S.T.A. Parking Corp. v. General Star Indemnity Company

Background

S.T.A. Parking Corp. (STA) owned a parking garage and hired King Sha Group, Inc., which subcontracted excavation and underpinning work to Golden Vale Construction Corporation. Golden Vale’s work damaged the structure of a neighboring rental apartment building. The neighboring property’s owners and their insurer sued STA in state court, and STA later obtained an approximately $3.8 million judgment against Golden Vale.

Golden Vale had a primary commercial general liability policy from AXIS Specialty Insurance Company and an excess commercial general liability policy from General Star Indemnity Company. The General Star policy provided up to $10 million per occurrence after the underlying AXIS policy was paid. STA notified General Star of the dispute, but General Star said it owed no coverage and did not defend Golden Vale. AXIS paid STA on October 6, 2016; General Star did not pay.

STA sued General Star in state court in December 2018, and General Star removed the case to federal court. STA asserted three claims: one under New York Insurance Law § 3420, one for breach of the General Star policy, and one seeking enforcement of its state-court judgment under Article 52 of New York’s Civil Practice Law and Rules.

General Star’s Motion

General Star moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not adequately state a legal claim. General Star argued that all of STA’s claims were subject to New York’s three-year deadline for liabilities imposed by statute. It also argued that STA could not bring a breach-of-contract claim because STA was not a third-party beneficiary of the insurance policy.

Statute of Limitations

The court held that the substance of STA’s claims was contractual, regardless of the legal forms in which STA pleaded them. Under New York law, contract claims generally have a six-year statute of limitations. The court concluded that the Insurance Law § 3420 claim was based on General Star’s contractual obligation to provide coverage under the policy. The fact that the policy contained provisions required by New York law did not change the fundamentally contractual nature of the dispute.

The court reached the same conclusion for the breach-of-contract claim and the Article 52 judgment-enforcement claim. Article 52 permits a judgment creditor to enforce a money judgment against certain debts or property, and New York courts have held that insurance policies may be debts subject to enforcement. The court ruled that STA could use either section 3420 or Article 52 to pursue the insurance proceeds and that the six-year contract period applied regardless of which enforcement method STA used.

The court did not decide when the limitations period began. General Star argued that it began in December 2013, after the state court entered judgment and General Star did not pay. STA argued that it began in October 2016, when AXIS paid its share. Under either date, the court found that STA’s December 2018 filing was timely.

Third-Party Beneficiary Claim

The court also rejected General Star’s argument that STA could not sue under the policy. A third-party beneficiary is someone who was not a party to a contract but whom the contracting parties intended to benefit directly. Although STA was not named as a beneficiary, the policy stated that General Star could pay a third-party claimant and that a person or organization could sue to recover on an agreed settlement or final judgment against an insured obtained after an actual trial. The court held that this language showed an intent to allow a third party such as STA to enforce the policy.

Disposition

Judge Gregory H. Woods denied General Star’s motion to dismiss. The Clerk of Court was directed to terminate the pending motion at docket entry 27.