failure to state a cause of action. A motion to dismiss made pursuant to CPLR § 3211(a)(7), can only be granted if, from the pleadings' four corners, factual allegations are not discerned which manifest any cause of action cognizable at law. In furtherance of this task, the court liberally construes the complaint, accepts as true the facts alleged in the complaint and any submissions in opposition to the dismissal motion, and accords the plaintiff the benefit of every possible favorable inference ( See, 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 NY2d 144).
In support of its motion, defendant asserts that the complaint must be dismissed because plaintiff does not yet have a ripe cause of action. Paragraph four of the General Provisions of the subject policy states:
Subrogation: We shall be subrogated to any and all rights of recovery which and Covered Person may have or acquire against any party or the insurer of any party for benefits paid or payable under the Group Master Policy. Any Covered Person who receives benefits from us for any accidental injury or death therefrom shall be deemed to have assigned their right of recovery for such benefits to us and agree to do what is necessary to secure such recovery, including execution of all appropriate papers to cause repayment to us. If the third party pays a Covered Person as a result of judgment, arbitration, compromise settlement or other arrangement for injuries sustained by the Covered Person for which benefits were paid under the Group Master Policy, the Covered Person agrees to repay us for all benefits paid. Cost of collection including attorney's fees and court costs shall be shared pro rata between the Covered Person and us.
In addition, if benefits are payable to a Covered Person under the Group Master Policy after a third party pays the Covered Person, we will take credit for all amounts received by the Covered Person, less amounts paid to us, against all future payments under the Group Master Policy. No amount shall be owed by us until the amount of benefits we would have paid on behalf of or to the Covered Person exceeds the amount received by the Covered Person from a third party.
In support of its motion, defendant asserts that plaintiff has been adjudicated to be partially disabled. The maximum amount of payment under the policy is $750.00 per month. It is uncontested that plaintiff commenced and settled a lawsuit related to this action, in March 2008, with a third-party for the sum of $21,436.00. Under the subrogation clause of the subject policy, defendant asserts it will take plaintiff 36 months, at $750.00 per month, to run off the credit from the settlement before the defendant must pay plaintiff's disability claims. In opposition, plaintiff asserts that he was deemed to be totally disabled by a physician employed by Fed Ex Delivery and that his settlement was for pain and suffering, not for the lost wages that he claims under this policy. Thus, plaintiff asserts that the subrogation clause does not apply and that his action is ripe.
Thus, when this court accepts as true plaintiff's version of the facts, as required by CPLR § 3211(a)(7), it is clear that plaintiff has properly alleged a cognizable cause of action. Accordingly, defendant's motion to dismiss for plaintiff's failure to state a cause of action is denied.