New York’s Highest Court Re-Affirms Governmental Immunity

Imagine this scenario:  a house gets built incorrectly, the town, village or city inspects and issues a certificate of occupancy (“CO”) notwithstanding the defects, the house burns down and the contractor who did the work doesn’t have any money or any insurance.  Sound familiar?  I am often asked in these circumstances if a subrogating carrier can sue the municipality that improperly issued the CO and pursue the municipality since the construction never should have been approved and your insureds never should have been allowed to live in the house.  The answer – in most cases - is “No.”

Immunity shielding the government stems back centuries, when it was viewed that the sovereign King was perfect and could never be sued for any reason.  Modern governments can allow themselves to be sued if their legislature passes laws granting to the people the right to sue them.  Most states allow for suits against them, but many immunity-waiving laws require filing a Notice of Claims within a few months and/or shorter-than-usual statutes of limitations.  New York State only allows you to sue it in a special court known as the “Court of Claims.”

New York’s highest court, the Court of Appeals, issued a decision November 29 in a wrongful death case.  While it was not a subrogation case, it is significant to subrogation practitioners since it re-affirms how difficult it is to sue any government in tort for causing injury or property damage.  In 2005, 20 passengers on a tour boat named “Ethan Allen” in Lake George were killed when the boat capsized and sank.  The law had required the State to inspect this vessel yearly and certify its maximum allowable passenger capacity.  New York officials had inspected the vessel annually and, since 1979, had certified it for a maximum of 48 people.  However, State employees admitted at deposition that they had simply “rubber-stamped” the 48-capacity limit from previous annual reports and did not conduct any tests on the Ethan Allen to independently determine whether the vessel could actually safely operate with 48 people.  In fact, the vessel had been significantly modified in 1989 – replacing a canvass canopy with a wood canopy – yet the State continued to certify the maximum passenger number at 48.  A wrongful death suit was filed by many of the deceased passengers’ families.   The owners of the Ethan Allen had insufficient insurance, so the claimants’ attorney sought to hold New York State liable for negligently certifying an unsafe passenger capacity and for failure to require a new assessment of the vessel’s stability after it was modified in 1989.

The Court of Appeals concluded that, in fact, at the time the accident happened, the Ethan Allen could not safely hold 38 people.  However, the Court nonetheless dismissed the lawsuit.  Their decision stated the long-held rule that a municipality may not be sued for “negligent performance of a governmental function” unless there exists some type of “special duty” specific to the injured person.  The vessel safety inspections were government functions similar to “a municipality…issuing certificates of occupancy or determining compliance with fire and safety codes.”   The Court identified three exceptions to the rule of no governmental liability:  (a) when the municipality violates a statutory duty enacted for the benefit of a particular class of persons; (b) when a governmental employee voluntarily assumes a duty that generates justifiable reliance by the person who benefits from the duty; or (c) when the municipality assumes positive direction and control in the face of a known, blatant and dangerous safety violation. 

The Court compared the Ethan Allen case with a 1983 decision involving a New York City inspector who certified a gas line – only to have an explosion occur once the gas system was activated.  Laws such as the vessel inspection law and the gas line inspection law are designed to protect “the general public” and are not designed to benefit any particular person.  The Court found that the vessel inspection law and the gas inspection law did not create a special duty of care owed by the State to any specific persons, such as the twenty killed Ethan Allen passengers.  The high court concluded that “the victims of this disastrous wreck are essentially left without an adequate remedy” and suggested the Legislature could fix the situation by requiring public vessels to carry adequate marine insurance in the future.

Bottom Line:  When pursuing a deep pocket to pick for a subrogation property matter, remember the old adage:  “You can’t fight City Hall.”  New York’s highest court has just re-affirmed that, unless one of the three narrow exceptions exists, governments are immune from suit even when they negligently perform their duties.

Dan Coffey is a member of the National Association of Subrogation Professionals (“NASP”), serves on the NASP amicus committee and is admitted to practice in all New York State courts.  He specializes in the area of fire property subrogation recovery.  Contact Dan at (519) 268-1916 or This email address is being protected from spambots. You need JavaScript enabled to view it. .

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