In our Dec. 19, 2013, No-Fault Insurance Wrap-up column, we reported on the split in the Judicial Departments regarding the statute of limitations for commencing an action to recover no-fault insurance benefits against a self-insured. At that time, the First and Second Departments were split as to whether the applicable statute of limitations should be six years or three years. As the Court of Appeals has now resolved this question, we offer the following discussion.
Statute of Limitations
Generally, the statute of limitations for a no-fault action against an insurer is six years from the date the claim becomes overdue, pursuant to CPLR §213(2), based on the fact that the action arises out of an alleged breach of the insurance contract. Mandarino v. Travelers Property Casualty Ins. Co. (37 A.D.3d 775 [2d Dept. 2007]). In Mandarino, the defendant insurer argued that because the provisions in an insurance policy for no-fault benefits are mandated by statute, the shorter three-year statute of limitations contained in CPLR 214(2) (“an action to recover upon a liability, penalty or forfeiture created or imposed by statute …”) should apply. The court held:
Although the terms of the insurance policy may be mandated by various provisions of the Insurance Law, this does not alter the fact that the dispute is fundamentally contractual in nature and not a creature of statute. Accordingly, the six-year statute of limitations set forth in CPLR 213(2) applies to this action ….
In contrast, the statute of limitations in a no-fault action against the Motor Vehicle Accident Indemnification Corporation (MVAIC), was found to be three years, pursuant to CPLR 214(2), essentially because no-fault benefits from MVAIC are strictly statutory in nature, insofar as MVAIC is a creature of statute, created as a last resort to provide benefits to accident victims where there is no available insurance coverage. See, Shtarkman v. MVAIC (20 Misc.3d 132(A) [App. Term 2d & 11th Jud. Dists. 2008]); Matter of Motor Veh. Acc. Indem. Corp. v. Aetna Cas. & Sur. Co. (89 N.Y.2d 214 ) (“MVAIC’s obligation to pay no-fault benefits to an injured party where the accident vehicle’s insurer denies such coverage is purely statutory, established under the no-fault scheme. MVAIC itself is a statutory creation”).
As for claims against self-insured entities, the decisions regarding the applicable statute of limitations have varied. For example, the First Department, in M.N. Dental Diagnostics v. New York City Transit Authority (82 A.D.3d 409 [1st Dept. 2011]) held:
Since it is undisputed that there existed no contract between plaintiff’s assignor and the NYCTA, the common carrier’s obligation to provide no-fault benefits arises out of the no-fault statute. Therefore, the three-year statute of limitations as set forth in CPLR 214(2) is applicable here.
The Second Department ruled otherwise. For example, as we reported previously, the Appellate Term, Second Department in Contact Chiropractic v New York City Transit Authority (42 Misc. 3d [App. Term 2d, 11th & 13th Jud. Dists. 2013]) found that it would be inequitable to apply two different statutes of limitations to the same type of action based only on whether the vehicle owner was insured or self-insured. Thus, the court, relying upon Manhattan & Bronx Surface Tr. Operating Auth. v. Evans (95 A.D.2d 470 [2d Dept. 1983]), held that the longer six-year statute of limitations under CPLR 2134(2) applies to self-insureds. The Appellate Division, Second Department affirmed (135 A.D.3d 804 [2d Dept. 2016]).
Due to the split in the Departments, the defendant in Contact Chiropractic v. New York City Transit Authority was granted leave to appeal to the Court of Appeals, which, in a 4–3 majority opinion drafted by Judge Fahey, reversed the lower courts’ decisions and ruled that the three-year statute of limitations applies to no-fault actions against self-insureds (2018 NY Slip Op 03093 (2018). The rationale for the court’s holding is as follows:
The no-fault benefits in dispute are not provided by a contract with a private insurer. Instead defendant has met its statutory obligation by self-insuring. No-fault is a creature of statute (see Aetna Life Ins. Co. v Nelson, 67 NY2d 169, 175  ["the No-Fault law does not codify common-law principles; it creates new and independent statutory rights and obligations in order to provide a more efficient means for adjusting financial responsibilities arising out of automobile accidents"]). Our holding in Aetna Life Ins. Co. is directly applicable here. As we stated in that case, “first-party benefits are a form of compensation unknown at common law, resting on predicates independent of the fault or negligence of the injured party” (id. at 175). In the absence of private law requiring defendant to pay first-party benefits (that is, in the absence of a contract for insurance), the only requirement that defendant provide such remuneration to the assignee as a result of the accident appears in relevant parts of the Vehicle and Traffic Law and the Insurance Law. Consequently, the source of this claim is wholly statutory, meaning that the three-year period of limitations in CPLR 214 (2) should control this case.
In addition to holding that the six-year breach of contract statute of limitations under CPLR 213(2) does not apply to actions against self-insureds, the court further addressed, at least implicitly, the potential argument that the six-year statute of limitations under the catch-all provision of CPLR 213(1) (“an action for which no limitation is specifically prescribed by law”) should apply. Thus, the court, citing Aetna Life Ins. Co. (67 NY2d 169 ), held that the six-year period under CPLR 213(1) would apply to liabilities existing at common law, but would not apply to no-fault benefits. That is because no-fault benefits existed only by statute and not at common law, and therefore, the six-year period under that section would not apply herein.
In an apparent attempt to address the dissent’s argument that lack of a uniform six-year statute of limitations would create an inequity, the majority further held:
Finally, we note that our holding here does not reduce the no-fault liability or obligations of self-insurers, or curtail the substantive no-fault rights of injured parties or their assignees as against such self-insurers. “Statutes of limitations are considered procedural because they are deemed as pertaining to the remedy rather than the right” (Portfolio Recovery Assoc. v. King, 14 N.Y.3d 410, 416, 901 N.Y.S.2d 575, 927 N.E.2d 1059  [internal quotation marks omitted] ). Therefore, applying the three-year statute of limitations set forth in CPLR 214(2) does not alter the substantive protections afforded under the no-fault law to those with a claim against a self-insurer.
It is now settled law, therefore, that no-fault actions against self-insureds must be commenced within three years.
Severance of purportedly unrelated claims in no-fault actions has been the requested relief in many motions by defendant insurers, who often argue that the joinder of seemingly unrelated claims in one lawsuit is nothing more than a strategic effort by plaintiffs to make it more difficult for insurers to defend such suits by confusing the defendants and the courts and creating an unwieldy trial of the many issues involved in each claim. Many plaintiffs, on the other hand, have often argued, in opposition, that motions to sever even claims involving the same or similar issues, are nothing more than a strategic effort by defendants to stall the litigation and payment of no-fault claims, contrary to the intended purpose of the no-fault laws.
Motions to sever will usually be granted where the claims of unrelated injured parties involved in separate accidents are joined together. See, e.g., Radiology Resource Network v. Fireman’s Fund Ins. Co. (12 A.D.3d 185 [1st Dept. 2004]) (68 claims severed into separate lawsuits); Ladim DME v. GEICO Gen. Ins. Co. [App. Term 2d & 11th Jud. Dists. 2007]) (claims for five injured persons separated into separate lawsuits); Andrew Carothers, M.D. v. Geico Indemnity Co., 2007 NYSlipOp 27034 [App. Term 2d & 11th Jud. Dists. 2007]).
Recently, in City Chiropractic v. Auto One Insurance Company (2018 NY Slip Op 50730(U) [App. Term 2d, 11th & 13th Jud. Dists 2018]) the Appellate Term, Second Department was asked to determine if denial of a severance motion was proper. In that case, the defendant argued that the claims for two unrelated injured persons, involving two different accidents, should be severed. The lower court denied the motion. On appeal, the Appellate Term affirmed, holding:
The decision to grant severance (see CPLR 603) is an exercise of judicial discretion which, in the absence of a party’s showing of prejudice to a substantial right, should not be disturbed on appeal (see King’s Med. Supply v, GEICO Cas. Ins. Co., 14 Misc 3d 136[A], 2007 NY Slip Op 50232[U] [App Term, 2d Dept, 2d & 11th Jud Dists 2007]). In the instant matter, while the assignors were injured in separate accidents and defendant interposed 48 defenses in its answer, these two facts do not demonstrate that resolution of the claims for services rendered to [first injured person] and [second injured person] will involve different questions of fact and law. As such, the record does not establish that the Civil Court’s denial of defendant’s motion was an improvident exercise of discretion.
David M. Barshay is a member of Sanders, Barshay & Grossman in Garden City. Steven J. Neuwirth, a member of the firm, assisted in the preparation of this article.