Insurance Co. v. Board of Education

• Citation: 196 F.2d 901
• Decision Date: 27 May 1952
• Docket Number: No. 4378.,4378.
• Parties: INSURANCE CO. OF NORTH AMERICA v. BOARD OF EDUCATION OF INDEPENDENT SCHOOL DISTRICT NO. 12, TEXAS COUNTY, OKl. et al.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

196 F.2d 901 (1952)

INSURANCE CO. OF NORTH AMERICA v. BOARD OF EDUCATION OF INDEPENDENT SCHOOL DISTRICT NO. 12, TEXAS COUNTY, OKl. et al.

No. 4378.

United States Court of Appeals Tenth Circuit.

May 5, 1952.

Rehearing Denied May 27, 1952.

Walter D. Hanson, Oklahoma City, Okl. (Stephen G. Evans, Oklahoma City, Okl., on the brief), for appellant.

Fisher Ames and James S. Twyford, Oklahoma City, Okl., for appellees.

Before HUXMAN, MURRAH and PICKETT, Circuit Judges.

HUXMAN, Circuit Judge.

This action was predicated on a fire insurance policy issued by the Insurance Company of North America, herein referred to as the Company, to the appellee, The Board of Education of Independent School District No. 12, Texas County, Oklahoma, herein referred to as the Board. The policy was the usual standard policy, insuring the property against loss from explosions, fires and other hazards. In its complaint the Board alleged that the loss to the School Board covered by the policy occurred from underground detonations and explosive charges that were set off by the Texas Oil Company, engaged in oil explorations within a short distance of the school house.

In its answer the Company denied liability on two grounds, (1) that the damage to the building was not the result of the detonations and (2) that in any event the action was barred by the applicable statute of limitations. It also asked that the Texas Company be interpleaded and that it have judgment over against it as subrogee for such amount, if any, as judgment might be rendered against it. Trial was had to the court. It made findings of fact and conclusions of law and found the issues against the Company and based thereon entered judgment against it for the amount of the ascertained damage. The Company's right to subrogation against the Texas Company was denied because the Court held the Company guilty of inequitable conduct. This appeal challenges the correctness of the court's findings and conclusions and the judgment based thereon.

Not much need be said with respect to the contention that the court's findings that the explosions caused severe damage to the building are unsupported by competent evidence. There was a sharp conflict in the evidence with respect to this issue. No needful purpose would be served by setting out the evidence in detail. It is sufficient to say that the court's findings with respect to the cause of the damage are supported by substantial evidence and are, therefore binding on this court on appeal.

A more serious question is presented with respect to the contention that the action was barred by the statute of limitations contained in the policy. Oklahoma has a statutory, standard form of fire insurance policy, which all companies are required to write. It is stipulated that the policy in question was a standard, statutory policy and covered loss by explosion. 36 O.S.A. § 244.1, which enacted the statutory, standard form of fire insurance policy, contains this provision with respect to the time within which action may be brought upon such a policy. "No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within twelve (12) months next after inception of the loss."

The damage occurred January 7, 1947. This action was not commenced until August 25, 1949, more than thirty months thereafter and approximately sixteen months after April 28, 1948, when the Company denied liability. The trial court, however, found that the Company, by its dilatory tactics and by continuing to negotiate with the School Board for a settlement of the claim into February, 1948, and not finally denying liability until in April, 1948, misled the District into believing the loss would be adjusted and that this conduct was inequitable and deprived it of the defense that the action was not commenced within the year. The Company contends that it was not guilty of inequitable conduct in this respect and that the court's finding is without support in the record, but for the purpose of this opinion the finding will be sustained.

From what has been said, it follows that the Company may not defend because the action was not instituted within one year from the date of the damage. The precise question, however, is within what period of time, after the Board was advised on April 28, 1948, that the Company denied liability, was it required to bring this action. The Board treats the one year period of limitation written into the policy as a contractual period of limitation and takes the position that since it was waived by the conduct of the Company it was gone and could not thereafter be reasserted and that thereafter the general five year statute of limitations, applying to contracts generally, would control. In short, it takes the position that it had five years after the denial of liability by the Company within which to bring this action. It relies for support of this position upon O'Brien v. Sovereign Camp, W. O. W., 122 Pa.Super. 39, 184 A. 546, and kindred cases set out in its brief.

We think the Board is wrong in speaking of the one year limitation in the policy as a contractual period of limitation. A contractual provision is one arrived at by mutual voluntary considerations, consents and agreements. It is one the parties are free to make as they may choose. In Oklahoma the parties to a fire insurance policy are not free to contract as to the period of time within which an action must be brought. The one year statutory period of limitation is by operation of law made a part of the contract. Writing it into the policy does not change its character. It is and remains a statutory and not a contractual period of limitation.¹

A casual perusal of the many decisions dealing with the use of the word "waive" or "waiver," when applied to periods of limitation for the institution of actions on insurance contracts, warrants the statement that these words are loosely and inaccurately treated when so used. A reading of many decisions makes it clear that when the court stated that the insurance company waived the contractual period of limitation it really meant that the conduct of the Company interrupted the running of the period of limitations and that it was thus interrupted by the Company's conduct during such period of time and that the inequitable...