policy refers to date of discovery of damage, the discovery of damage occurred no later than August 8, 1994, as indicated on the notice of claim report, and that Myers therefore was obligated to initiate suit against Cigna within one year after August 8, 1994.
Myers contends that the one-year limitation period did not commence until all conditions precedent to recovery under the insurance contract had been satisfied and Myers' cause of action against Cigna had accrued. Given prior communications with Cigna in which Cigna informed Myers that it would not be able to determine whether damage to the vessel was covered under the policy until after the source of the fuel was determined, however, Myers contends that suit would have been premature under the Policy, which required cooperation with the insurer, until thirty days after May 28, 1995, the date on which the source of the fuel in the bilges was discovered.
The Policy requires: "any person making a claim must . . . cooperate with us in the investigation, settlement, or defense of any claim or suit under this policy." (Anderson Aff., Ex. A. at 5.) A further provision of the Policy states that "you may not bring a suit against us unless you have complied with all terms of this policy." (Id. at 5.) Finally, the policy provides for payment of the loss "within thirty (30) days after the detailed sworn proof of loss"
is submitted. (Id. at 4.) Myers contends that it was unable to commence suit against Cigna sooner than it did because the Policy required him to cooperate with Cigna in the investigation of the damage to the vessel.
Marine insurance contracts are governed by federal admiralty law when there is an established federal rule and by state law when there is not. Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 99 L. Ed. 337, 75 S. Ct. 368 (1955); Ingersoll Mill. Mach. Co. v. M/V Bodena, 829 F.2d 293 (2d Cir. 1987). The parties do not dispute that as no federal statute or Supreme Court rule exists relating to interpretation of the time bar or notice of loss provisions, New York state law applies. See Big Lift Shipping Co. v. Bellefonte Ins. Co., 594 F. Supp. 701, 704 (S.D.N.Y. 1984).
New York law supports Myers' contention that the Policy should be construed to mean that the one-year limitation to bring suit begins to run after the claim became due and payable as opposed to the date of loss or damage to the insured property.
In Steen v. Niagara Fire Insurance Co., the New York Court of Appeals interpreted language in an insurance policy that required the insured to bring suit against the insurer within a "term of twelve months next after the loss or damage shall occur," to require suit to be brought within a year from the time the loss was due and payable by the insurer, rather than a year after the actual physical damage to the insured property occurred. 89 N.Y. 315, 321-22 (1882). In Proc v. Home Ins. Co., 17 N.Y.2d 239, 242-43, 270 N.Y.S.2d 412, 217 N.E.2d 136 (1966), the New York Court of Appeals distinguished between time-limitation provisions that begin "after inception of the loss" and less explicit provisions, which have been interpreted to begin "from the time the cause of action accrued." See Margulies v. Quaker City Fire & Marine Ins. Co., 276 A.D. 695, 97 N.Y.S.2d 100 (App. Div., 1st Dep't 1950) (finding period of limitation beginning at "inception of the loss" to start at occurrence of casualty); Parker v. American Sur. Co. of New York, 176 Misc. 985, 29 N.Y.S.2d 414 (Sup. Ct., Monroe County 1941) (finding period of limitation beginning "the date upon which the loss or damage occurred" to start at accrual of liability).
The Time-Bar Provision is similar to that in Steen and does not refer to the "inception" of the loss or damage or to the "event from which the loss or damage arises. Myers, therefore, must have brought suit within one year of the date Cigna's liability accrued.
For the purpose of this motion it is unnecessary to determine when, if ever, the claim became payable; it is only necessary to determine if the claim had become payable by February 7, 1995. Resolving all inferences in favor of Myers, it is possible that liability under the policy did not accrue, if ever, until some time after February 7, 1995. The source of the leak, according to Cigna's letter of February 22, 1995, (Anderson Aff. Ex. D), was still unknown as of February 7, 1995. Because the Policy requires a "detailed sworn proof of loss" prior to payment, Myers had insufficient information at that time to provide such a proof of loss and thereafter bring suit. A reasonable factfinder could find that liability to Cigna did not accrue until some time thereafter. Cigna has therefore failed to show that no genuine issue of fact exists with respect to Myers' timeliness of bringing suit.
II. Failure to Comply With Notice of Loss Provision of Policy
Cigna also has disclaimed liability under the policy on the ground that it was not afforded timely notice of loss as required by the Policy. The Notice Provision requires written notice "as soon as possible after the occurrence of any accident, loss, damage, or expense which may be covered under this policy." Myers first noticed fuel in the bilges of the vessel in July 1994 and notified Cigna about a claim on the policy on October 7 1994, with a written notice that reported the discovery date as August 8, 1994. Cigna argues that even accepting a discovery date of August 8, 1994, Myers failed to notify it "as soon as possible."
Prompt notice provisions "require that notice be given within a reasonable time under all the circumstances." Security Mutual Ins. Co. of New York v. Acker-Fitzsimons Corp., 31 N.Y.2d 436, 441, 340 N.Y.S.2d 902, 293 N.E.2d 76 (1972). New York courts have adhered strictly to prompt notification provisions, even for losses "which appear insubstantial or which in the insured's estimation may not ultimately ripen into a claim." Power Authority v. Westinghouse Electric Corp., 117 A.D.2d 336, 502 N.Y.S.2d 420, 422 (App. Div., 1st Dep't 1986) (finding unjustified delay of fifty-three days to violate prompt notification provision); Pandora Indus., Inc. v. St. Paul Surplus Lines Ins. Co., 188 A.D.2d 277, 590 N.Y.S.2d 471, 471 (App. Div., 1st Dep't 1992) (finding thirty-one days in violation of prompt notification provision despite good faith belief loss was not covered); Republic New York Corp. v. American Home, 125 A.D.2d 247, 509 N.Y.S.2d 339 (1st Dep't. 1986) (forty-five days).
Myers alleges that after he observed fuel oil in the bilges on July 19, 1994, he immediately sent the yacht to be tested but was unable to determine the source of the leak; that after he observed more oil in the bilges on the last weekend of August, he again sent the yacht to be tested and was informed in early October 1994 that the source of the leak again could not be found. (Myers Aff. PP 9-19.) Myers' affidavit, however, is contradicted by his "Notice of Loss" form, in which he reported the discovery date as August 8, 1994. Thus, resolving all ambiguities in favor of Myers, Myers discovered the leak on August 8, 1994 and waited until October 7, 1994, a period of sixty days, before notification.
Given Myers' discovery of the fuel leak on August 8, 1994, and Myers' knowledge of the damage that had occurred to the yacht in 1991 for which he had accidental loss insurance, Myers had knowledge of an "accident, loss, damage, or expense which may be covered under the policy," as of August 8, 1994. Under the circumstances of this knowledge, notice to Cigna on October 7, 1994 was unreasonable delay. Myers therefore failed to comply with the terms of its policy and may not bring suit.
For the foregoing reasons, Defendant's motion for summary judgment is hereby granted.
IT IS SO ORDERED.
Dated: New York, New York
February 5, 1997
Robert P. Patterson, Jr.