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July 19, 1984


The opinion of the court was delivered by: GOETTEL


The defendant, The Fireman's Fund Insurance Company ("FFIC"), moves for summary judgment against the plaintiff, Wolf G. Tillman ("Tillman"). FFIC's motion, as originally filed, is based upon three separate groaunds. In particular, FFIC contends that Tillman has failed to state a claim upon which relief can be granted, that his suit is barred because of his failure to comply with statutorily imposed notice requirements, and that it is also barred because it was not filed within the limitations period imposed by the terms of the very policy upon which he attempts to base his recovery. *fn1" Establishment of any one of these grounds would provide a sufficient basis for granting FFIC's motion. Since the Court determines that FFIC has demonstrated Tillman's failure to state a cause of action, the motion for summary judgment is granted on that ground alone, without considering the other grounds.


 This case concerns a frustrated owner's attempt to obtain from an insurance company a judgment that was entered not against the insurance company but rather against one of its former insureds. The question is whether the insurance company, FFIC, is liable for a judgment entered in favor of the owner, Tillman, and against the insured, Lincoln Warehouse Corporation ("Lincoln"), for the purpose of compensating Tillman for the loss of property stored with Lincoln.

 The story begins in 1944, when Tillman's mother died and left an extensive and valuable collection of pottery and china. Her executor, for reasons not revealed in the papers, caused the collection to be stored in one of Lincoln's warehouses in New York City, where it was kept for many years.

 In 1963, when the estate was settled, Tillman became the owner of the collection. After receiving notification of this change in ownership, Lincoln held the collection in Tillman's name. Once, in 1966, he came briefly to look at one of the thirteen barrels in which the collection was stored, but he apparently did not otherwise check on the collection until May 23, 1969. On that date, when he came to pick up the collection, he examined the contents of the barrels only to find that the entire collection was missing.

 In May of 1970, Tillman sued Lincoln for the value of the lost collection. More than ten years later, on February 6, 1981, he obtained a judgment against Lincoln for approximately $1.5 million. One and a half years later, in September of 1982, after execution of the judgment had been duly issued against the property of Lincoln, it was returned unsatisfied. To this day, the judgment against Lincoln remains wholly unpaid, and Lincoln claims that it is insolvent.

 On November 19, 1982, Tillman commenced this suit against FFIC, setting forth two causes of action. In the first, he alleges that an FFIC liability policy issued to Lincoln was in full force and effect at the time of the loss of the collection and that FFIC is therefore liable to Tillman for the judgment of $1.5 million. Tillman's claim is that he is a third-party beneficiary of the policy and thus FFIC is liable to him under its terms. In the second cause of action, he alleges that no limitations period imposed by the terms of the policy should be construed to apply to his claim because FFIC had previously denied the existence of any such policy when directly questioned about it and, thus, should not now be able to take advantage of the 12-month limitations period for the commencement of suit that the policy imposes. *fn2"

 The facts with respect to this insurance policy, either as alleged by the plaintiff or as set forth by the defendant and not denied by the plaintiff, are as follows. In 1958, FFIC issued Policy No. FWP 2629-C (the "policy") to Lincoln. The policy provided two types of coverage for property stored in Lincoln's warehouses. Under the first provision, FFIC agreed to insure any stored property upon which its owner and Lincoln agreed to effect insurance for the account of the owner. Defendant's Exhibit 4, FFIC Policy No. FWP 2629-C, Coverage Endorsement "A". Clearly, FFIC was not providing this type of coverage for the Tillman collection. Tillman has presented no evidence to suggest that either he or the executor of his mother's estate ever requested such coverage under the FFIC policy or paid the requisite premium for such coverage. Furthermore, there is ample evidence that similar coverage was obtained separately under a policy issued by the American Surety Co. and that Tillman has already collected $150,000 under that policy.

 Under the second provision of the FFIC policy, FFIC agreed to insure Lincoln against any liability it incurred as a warehouseman or bailee for any physical loss of or damage to property stored for its customers on its premises. *fn3" Id., Coverage Endorsement "B". Under this second provision, however, coverage was expressly limited to Lincoln and not extended to its customers. "The coverage provided . . . is intended only for the protection of the Assured [Lincoln] and no action or proceeding based on the provisions hereof shall be brought in the name or for the benefit of the Assured's Customers or of any other person or corporation." Id.

 Despite this restrictive language, Tillman argues that the second provision of the policy makes him a third-party beneficiary of the policy. FFIC naturally argues to the contrary. FFIC contends that the policy was a contract solely between it and Lincoln and that no one other than Lincoln had a legal or equitable interest in the policy. In FFIC's view, Tillman was not and is not a third-party beneficiary of the policy and so has no standing to make a claim based on the common law rights of such beneficiaries.

 In addition, FFIC contends that, even if the second provision had covered any liabilities incurred by Lincoln before it cancelled the FFIC policy in 1965, it could not possibly have covered liabilities incurred thereafter. Tillman's rights, FFIC argues, could not be greater than those of Lincoln, and once Lincoln cancelled the policy and forfeited coverage, no third-party who thereafter filed a claim could possibly have any rights under the policy. *fn4"

 Finally, as noted earlier, FFIC contends that even if Tillman were considered a third-party, his claim would have to be dismissed because he failed to file it within one year of the discovery of the loss, as is required under the insurance policy.

 To these arguments Tillman responds by claiming that he is a proper third-party beneficiary of the policy. He also argues that his loss occurred before the cancellation of the policy in September of 1965 and that he can prove this fact. Finally, he claims that he could not have instituted this suit any sooner because he was misled about the existence of the policy both in 1969 and later in 1981.


 At the outset, the Court notes that the plaintiff's presentation of his case is most puzzling. Initially, FFIC interpreted Tillman's first claim as being made pursuant to section 167 of New York's Insurance Law, N.Y. Ins. Law § 167 (McKinney 1966), and, accordingly, addressed its motion for summary judgment to that provision. Memorandum of Law in Support of Defendant's Motion for Summary Judgment at 2-14. However, in his responsive papers, Tillman clearly states that his complaint makes no mention of section 167 and that he is not making a claim under that statute, but rather under common law theories concerning third-party beneficiaries. Plaintiff's Memorandum of Law in Opposition to Defendant's Motion for Summary Judgment at 3-7. As the following analysis shows, however, this declaration virtually guarantees the success of FFIC's motion for summary judgment. In effect, by disclaiming any resort to section 167 (apparently in an effort to defeat the fairly strong arguments FFIC has raised for dismissing a section 167 claim), Tillman has checkmated himself.

 It has long been the general rule that, unless a statute or policy states otherwise, liability coverage of the sort provided by the FFIC policy is granted to the insured only, and that only the insured has a cause of action against the insurer and a right to sue under the policy. Morton v. Maryland Casualty Co., 1 A.D.2d 116, 124-25, 148 N.Y.S.2d 524, 531-33 (1955), aff'd, 4 N.Y.2d 488, 176 N.Y.S.2d 329, 151 N.E.2d 881 (1958). "[A]s a general rule, in the absence of statutory or applicable policy provisions to the contrary, one who suffers injury within the provisions of a liability insurance policy is not in privity of contract with the insurer of the alleged tort feasor, [sic] and cannot bring an action directly against the insurer on the claim." Aetna Insurance Co. v. Pennsylvania Manufacturers Association Ins. Co., 456 F. Supp. 627, 634 (E.D. Pa. 1978). In other words, only if there is statutory or policy language to the contrary does a third-party have the right to sue the insurer directly.

 What that means in this case is that we have to look to the applicable language of the statute and the policy to determine whether a right of direct action has been created. Turning first to New York's Insurance Law, we find it most understandable that FFIC originally inferred that Tillman was making a section 167 claim.This provision (originally section 109) was enacted for the express purpose of creating a limited right of direct action. Morton v. Maryland Casualty Co., supra, 1 A.D.2d at 124-26, 148 N.Y.S.2d 531-33 (1955). Before this statute was enacted, a direct action suit by an injured party against the insurer of the party who allegedly caused the injury "was unknown to the common law." Thrasher v. United States Liability Insurance Co., 19 N.Y.2d 159, 166, 225 N.E.2d 503, 506, 278 N.Y.S.2d 793, 798 (1967).

 What section 167 does, therefore, is to specify exactly when a third-party may bring such a suit and exactly what procedural conditions must be satisfied. *fn5" In particular, subsection 167-7(a) creates the right of a judgment creditor of the insured to sue the insurer directly. *fn6" However, this right is conditioned upon compliance with certain requirements, such as giving the insurer thirty days written notice of the judgment before commencing an action, N.Y. Ins. Law § 167-1(b).

 It was the perceived failure of Tillman to comply with this requirement (as well as his failure to commence his action within the one year limitations period specified in the policy) that formed much of the original basis for FFIC's motion. Rather than responding directly to this objection, however, Tillman has attempted to sidestep it by contending that as a third-party beneficiary of the policy he need not make a section 167 claim or meet that statute's conditions.

 The problem with this argument, of course, is that it is precisely section 167 that gives him a right of direct action. Without it, and without a showing that he has complied with its conditions, he simply cannot make out a proper claim upon which relief can be granted. Id. As one New York court has held, section 167 and the cases decided thereunder "firmly establish it to be the public policy of this State that a direct action against an insurer can be maintained in our courts only when the conditions of our statute are complied with." Morton v. Maryland Casualty Co., supra, 1 A.D.2d at 126, 148 N.Y.S.2d at 533. Tillman does not deny that he failed to serve FFIC with notice of the entry of judgment against Lincoln thirty days before he commenced this action, as is required under subsection 167-1(b). That failure by itself is fatal to any section 167 claim. Thrasher v. United States Liability Insurance Co., supra, at 165, 225 N.E.2d at 506, 278 N.Y.S.2d at 798; Mcnamara v. Allstate Insurance Co., 3 A.D.2d 295, 298-300, 160 N.Y.S.2d 51, 54-56 (4th Dep't 1957).

 Of course, as noted earlier, the policy itself must also be examined to determine whether it, as opposed to section 167, creates a right of direct action. After all the insurer and the insured may initially bargain to create such a right in certain third parties. See, e.g., Stainless, Inc. v. Employers Fire Insurance Co., 69 A.D.2d 27, 34, 418 N.Y.S.2d 76, 81 (1st Dep't 1979), aff'd, 49 N.Y.2d 924, 406 N.E.2d 490, 428 N.Y.S.2d 675 (1980), and cases cited therein. However, such an intention must be clearly expressed in the language of the policy itself before a court can hold that a right of direct action was intended by the parties. See, e.g., Waring v. The Indemnity Fire Insurance Co., 45 N.Y. 606, 612-13 (1871). In the instant action, though, what the policy clearly expresses is FFIC and Lincoln's intention not to create such a right of direct action. Thus, even if one views this policy as a bailee's liability insurance policy, as Tillman urges, his rights under the policy as the owner of lost property were always limited to the distribution of whatever benefits Lincoln recovered under the policy. 18 Couch on Insurance 2d (Rev. 3d.) § 74:323 (1983). In other words, where, as here, a policy provision expressly prevents third parties from directly suing the insurer, the owner of property insured by the warehouseman or bailee has no common law right of direct action. Id.; Lewis v. Home Insurance Co., 199 A.D. 556, 564, 192 N.Y.S. 170, 176 (1st Dep't), aff'd, 234 N.Y. 498, 138 N.E. 421 (1922).

 Thus it is that we come full circle and determine that only if Tillman had brought a proper section 167 claim could he bring suit against FFIC. Having failed to do so, he has simply failed to state a claim upon which relief can be granted.


 Accordingly, FFIC's motion for summary judgment is granted on the ground that Tillman has failed to state a legal claim. *fn7" The Clerk shall enter judgment for the defendant.


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