Chase Scientific Research, Inc. v. Nia Group, Inc.

Under CPLR 214 (6), a three-year statute of limitations is applicable in nonmedical malpractice actions, regardless of whether the underlying theory is based in contract or tort. The appeals now before us raise the novel issue of what “malpractice” means in this statute. Put another way, given that malpractice is professional misfeasance toward one’s client, who is a “professional” within the section? The question arises in the context of insurance agents and brokers.

I

n the first case, Chase Scientific Research v NIA Group, plaintiff Chase, a manufacturer of precision rotors, in May 1995 engaged defendants — insurance brokers — to procure property insurance for its business; on May 31, 1995, defendants procured such a policy for plaintiff. Some months later, on January 19, 1996, a severe storm damaged plaintiff’s warehouse and inventory. In response to plaintiff’s insurance claim, the carriers acknowledged the incident as a “covered occurrence” under the policy but offered only $50,000 despite plaintiff’s demand for the policy limit of $550,000 on claimed losses exceeding $1 million. Plaintiff later settled a case against the carriers for $275,000.

On January 7, 1999, plaintiff filed suit against defendants, asserting one cause of action for negligence and one for breach of contract based on defendants’ failure to secure coverage adequate to indemnify plaintiff against losses to its highly specialized inventory. Defendants moved to dismiss the entire action as time-barred under CPLR 214 (6), contending that the claim was one for malpractice, that it accrued on the policy date, and that more than three years had elapsed before this action was commenced. Plaintiff countered that the action was governed by the six-year statute of limitations applicable to contract actions (CPLR 213 [2]), and that, even applying the three-year statute of limitations (CPLR 214 [6]), the claim was timely because it accrued on the date of loss. Supreme Court agreed with defendants and dismissed the complaint. The Appellate Division affirmed.

In the second case, Gugliotta v Apollo Roland Brokerage, defendant Apollo through its insurance agent (defendant Thomas Lovetere) in December 1994 procured insurance for plaintiff’s commercial building from defendant New York Merchant

When this Court subsequently confronted nonmedical malpractice claims based on a breach of contract theory, it applied the six-year contract statute of limitations (see, Sears, Roebuck & Co. v Enco Assocs., 43 NY2d 389 ; Video Corp. v Flatto Assocs., 58 NY2d 1026 ; National Life Ins. Co. v Hall & Co., 67 NY2d 1021 ; Santulli v Englert, Reilly & McHugh, 78 NY2d 700 ). In all of these “contractual” malpractice cases, the Court’s analysis centered on the nature of the claim asserted by plaintiffs — tort or contract — in determining the applicable statute of limitations. While the cases involved architects, lawyers and insurance brokers, no issue was raised — and none decided — as to whether those actors were capable of malpractice within the contemplation of CPLR 214 (6).

Most recently, in response to Sears and its progeny, the Legislature amended 214 (6) to clarify that the limitations period in nonmedical malpractice claims is three years, “whether the underlying theory is based in contract or tort” (CPLR 214 [6], as amended by L 1996, ch 623). This change was intended not only to remediate the Sears line of cases but also to reduce potential liability of insurers and corresponding malpractice premiums, and to restore a reasonable symmetry to the period in which all professionals would remain exposed to a malpractice suit (Letter from NY State Ins Dept, July 16, 1996, Bill Jacket, L 1996, ch 623, at 9-10 [“The Courts have applied (a contract) theory to architect and legal malpractice”]; Legis Rep No. 76-B of NY State Bar Assn, Bill Jacket, at 13-14 [“there is no rationale for subjecting professional malpractice by an architect, engineer, lawyer, or accountant to a statute of limitations over twice as long as that applied to doctors, dentists and podiatrists”]).

As a final link in the statute’s litigation chain, barely five months ago, in Brothers v Florence and its companion cases ( 95 NY2d 290 ) — involving the alleged malpractice of attorneys and real estate appraisers — this Court concluded that the amended statute applied retroactively to bar certain claims accruing prior to the effective date of the statute. Again, no one disputed that a real estate appraiser was capable of malpractice within the meaning of 214 (6), and we resolved the appeal without reaching that question (see, Brothers, 95 NY2d, at 298, 306 ).

“Professional” is a term in wide usage, commonly understood to have several meanings. For example, it denotes a measure of quality, as in professional dry cleaners; a distinction from trade or businesspeople, and from amateur status, as in professional golfers; a lifework as opposed to pastime, as in professional musicians. Often there are study, licensure and continuing skills requirements, as for barbers, electricians and real estate brokers. Thus, neither common parlance nor licensure can determine the meaning of “professional,” for surely the Legislature did not have such a vast, amorphous category of service providers in mind when it amended CPLR 214 (6) (Alexander, 1999 Supp Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C:214 [6], 2001 Cum Pocket Part, at 214 [“The Legislature presumably sought to confer the protections of CPLR 214 (6) on a relatively small group of defendants. Otherwise, it would have shortened the six-year breach of contract period to three years for all contracts for services.”]).

Nor does the law defining “professional” for other purposes necessarily resolve the statute of limitations issue before us (see, e.g., People ex rel. Fullam v Kelly, 255 NY 396 [music a profession, not a trade, under zoning resolution]; People ex rel. Tower v State Tax Commn., 282 NY 407 [customhouse broker not a professional for purposes of unincorporated business tax exclusion]; Business Corporation Law § 1501; Education Law, tit VIII, art 130 et seq. [“The Professions”]). An abbreviated statute of limitations bars claims of allegedly injured parties, and should therefore reflect the Legislature’s intent that the particular defendant groups receive such a benefit. In Karasek v LaJoie ( 92 NY2d 171 ), for example, we refused, absent legislative clarification, to include licensed

The term “professional” is also commonly understood to refer to the learned professions, exemplified by law and medicine, which have particular relevance to the history of CPLR 214 (6). The two- and three-year malpractice statutes of limitation, after all, began with doctors, enlarged soon after to encompass attorneys and accountants. In 1996, when CPLR 214 (6) was before the Legislature for amendment, the report of the New York State Bar Association referred specifically to those categories in speaking of professional malpractice: “an architect, engineer, lawyer or accountant” (Legis Rep No. 76-B of NY State Bar Assn, Bill Jacket, L 1996, ch 623, at 13-14).

The qualities shared by such groups guide us in defining the term “professional.” In particular, those qualities include extensive formal learning and training, licensure and regulation indicating a qualification to practice, a code of conduct imposing standards beyond those accepted in the marketplace and a system of discipline for violation of those standards (see, Matter of Freeman, 34 NY2d 1 , 7-8; see also, BDO Seidman v Hirshberg, 93 NY2d 382 , 389-390; Port Auth. v Evergreen Intl. Aviation, 179 Misc 2d 674 ). Additionally, a professional relationship is one of trust and confidence, carrying with it a duty to counsel and advise clients (see, Murphy v Kuhn, 90 NY2d 266 , 270; Kimmell v Schaefer, 89 NY2d 257 , 263).

This definition, we believe, implements the Legislature’s intention to benefit a discrete group of persons affected by the concerns that motivated the shortened statute of limitations (see, Alexander, 2000 Supp Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C:214 [6], 2001 Cum Pocket Part, at 211). We are mindful as well that our definition ideally should establish a bright line, so that, absent legislative clarification, it can be fairly and uniformly applied. Moreover, with the rise of large numbers of skilled “semi-professions” (see, Polelle, supra, 33 USF L Rev, at 205), any broader definition would, for the future, make it hard to draw meaningful distinctions and the groups covered by CPLR 214 (6) would quickly proliferate.

Accordingly, in Chase the order of the Appellate Division should be reversed, with costs, and the complaint reinstated. In Gugliotta, the order of the Appellate Division, insofar as appealed from, should be modified, without costs, to reinstate the cause of action for breach of contract as against Apollo, and otherwise affirmed.

Judges Smith, Levine, Ciparick, Wesley, Rosenblatt and Graffeo concur.

In Chase Scientific Research v NIA Group: Order reversed, with costs, and defendants’ motion to dismiss the complaint denied.

In Gugliotta v Apollo Roland Brokerage: Order, insofar as appealed from, modified, without costs, by reinstating the cause of action for breach of contract against defendant Apollo Roland Brokerage, Inc. and, as so modified, affirmed.