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May 09, 2011

Court Decides Statute of Limitations for Claim by Insured Against Insurance Broker

In 2002, Plaintiff, Randy Bond, commenced a personal injury action against the O'Rourkes following a collision between plaintiff's snowmobile and the O'Rourkes' vehicle. The O'Rourkes' vehicle was insured by Progressive Insurance Company ("Progressive"). The O'Rourkes informed their insurance agent, Hopmeier-Evans-Gage Agency ("HEG"), which failed to notify Progressive. Thereafter, the O'Rourkes assigned their claims against Progressive and HEG to the Plaintiff following entry of a $1.2 million default judgment against the O'Rourkes, which Progressive declined to pay.

Plaintiff sued Progressive and HEG alleging causes of action in negligence and breach of contract. Bond v. Progressive Ins. Co., 2011 N.Y.App.Div. LEXIS 1506 (3d Dep't Mar. 3, 2011). Supreme Court denied motions by the defendants to dismiss the complaint as time-barred. Only HEG pursued an appeal. The Third Department, Appellate Division, affirmed the lower court's denial of the motion to dismiss by HEG.

HEG contended that any breach of duty accrued when it failed to notify Progressive in March, 2002. The Appellate Division found that the three-year statute of limitations for negligence did not accrue until the damage award. The Court held that the lower court properly determined that the Plaintiff's claims were timely.

The Third Department noted that it had not previously addressed the issue of the time of accrual of a cause of action against an insurance broker for failing to give proper notice to an insurer of a claim against the insured. It cited a First Department decision that such a claim accrued when injury resulted from the broker's failure to notify the insurer, rather than at the time of the failure itself. The Third Department also noted that it had previously held that an insurance broker's breach of duty to procure coverage requested by an insured sounded in tort, and did not accrue until the insured's vehicle was involved in an accident for which coverage was inadequate. Venditti v. Liberty Mut. Ins. Co., 6 A.D.3d 961 (3d Dep't 2004). As a result, the Court held:

The injury underlying plaintiff's claim against HEG was not sustained at the time of HEG's alleged breach, but when that breach later caused harm, in the form of the judgment entered against the O'Rourkes.

This case stands for the proposition that an errors and omissions claim against a broker for failure to notify an insurer of a liability claim accrues when a judgment is rendered against the insured, not when the failure to notify occurs.

If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact any of the members of the Practice Area.

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