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Pike v. New York Life Insurance Co.

April 27, 2010

GARY M. PIKE, ET AL., RESPONDENTS-APPELLANTS,
v.
NEW YORK LIFE INSURANCE COMPANY, ET AL., APPELLANTS- RESPONDENTS, ALFONSO MENESES, ET AL., DEFENDANTS- RESPONDENTS.



In an action, inter alia, to recover damages for breach of contract, the defendants New York Life Insurance Company and New York Life Annuity Corporation appeal from so much of an order and judgment (one paper) of the Supreme Court, Suffolk County (Rebolini, J.), entered October 21, 2008, as denied their motion for leave to amend their answer to assert affirmative defenses based on, among other things, the applicable statutes of limitations and lack of standing, and to dismiss the complaint insofar as asserted against them, in effect, pursuant to CPLR 3211(a)(3), (5), and (7), or in the alternative, for summary judgment dismissing the complaint insofar as asserted against them, and the plaintiffs cross-appeal from so much of the same order and judgment as, in effect, granted the motion of the defendants Alfonso Meneses and Douglas W. Brown to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211(a)(1), (5), (7), and CPLR 3016(b), with leave to replead only so much of the first cause of action as sought to recover damages against those defendants for breach of contract with respect to certain insurance policies numbered 57 219 142, 63 653 267, and 63 653 295, and dismissed the complaint insofar as asserted against those defendants with leave to replead.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

MARK C. DILLON, J.P., HOWARD MILLER, RANDALL T. ENG and SHERI S. ROMAN, JJ.

(Index No. 12823/06)

DECISION & ORDER

ORDERED that the order and judgment is modified, on the law, on the facts, and in the exercise of discretion, (1) by deleting the provision thereof denying that branch of the motion of the defendants New York Life Insurance Company and New York Life Annuity Corporation which was for leave to amend their answer to assert affirmative defenses based on, among other things, the applicable statutes of limitations and lack of standing, and substituting therefor a provision granting that branch of the motion, (2) by deleting the provision thereof denying that branch of the motion of the defendants New York Life Insurance Company and New York Life Annuity Corporation which was, in effect, pursuant to CPLR 3211(a)(5) to dismiss so much of the complaint insofar as asserted against them as was premised upon insurance policies purchased in 1997 and 1999 as time-barred, and substituting therefor a provision granting that branch of the motion, (3) by deleting the provision thereof denying that branch of the motion of the defendants New York Life Insurance Company and New York Life Annuity Corporation which was, in effect, pursuant to CPLR 3211(a) (5) to dismiss so much of the fourth, sixth, and seventh causes of action insofar as asserted against them as were premised upon insurance policies purchased in 2000 as time-barred, and substituting therefor a provision granting that branch of the motion, (4) by deleting the provision thereof denying that branch of the motion of the defendants New York Life Insurance Company and New York Life Annuity Corporation which was, in effect, pursuant to CPLR 3211(a)(3) to dismiss so much of the first, second, third, and fifth causes of action insofar as asserted against them as were premised on certain insurance policies numbered 63 652 948, 63 653 120, 63 652 972, and 63 658 547 for lack of standing, and substituting therefor a provision granting that branch of the motion, (5) by deleting the provision thereof denying that branch of the motion of the defendants New York Life Insurance Company and New York Life Annuity Corporation which was, in effect, pursuant to CPLR 3211(a)(7) to dismiss so much of the first and fifth causes of action insofar as asserted against them as were premised on certain insurance policies numbered 57 219 142, 63 653 267, and 63 653 295 for failure to state a cause of action, and substituting therefor a provision granting that branch of the motion, and (6) by deleting the provisions thereof granting those branches of the motion of the defendants Alfonso Meneses and Douglas W. Brown which were pursuant to CPLR 3211(a)(7) and CPLR 3016(b) to dismiss so much of the second and third causes of action insofar as asserted against Douglas W. Brown as were premised upon certain insurance policies numbered 57 219 142, 63 653 267, and 63 653 295 and dismissing that portion of the complaint, and substituting therefor a provision denying that branch of the motion; as so modified, the order and judgment is affirmed insofar as appealed and cross-appealed from, without costs or disbursements.

Between 1997 and 2002, the plaintiffs, Gary M. Pike, Kelly Ann Pike, and their four minor children, purchased 14 policies, including life insurance policies and variable annuities, from the defendants New York Life Insurance Company (hereinafter NY Life) and New York Life Insurance and Annuity Corporation (hereinafter NYIAC). Six of the policies were purchased in 1997, one in 1999, and the remaining seven in 2000. The plaintiffs purchased all of the policies through the defendant Douglas W. Brown, a servicing agent with NY Life and NYIAC (hereinafter together the defendant companies). The defendant Alfonso Meneses became the servicing agent on the policies in 2002 when Brown left the companies.

In May 2006 the plaintiffs brought this action against all of the defendants asserting causes of action sounding in breach of contract (first), fraudulent misrepresentation (second), fraudulent inducement (third), suitability (fourth), breach of fiduciary duty (fifth), breach of General Business Law § 349 (sixth), and breach of the Insurance Law (seventh). The gravamen of the complaint was that Brown induced them to purchase multiple policies which were unsuitable for their needs and which they could not reasonably afford.

The defendant companies answered, asserting general denials. The parties engaged in settlement negotiations, and when the negotiations failed, Brown and Meneses submitted a pre-answer motion to dismiss the complaint insofar as asserted against them, based on the statute of limitations, failure to state a cause of action (CPLR 3211[a][7]), and failure to plead the fraud causes of action with specificity (CPLR 3016[b]). Thereafter, the defendant companies moved, inter alia, for leave to amend their answer to assert affirmative defenses based on, among other things, the statute of limitations and lack of standing; and to dismiss the complaint insofar as asserted against them, in effect pursuant to CPLR 3211(a)(3), (5), and (7). The plaintiffs opposed both motions.

In an order and interlocutory judgment entered October 21, 2008, the Supreme Court denied the motion of the defendant companies in its entirety, dismissed the first cause of action (breach of contract) insofar as asserted against Brown and Meneses, with leave to replead as to certain policy numbers, and dismissed the plaintiffs' remaining claims against Brown and Meneses.

With respect to the defendant companies' appeal, the Supreme Court improvidently exercised its discretion in denying that branch of their motion with was for leave to amend their answer to assert affirmative defenses. Permission to amend a pleading should be "freely given" (CPLR 3025[b]). As a general rule, leave to amend a pleading should be granted where there is no significant prejudice or surprise to the opposing party and where the documentary evidence submitted in support of the motion indicates that the proposed amendment may have merit (see Edenwald Contr. Co. v City of New York, 60 NY2d 957, 959; Ingrami v. Rovner, 45 AD3d 806; Sayers v Albicocco, 298 AD2d 572, 573; Travelers Prop. Cas. v Powell, 289 AD2d 564, 565). Here, the defendant companies' proposed affirmative defenses may have merit, and the plaintiff failed to show surprise or prejudice resulting from their delay in asserting the affirmative defenses (see Edenwald Contr. Co. v City of New York, 60 NY2d at 959; McCaskey, Davies & Assoc. v New York City Health & Hosps. Corp., 59 NY2d 755, 757; Frumento v On Rite Co., Inc., 66 AD3d 828; Ingrami v. Rovner, 45 AD3d 806; Mackenzie v Croce, 54 AD3d 825).

Next, based upon the defendant companies' proposed affirmative defenses (see e.g. Frumento v On Rite Co., Inc., 66 AD3d 828), all of the causes of action with respect to the six policies purchased in 1997 and the one purchased in 1999 should have been dismissed as time-barred insofar as asserted against them. The plaintiffs brought this action in May 2006. Their causes of action sounding in breach of contract, fraudulent misrepresentation, and fraudulent inducement are all governed by a six-year statute of limitations (see CPLR 213[2], [8]), as was their breach of fiduciary duty cause of action, which was based on allegations of fraud (see CPLR 213[8]; Klein v Gutman, 12 AD3d 417, 419; Kaufman v Cohen, 307 AD2d 113). The plaintiffs' breach of General Business Law § 349 and breach of the Insurance Law causes of action are both governed by a three-year statute of limitations (see CPLR 214[2]; Gaidon v Guardian Life Ins. Co. of Am., 96 NY2d 201, 208; Dolce v Northwestern Mut. Life Ins. Co., 272 AD2d 432), and their fourth cause of action, alleging that the subject policies were unsuitable for their needs, was properly treated by the court as an attempt to state a claim under 28 USC § 1658(b), the Sarbanes-Oxley Act, which is governed by a statute of limitations of two years after the discovery of the facts constituting the violation, or five years after the violation. Therefore, all the causes of action asserted herein are governed by either two, three, five, or six year limitation periods. Since the latest of the 1997 and 1999 policies was purchased in February 1999, all the causes of action relating to them are time-barred even under the longest statute of limitations applicable to any of the causes of action. Accordingly, the Supreme Court should have dismissed all the causes of action based on the policies purchased in 1997 and 1999 insofar as asserted against the defendant companies.

Further, with respect to the seven policies purchased in 2000, the fourth, sixth and seventh causes of action, to recover damages for "unsuitability," violations of General Business Law § 349, and violations of the Insurance Law respectively, carry statutes of limitations of less than six years and are therefore also time-barred (see 28 USC § 1658[b]; CPLR 214[2]; Gaidon v Guardian Life Ins. Co. of Am., 96 NY2d at 208; Dolce v Northwestern Mut. Life Ins. Co., 272 AD2d 432).

Contrary to the plaintiffs' contention, the continuing wrong doctrine does not apply to toll the statutes of limitations herein. Although the plaintiffs allege that they were induced to purchase unsuitable policies, and that they were unaware that they would have to pay "substantial" premiums, they do not point to any specific wrong that occurred each time they paid a premium, other than having to pay it. Thus, any wrong accrued at the time of purchase of the policies, not at the time of payment of ...


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