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Gurnee v. Aetna Life & Casualty Co.

55 N.Y.2d 184 Court N.Y. Decision date 1982-02-18 English

Delivered by Chief Judge Cooke.

Contents

Majority

p. 184
Morris C. Gurnee, Appellant, v Aetna Life and Casualty Company, Respondent. Moshe Weinreich, Appellant, v State-Wide Insurance Company et al., Respondents, et al., Defendants.
Argued January 12, 1982;
decided February 18, 1982
p. 185
POINTS OF COUNSEL
Willard M. Pottle, Jr., for appellant in the first above-entitled action.
I. The court below is in error in dismissing the complaint under CPLR 3211. II. The Kurcsics case is retroactive. (Finger Lakes Racing Assn. v New York State Racing & Wagering Bd., 45 NY2d 471 ; Chevron Oil Co. v Huson, 404 US 97 .) III. Application of Kurcsics to other similarly situated claimants would not violate the New York State and United States Constitutions. (Finger Lakes Racing Assn. v New York State Racing & Wagering Bd., 45 NY2d 471 ; Matter of Empire Mut. Ins. Co. [Konetsky], 92 Misc 2d 843 , 55 AD2d 893 , 43 NY2d 889 ; State Farm Mut. Auto. Ins. Cos. v Brooks, 101 Misc 2d 704 ; Welty v Brown, 57 AD2d 1000 ; Patterson v Carey, 41 NY2d 714 ; Mandels v
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Liberty Mut. Ins. Co., 45 NY2d 455 ; Becker v Huss Co., 43 NY2d 527 .) IV. This motion should be given summary judgment treatment for plaintiff-appellants. (Hurd v City of Buffalo, 41 AD2d 402 , 34 NY2d 628 ; Mercury Mach. Importing Corp. v City of New York, 3 NY2d 418 ; Adrico Realty Corp. v City of New York, 250 NY 29 .)
Lawrence Milberg and Jeremy M. Heisler for appellant in the second above-entitled action.
I. Plaintiff is suing for breach of an insurance contract, the terms of which were mandated by the Insurance Law. Nonretroactivity and constitutional analysis or analysis grounded on equitable considerations, are not relevant to the instant frame of reference. (People v Broadway R. R. Co. of Brooklyn, 126 NY 29 ; Miller v Continental Ins. Co., 40 NY2d 675 ; Sturges Mfg. Co. v Utica Mut. Ins. Co., 37 NY2d 69 ; Kocak v Metropolitan Life Ins. Co., 237 App Div 780 , 263 NY 518 .) II. There is no constitutional barrier to recovery of payments the Court of Appeals has ruled are due to plaintiff and class members under the insurance contract. (Mariniello v Shell Oil Co., 511 F2d 853 ; Great Northern Ry. v Sunburst Co., 287 US 358 ; Patterson v Colorado, 205 US 454 ; Woodall v Keller, 337 F Supp 595 ; United States v Bensinger, 507 F2d 103 ; Cipriano v City of Houma, 395 US 701 ; Hurd v City of Buffalo, 41 AD2d 402 .) III. Even assuming classic nonretroactivity analysis is applied, the equities in favor of plaintiff and other insureds outweigh the equities in favor of the insurance companies. (Chevron Oil Co. v Huson, 404 US 97 ; Montgomery v Daniels, 38 NY2d 41 .) IV. The argument against nonretroactive application of Kurcsics cannot apply to any date after February 28, 1978, the date of the Kurcsics Supreme Court decision. (Peters v Wayne State Univ., 476 F Supp 1343 ; Los Angeles Dept. of Water & Power v Manhart, 435 US 702 .) V. Special Term’s denial of plaintiff’s motion to determine class should be reversed and the motion granted on the merits. VI. General considerations favor class treatment of both plaintiff and defendant classes. (Friar v Vanguard Holding Corp., 78 AD2d 83 ; Gilman v Merrill Lynch, Pierce, Fenner & Smith, 93 Misc 2d 941 .) VIL The prerequisites of CPLR 901 et seq. with respect to a plaintiff class action have been satisfied. (Friar v Vanguard Holding Corp., 78 AD2d 83 ;
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Contract Buyers League v F & F Inv., 300 F Supp 210 ; La Mar v H & B Novelty & Loan Co., 489 F2d 461 ; Ammon v Suffolk County, 67 AD2d 959 ; Evans v City of Johnstown, 96 Misc 2d 755 .) VIII. The statutory provision for interest payments and attorneys’ fees do not support dismissal of the action. (Murphy v North Amer. Light & Power Co., 33 F Supp 567 ; Union Estates Co. v Adlon Constr. Co., 221 NY 183 .) IX. A defendant class should have been certified by the court below. All criteria of CPLR 901 et seq. were satisfied. (Northwestern Tel. Co. v Western Union Tel. Co., 197 Misc 1075 ; Research Corp. v Pfister Associated Growers, 301 F Supp 497 ; Otero v New York City Housing Auth., 354 F Supp 941 ; Technograph Printed Circuits v Methode Electronics, 285 F Supp 714 .)
Charles Platto, William E. Hegarty, Kevin J. Burke and Ralph L. Halpern for respondent in the first above-entitled action. Charles Platto, William E. Hegarty and Kevin J. Burke for State-Wide Insurance Company, respondent in the second above-entitled action.
I. Retroactive application
of Kurcsics to other claimants would violate the New York State and United States Constitutions. (Great Northern Ry. v Sunburst Co., 287 US 358 ; Lemon v Kurtzman, 411 US 192 ; Mandels v Liberty Mut. Ins. Co., 60 AD2d 864 , 45 NY2d 455 ; Patterson v Carey, 41 NY2d 714 ; Missouri Pacific Ry. v Nebraska, 164 US 403 ; Chicago, St. Paul, Minneapolis & Omaha Ry. v Holmberg, 282 US 162 ; Thompson v Consolidated Gas Corp., 300 US 55 ; Pennsylvania Coal Co. v Mahon, 260 US 393 ; Health Ins. Assn. of Amer. v Harnett, 44 NY2d 302 ; United States Trust Co. v New Jersey, 431 US 1 ; Allied Structural Steel Co. v Spannaus, 438 US 234 .) II. Kurcsics may not be given retroactive application since the insurance carriers obeyed regulations of the Superintendent of Insurance. (Atlantic Coast Line v Florida, 295 US 301 ; Moss v Civil Aeronautics Bd., 521 F2d 298 , cert den sub nom. Roberts v Civil Aeronautics Bd., 424 US 966 ; Incorporated Vil. of Northport v Guardian Fed. Sav. & Loan Assn., 87 Misc 2d 344 , 54 AD2d 893 ; Daly v Eagan, 77 Misc 2d 279 .) III. Kurcsics should not be given retroactive application as a matter of equity under the Chevron rule. (Chicot County Dist. v Bank, 308 US 371 ; Chevron Oil Co. v Huson, 404 US 97 ; Montgomery v Dan
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iels, 38 NY2d 41 ; Stevens v Califano, 448 F Supp 1313 , 443 US 901 ; Matter of Granger v Urda, 44 NY2d 91 ; Grello v Daszykowski, 44 NY2d 894 ; Matter of Irish Int. Airlines v Levine, 48 AD2d 202 ; Rush v Savchuck, 444 US 320 ; Seider v Roth, 17 NY2d 111 ; New York Public Interest Research Group v Steingut, 40 NY2d 250 ; Matter of Hellerstein v Assessor of Town of Islip, 37 NY2d 1 ; Hurd v City of Buffalo, 41 AD2d 402 , 34 NY2d 628 .) IV. This is not a breach of contract case. (Jonneck v Metropolitan Life Ins. Co., 162 NY 574 ; Lloyd v North British & Mercantile Ins. Co. of London & Edinburgh, 174 App Div 371 ; Greenhaus v American Progressive Health Ins. Co., 33 Misc 2d 280 , 18 AD2d 1076 ; Kocak v Metropolitan Life Ins. Co., 237 App Div 780 , 263 NY 518 ; People v Broadway R. R. Co. of Brooklyn, 126 NY 29 ; Chicot County Dist. v Bank, 308 US 371 .) V. The motion to dismiss was properly granted under CPLR 3211. (Matter of Wilco Props. Corp. v Department of Environmental Conservation of State of N. Y., 39 AD2d 6 ; People v Wiley, 59 Misc 2d 519 ; Matter of Siwek v Mahoney, 39 NY2d 159 ; O’Hara v Del Bello, 47 NY2d 363 ; Maybrown v Malverne Distrs., 57 AD2d 548 ; Franklin v Pee Dee Jay Amusement Co., 71 AD2d 866 ; City of Mount Vernon v East Hudson Parkway Auth., 45 Misc 2d 471 , 23 AD2d 849 .) VI. The retroactivity issue was not addressed in Kurcsics and is properly before this court. (Matter of American Bible Soc. v Lewisohn, 40 NY2d 78 ; Empire Sq. Realty Co. v Chase Nat. Bank of City of N. Y., 181 Misc 752 , 267 App Div 817 ; City of Buffalo v Cargill, Inc., 44 NY2d 7 .) VII. The Finger Lakes, Gillead, Becker, Empire Mutual and Brooks cases are inapposite. (Finger Lakes Racing Assn. v New York State Racing & Wagering Bd., 45 NY2d 471 ; Matter of Gillead [City of New York], 104 Misc 2d 1126 ; Becker v Huss Co., 43 NY2d 527 ; Matter of Empire Mut. Ins. Co. [Konetsky], 92 Misc 2d 843 , 55 AD2d 893 , 43 NY2d 889 ; Matter of Adams [Government Employees Ins. Co.], 52 AD2d 118 ; State Farm Mut. Auto. Ins. Cos. v Brooks, 101 Misc 2d 704 .) VIII. Appellants’ motions for certification of plaintiff class and defendant class were properly denied. (Seligman v Guardian Life Ins. Co. of Amer., 59 AD2d 859 ; Rapp v Dime Sav. Bank of N. Y., 64 AD2d 964 , 48 NY2d 658 ; Levine v Chesapeake & Ohio R.R. Co., 60 AD2d 246 ;
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People ex rel. Kaufmann v Goldman, 86 Misc 2d 776 ; Turner v Codd, 85 Misc 2d 483 ; Matter of Shook v Lavine, 49 AD2d 238 ; Evans v City of Johnstown, 96 Misc 2d 755 ; Spatz v Wide World Travel Serv., 70 AD2d 835 ; Matter of Knapp v Michaux, 55 AD2d 1025 ; Vallone v Delpark Equities, 95 Misc 2d 161 .) IX. The claims for interest and attorneys’ fees were properly denied.
Eugene A. Leiman for Maryland Casualty Company, respondent in the second above-entitled action.
The order and decision below should be affirmed (Greenhaus v American Progressive Health Ins. Co., 33 Misc 2d 280 , 18 AD2d 1076 ; American Paint Serv. v Home Ins. Co. of N. Y., 246 F2d 91 ; Goldman v Piedmont Fire Ins. Co., 198 F2d 712 ; Clark v Travelers Ind. Co., 313 F2d 160 ; Kisting v Westchester Fire Ins. Co., 290 F Supp 141 , 416 F2d 967 .)
Sheldon V. Burman for Samuel Uretsky and others, amici curiae, in the first above-entitled action.
I. Plaintiffs set forth legally sufficient causes of action which are improperly sought to be dismissed by the demurrer motions of defendants. (Abrams v Allen, 297 NY 52 ; Columbia Gas of N. Y. v New York State Elec. & Gas Corp., 28 NY2d 117 ; Guggenheimer v Ginzburg, 43 NY2d 268 ; Rovello v Orofino Realty Co., 40 NY2d 633 ; Stukuls v State of New York, 42 NY2d 272 ; Dolgow v Anderson, 438 F2d 825 ; Bradley v Richmond School Bd., 416 US 696 ; Albemarle Paper Co. v Moody, 422 US 405 ; Los Angeles Dept. of Water & Power v Manhart, 435 US 702 ; Becker v Huss Co., 43 NY2d 527 .) II. The uniform insurance contracts and the statutory requirements of section 671 of the Insurance Law mandate payment of up to $1,000 per month for lost earnings. (Breed v Insurance Co. of North Amer., 46 NY2d 351 ; Miller v Continental Ins. Co., 40 NY2d 675 ; American Home Assur. Co. v Hartford Ins. Co., 74 AD2d 224 ; Patterson v Carey, 41 NY2d 714 ; Health Ins. Assn. of Amer. v Harnett, 44 NY2d 302 ; Allied Structural Steel Co. v Spannaus, 438 US 234 ; Pennsylvania Coal Co. v Mahon, 260 US 393 ; United States Trust Co. v New Jersey, 431 US 1 ; Mandels v Liberty Mut. Ins. Co., 45 NY2d 455 .)
Robert Abrams, Attorney-General (Shirley Adelson Siegel and Robert S. Hammer of counsel), for Superintendent of Insurance of the State of New York, amicus curiae, in
p. 190
the second above-entitled action.
The Kurcsics ruling should be applied prospectively to cases which arise after its decision. (Flushing Nat. Bank v Municipal Assistance Corp. for City of N. Y., 40 NY2d 731 ; Matter of Hellerstein v Assessor of Town of Islip, 37 NY2d 1 , 39 NY2d 920 ; Los Angeles Dept. of Water & Power v Manhart, 435 US 702 ; Lemon v Kurtzman, 411 US 192 ; New York Public Interest Research Group v Steingut, 40 NY2d 250 ; Chevron Oil Co. v Huson, 404 US 97 ; Matter of Jessica XX, 77 AD2d 381 ; Flushing Nat. Bank v Municipal Assistance Corp. for City of N. Y., 88 Misc 2d 1047 ; Incorporated Vil. of Northport v Guardian Fed. Sav. & Loan Assn., 87 Misc 2d 344 ; Matter of Government Employees Ins. Co. v Sparrow, 66 AD2d 782 .)

OPINION OF THE COURT

These cases present the „ question whether the holding of Kurcsics v Merchants Mut. Ins. Co. ( 49 NY2d 451 ) should be given retroactive effect. For the outlined reasons, this court holds that Kurcsics should be applied to all claims not barred by the Statute of Limitations.

In Kurcsics, the court construed the phrase “first party benefits”, contained in section 671 of the Insurance Law, as it related to no-fault insurance protection. The court held that under section 671, a covered person injured in a motor vehicle accident who sustained lost earnings of more than $1,000 per month can recover as first-party benefits 80% of his or her actual lost earnings up to a maximum of $1,000 per month. The court rejected the Superintendent of Insurance’s interpretation of section 671 as limiting recovery for lost earnings to a maximum of 80% of $1,000, or $800.

Morris Gurnee, plaintiff in one of the instant actions, was injured in November, 1977 while driving a car owned by an insured of Aetna Life and Casualty Company. He claimed lost wages of more than $3,200 per month. Aetna paid him $800 per month, in accordance with State Insurance Department regulations. After this court decided Kurcsics in February, 1980, Gurnee sued Aetna, claiming he was entitled to the maximum $1,000 per month for lost earnings. Supreme Court granted defendant’s motion to

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dismiss the complaint for failure to state a cause of action, holding that Kurcsics should not be applied retroactively. That court also denied as academic plaintiff’s motion to maintain the lawsuit as a class action. The Appellate Division affirmed.

Moshe Weinreich was injured in an accident in July, 1975 involving a vehicle insured by State-Wide Insurance Company. In the wake of Kurcsics, he sued State-Wide, alleging that it refused to pay him more than $800 per month in lost wages even though he was entitled to $1,000. Weinreich also moved for an order determining that the suit could be brought as a class action. Supreme Court granted defendant’s motion to dismiss for failure to state a cause of action, holding that Kurcsics was not retroactive, and denied the motion for class certification. Appellate Division affirmance followed.

In determining whether the holding of Kurcsics is applicable to other claims that arose before the decision was handed down, it is questionable whether retroactivity analysis is relevant with respect to the application of the first decision of the State’s highest court interpreting a new statute. Such analysis is traditionally used where there has been an abrupt shift in controlling decisional law. In Kurcsics, this court merely construed, at its first opportunity to do so, the language of a statute that had been in effect since 1974.

Even under what might be described as the traditional retroactivity analysis, however, it is clear that Kurcsics should be accorded full retroactive effect. Several principles provide guidance for such examination. First, it is well established that, “consonant with the common law’s policy-laden assumptions, a change in decisional law usually will be applied retrospectively to all cases still in the normal litigating process” (Gager v White, 53 NY2d 475 , 483; see People v Pepper, 53 NY2d 213 , 219-220; People v Morales, 37 NY2d 262 , 267-269; Kelly v Long Is. Light. Co., 31 NY2d 25 , 29, n 3; Knapp v Fasbender, 1 NY2d 212 , 243). As an exception to this general rule, however, “where there has been such a sharp break in the continuity of law that its impact will ‘wreak more havoc in society than society’s interest in stability will tolerate’ ” a court may direct that

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the new pronouncement operate prospectively alone (Gager v White, supra, at pp 483-484 , quoting Fairchild, Limitation of New Judge-Made Law to Prospective Effect Only: “Prospective Overruling” or “Sunbursting”, 51 Marq L Rev 254 ).

. In Chevron Oil Co. v Huson ( 404 US 97 , 106-107), the Supreme Court outlined three factors to consider in determining if a ruling should be prospective only. “First, the decision to be applied nonretroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied * * * or by deciding an issue of first impression whose resolution was not clearly foreshadowed” (404 US, at p 106). Second, the prior history of the rule at issue and the impact of retroactive application upon its purpose and effect should be considered. Finally, the court should take into account any inequity that would be created by retroactive application (id.).

Turning to the instant cases, defendants argue that Kurcsics should not be applied retroactively because its result was not clearly foreshadowed. In this regard it is important to emphasize that Kurcsics did not “establish a new principle of law.” It merely construed a statute that had been in effect for a number of years. It is true that the Insurance Department had promulgated regulations based on a construction of section 671 contrary to that subsequently articulated by this court. A judicial decision construing the words of a statute, however, does not constitute the creation of a new legal principle. Additionally, the definitional language of section 671 itself foreshadowed the conclusion this court first had the opportunity to express in Kurcsics.

With respect to the second factor set forth in Chevron, defendants argue that the purposes of the legislation would not be furthered because retroactive application of Kurcsics would reduce neither insurance premium rates nor the number of law suits stemming from automobile accidents, both admittedly salutary goals of the no-fault scheme. In Montgomery v Daniels ( 38 NY2d 41 , 55), however, this court stated that a crucial facet of the Legislature’s plan in enacting article 18 of the Insurance Law consisted of “guaranteeing prompt and full compensation of economic

p. 193
losses up to $50,000 without the necessity of recourse to the courts” (emphasis added). It is this right of an injured party to prompt and full compensation that offsets the no-fault law’s elimination of the ability to recover for pain and suffering for relatively minor injuries (see NY Legis Ann, 1973, p 298; 2 McKinney’s Session Laws of NY, 1973, p 2335). An important aspect of the no-fault scheme, then, was the provision of first-party benefits. “Full compensation” under the scheme includes the amount of lost earnings allowed by section 671. To argue that application of the correct interpretation of section 671 will not further the purposes of the no-fault legislation is to ignore these crucial benefits. Indeed, to deny Kurcsics application to these cases would directly contradict the legislative design.

The third factor cited in Chevron entails weighing relative burdens that would be imposed upon either party if Kurcsics were given retroactive effect. Defendants maintain that they based their premium rates upon the assumption that their liability for lost earnings would be limited to $800 per month. They assert that a determination that their maximum liability was $1,000 per month would create severe financial hardships. Whatever hardships may be suffered by insurers who erroneously believed that their maximum exposure was $800 per month for lost earnings, however, is more than outweighed by the hardship suffered by those injured individuals who received only $800 per month for lost earnings although entitled to a maximum of $1,000 per month. As this court observed in Montgomery v Daniels ( 38 NY2d 41 , 55, supra), the no-fault legislation foreclosed recovery for pain and suffering by persons who had suffered relatively minor injuries in automobile accidents, but balanced this by providing a means of obtaining prompt and full recovery for certain economic losses. Plaintiffs were denied the ability to sue for pain and suffering, yet they were also denied the full recovery to which they were entitled under that scheme. The unfairness to such injured persons outweighs whatever financial burden may be imposed on insurers. With respect to this burden, it should be noted that the applicable six-year Statute of Limitations has already extinguished a portion of the insurers’ potential liability (see CPLR 213).

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When all of the applicable criteria are considered, retroactive application of Kurcsics is mandated. In sum, that case established no new principle of law; it merely construed the language of a statute that was already in existence. Also, the purposes of the no-fault insurance legislation would be furthered by retroactive application of Kurcsics. And, finally, a balancing of the equities dictates that the injured parties not be made to bear the burden of foregoing part of the recovery to which they were statutorily entitled.

Defendants also raise constitutional challenges to retroactive application of Kurcsics. These arguments, however, are unpersuasive. Kurcsics merely construed the language of a statute governing certain provisions required of automobile insurance contracts. Such a judicial construction cannot, by its very nature, constitute a “Law impairing the Obligation of Contracts” (US Const, art I, § 10, par 1). Likewise, retroactive application of Kurcsics effects no unconstitutional taking of property without due process. Requiring defendants to pay covered persons according to the command of a statute governing their insurance policies and in effect when those policies were written simply is not a “taking”. There is thus no persuasive reason why this court’s construction of section 671 should not be held applicable to all claims that are not time-barred. To the contrary, equitable considerations and the nature of this court’s decision in Kurcsics require that Kurcsics be applied retroactively. Plaintiffs’ complaints therefore should not have been dismissed for failure to state a cause of action.

With respect to plaintiffs’ motions for orders determining that they could bring their suits as class actions, this court has no occasion at this point to address the merits.. The motions were denied as academic, in one case explicitly and in the other implicitly, in light of the dismissals of plaintiffs’ complaints for failure to state a cause of action. Given the inherently factual and discretionary nature of such determinations (see Ray v Marine Midland Grace Trust Co., 35 NY2d 147 , 155; Siegel, New York Practice, § 147), the merits of the motions should first be explored and considered by the trial courts (see CPLR 901-909).

p. 195
Accordingly, the orders of the Appellate Divisions should be reversed, with costs, and defendants’ motions to dismiss the complaints should be denied.

Judges Jasen, Gabrielli, Jones, Wachtler and Meyer concur; Judge Fuchsberg taking no part.

In Gurnee v Aetna Life & Cas. Co.: Order reversed, with costs, and defendant’s motion to dismiss the complaint denied.

In Weinreich v State-Wide Ins. Co.: Order reversed, with costs, and defendants’ motions to dismiss the complaint denied.

Cases cited

Statutes and regulations cited