HAHN AUTOMOTIVE v. AMERICAN
18 N.Y.3d 765 (2012)
967 N.E.2d 1187
944 N.Y.S.2d 742
2012 NY Slip Op 2344
HAHN AUTOMOTIVE WAREHOUSE, INC., Respondent,
AMERICAN ZURICH INSURANCE COMPANY et al., Appellants.
Court of Appeals of New York.
Argued February 15, 2012.
Decided March 29, 2012.
Chief Judge LIPPMAN and Judges CIPARICK and JONES concur. with Judge GRAFFEO; Judge READ dissents in a separate opinion in which Judges SMITH and PIGOTT concur.
The issue on this appeal is whether the six-year statute of limitations applicable to the insurers' breach of contract counterclaims began to run when they possessed the legal right to demand payment from the insured or years later after they issued invoices. Under the terms of the insurance contracts in this case, we conclude that the counterclaims accrued when the insurers had the right to demand payment.
Plaintiff Hahn Automotive Warehouse, Inc., an auto parts distributor with operations in multiple states, secured general liability, automotive liability and workers' compensation policies from defendants American Zurich Insurance Company and Zurich American Insurance Company (collectively, Zurich) for annual coverage periods between September 1992 and September 2003. Zurich also acted as the claims agent for automobile damage claims for which Hahn was self-insured from March 1997 until September 2003. The complex insurance arrangements at issue in this litigation can be broken into four general categories: (1) policies subject to retrospective premium agreements; (2) adjustable deductible policies; (3) deductible policies; and (4) claim services contracts.
Under the first category—encompassing several policies tied to retrospective premium plans—Hahn's initial premiums were based on estimated expenses and losses. Zurich was contractually required to recalculate the premiums owed 18 months after the policies' inception, with annual adjustments based on actual claims experience for as long as open claims remained. If an adjusted premium exceeded the initial premium. Zurich was to invoice Hahn for the difference. But if the recalculation resulted
in a lesser premium than initially paid, Zurich would owe Hahn a refund. Any amounts owed by Hahn were to be paid "within ten (10) days of receipt of [Zurich's] demand" for payment.
Similarly, the adjustable deductible policies—the second type of insurance plan used by the parties—involved the payment of an initial premium to be adjusted annually by Zurich based on actual claims experience, beginning 18 months after policy inception. These policies further required Hahn to pay deductible losses and claim expenses on a monthly or quarterly basis for 42 months, after which such losses and expenses were to be billed annually as part of the premium adjustment process.
In the third category, the deductible policies, Zurich was to pay the submitted claims but could then seek payment from Hahn on a monthly basis for the amounts that fell below the applicable deductible together with "allocated loss adjustment expenses" and other fees. These policies also required Zurich to perform an initial adjustment 18 months after policy inception, followed by yearly adjustments. The deductible policies specified that Hahn "shall pay ... [Zurich] within twenty (20) days of its demand."