Court of Appeals Decides No-Fault Claims Against a Self-Insurer are Subject to a Three-Year Statute of Limitations

In the case of Contact Chiropractic P.C. v. New York City Tr. Auth., the New York Court of Appeals held that a three-year statute of limitations applies to no-fault cases involving a self-insurer.  The case involved a passenger injured in an accident while riding in a bus that was owned by the New York Transit Authority (NYCT). NYCT was self-insured, and therefore, did not have no-fault insurance coverage.  After the plaintiff provided services to the injured passenger, they assigned their right to collect first-party benefits from NYCT.  The Plaintiff then brought the action seeking reimbursement for outstanding invoices.

In their defense, NYCT moved to dismiss on multiple grounds including that the action was untimely under CPLR 214(2).  Under CPLR 214(2), a three-year statute of limitations applies to actions to recover upon a liability created or imposed by statute.  They further argued that CPLR 213(2), which provides a six-year statute of limitations for actions based on a contractual obligation or liability, did not apply because NYCT is self-insured and did not have an insurance policy.

NYCT primarily relied on First Department authority which provides that a self-insurers obligation to provide no-fault benefits arises out of the no-fault statute, and therefore, the three-year statute of limitations would apply.  The remaining three departments had previously held that a six-year statute of limitations applies to such cases as the insurance contract creates a contractual obligation. The Civil Court denied the motion to dismiss, siding with the other three departments. The Appellate Term and Appellate Division affirmed the decision.

A majority of the Court of appeals reversed the decision.  The Court acknowledged that the law is clear that a six-year statute of limitations applies to no-fault claims against insurers, but that the law was unsettled as to self-insurers. The Court recognized that the no-fault law is a “creature of statute, unknown at common law” and that the benefits in question were not provided by an insurance contract, but rather by the NYCT meeting its statutory obligations. Therefore, the majority held the three-year statute of limitations applies.  The Court was careful in its decision in stating “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 against such self-insurers.”

In the dissent, the minority justices noted the issues with establishing two separate statutes of limitations for insurers and self-insurers.  The justices relied on the fact that the no-fault law does not distinguish between the differing insurers as seen in the equal liability for both insurers and the accrual date being the same for both insurers.  They further noted that the lack of an insurance contract does not necessarily mean that the action against self-insurers becomes statutory in nature.  Additionally, the justices noted that public policy dictates that the differing statutes of limitations would not be “fundamentally fair” and would lead to “arbitrary and inequitable results.”

To read a full copy of the decision, click here.