INSURANCE ADVOCATE - April 1993

INSURANCE LAW REVIEW

N.Y. Court of Appeals Overrules 1901 Doctrine: Decision Holds Proofs of Loss in Mail Before 60-Day Deadline Meets Test of 'Furnish(ed)'

The New York Court of Appeals has interpreted the New York Insurance Law relating to the furnishing of proofs of loss within a 60 day period, asserting in a case just decided that, "We hold that proofs of loss are 'furnish(ed) within the meaning of the statute, when they are placed in the mail, not when they are received by the insurer."

This suit involved a burglarized home and a loss of $128,000. The homeowners Mr. and Mrs. Michael A. Ball, on March 13, 1989, received by certified mail, a written demand from their insurance company, Allstate, for proofs of loss.

This written demand for proofs is in compliance with Section 3407 of the N.Y. Insurance Law. The Balls were asked "to furnish the completed and executed sworn statement in proofs of loss" to the law firm representing Allstate, within sixty (60) days after receipt of the notice.

In the unanimous per curiam decision of the court, which overturned the Appellate Division finding, the relevant section of the law was quoted, with emphasis placed on the key phrase: "If the insured shall furnish proofs of loss within sixty days after the receipt of such notice and such form or forms, or within any longer period of time specified in such notice, such insured shall be deemed to have complied with the provisions of such contract of insurance relating to the time within which proofs of loss are required."

The court said that the issue presented in the appeal is whether the requirement of the statute is satisfied when an insured places proofs of loss in the mail within 60 days, but they are not received by the insurer until after the 60 days has expired.

The answer by the court was that the statute means when the proofs are placed in the mail and not when the insurer receives them.

After the home was burglarized, the homeowners filed the $128,000 claim and on March 13, 1989, the Balls received the certified mail demand for proofs. On May 10, 58 days after receipt of the written demand, the proofs of loss were completed and mailed to Allstate's counsel in compliance with the demand.

There was no dispute that Allstate did not receive the mailed proofs until May 16 and that was 64 days after receipt of the demand. Allstate argued that the Balls thus failed to fulfill the statutory requirements that the proofs be received, rather than just mailed within the statutory period. In this argument, Allstate cited the case of Peabody v. Satterlee (166 NY 174), decided in 1901. The Court of Appeals said that decision was before the recodification of the N.Y. law. Section 3404 was originally Section 172.

The Court of Appeals said that the term in the prior law which was dealt with in the Peabody case was "render" rather than "furnish" and was based on the interpretation of a contract and not a "remedial statutory provision." The court said: "We are called upon to determine whether its holding must control our interpretation of the statute."

The term "furnish" was examined by the court which, citing Webster's Third International Dictionary, was said to mean "to provide" or "to supply with." The court said this "does not unambiguously indicate whether deposit in the mail suffices." Also cited was Michigan case in which the provision requiring proofs of loss was involved. It used the term to be "rendered" in 60 days and concluded that the demand was satisfied if placed in mail within that period."

Thus, states the Court of Appeals decision, "we must look beyond the language, to the purpose the Legislature sought to accomplish when it enacted the statute." The court said: "Manifestly, the Legislature acted to protect insureds from unknowing forfeitures. By requiring that insurance claimants be alerted to their duty to furnish proofs of loss and extending the time period in which to comply, the Legislature sought to 'protect the insured from the consequences of---oversight or neglect in complying with one of the conditions precedent to a recovery under the policy.'" That was quoted by the Court of Appeals from a decision of the Appellate Division Margulius v. Quaker City Fire & Marine.

The statute, said the Court of Appeals, does not save the insured who fails to furnish proof within 60 days from the date demanded, though alerted to the duty to do so. It protects only those who, once put on notice, act promptly to assert their rights.

"Given the remedial nature of Section 3407," the Court of Appeals said in its decision, "we conclude that the Legislature contemplated that proofs of loss would be 'furnish(ed)' to the insurer when they were mailed. Allstate's contrary interpretation of the statute would result in forfeiture even in those instances where the insured placed the proofs in the mail with the reasonable expectation that they would arrive at their destination before expiration of the 60-day period but were not received because of the inefficiency or mistake of the post office. The statute contains no explicit language requiring receipt within 60 days. For us to add that requirement would create a trap for the unwary insureds who timely mail their proofs of loss, but forfeit their claims nonetheless, because, for reasons beyond their control, the proofs were not received by the insurer until after expiration of the 60-day period. The result is not compatible with the modern commercial environment where the mails are extensively relied upon for communication between parties."

In reaching this conclusion the court said it was overruling its prior decision in Peabody v. Satterlee, to the extent the 1901 decision conflicts with its current findings.

Dennis T. D'Antonio, senior partner of the New York City law firm of Weg & Myers, P.C., who represented the Balls, said that since the decision in Peabody, there have been many cases in which insureds have in fact forfeited multi-millions of dollars in claims by not having been able to prove that the insurer received the proof of loss document within the 60-day period. He said these forfeitures have been upheld by the courts. He said the decision of the Court of Appeals in this case will now allow the Balls to pursue their insurance claim.

Myrle L. Davis, an associate in the Weg & Myers firm, wrote the brief in the Ball v. Allstate Insurance companycase.

Allstate was represented by Stuart D. Markowitz of Feldman and Rudy, a law firm based on Long Island.