Court Opinion

ID: 5827034
Source: CourtListenerOpinion
Date Created: 2022-01-12 21:26:28.092958+00
Date Added: 2024-06-11T08:43:19.452502
License: Public Domain

Larkin, J. (dissenting).
We respectfully dissent. In 1975, the year in which the car was destroyed and the insurance proceeds from the policy came into being, such funds were not "proceeds” protected by the filing of a security agreement under the Uniform Commercial Code. In fact, such funds were statutorily excluded: "This Article does not apply * * * (g) to a transfer of an interest or claim in or under any policy of insurance or contract for an annuity including a variable annuity” (Uniform Commercial Code, § 9-104).
*62It was not until 1977, when the Uniform Commercial Code was amended, that such funds payable under an insurance policy were included in the definition of "proceeds” and thus protected by a filing. Section 19 of chapter 866 of the Laws of 1977, provided in part: "(1) 'Proceeds’ includes whatever is received upon the sale, exchange, collection or other disposition of collateral or proceeds. Insurance payable by reason of loss or damage to the collateral is proceeds, except to the extent that it is payable to a person other than a party to the security agreement” (Uniform Commercial Code, § 9-306; emphasis supplied). This expanded definition of the term "proceeds”, however, did not become effective until July 2, 1978. Therefore, it is not applicable to the facts herein.
A creditor protects its security interest by filing a financing statement in the county of the debtor’s residence at the time the debt was incurred (Uniform Commercial Code, § 9-401, subd [1], par [a]). If the initial filing is proper, it remains effective even if the debtor moves to another county or moves the collateral (Uniform Commercial Code, § 9-401, subd [3]). Therefore, under the majority ruling in this case an insurance company which issues a collision policy to an applicant who thereafter sustains a collision loss must determine before payment if there is any security interest filed against the car covered by the collision policy. At the very least, the insurer must determine the county of residence of the insured, or the several counties of residence of the insured, and check the indices in those counties to see if there was an effective security interest filed therein. Failure to do so is to pay over to the insured at the company’s peril. At the time pertinent herein, such a mandate was not contemplated by the Legislature. It was, in fact, statutorily excluded (Uniform Commercial Code, § 9-104).
The judgment should be reversed.
Main and Mikoll, JJ., concur with Kane, J. P.; Larkin and Herlihy, JJ., dissent and vote to reverse in an opinion by Larkin, J.
Order and judgment affirmed, with costs.