Ashburn v. SAFECO Ins. Co. of America

• Decision Date: 28 January 1986
• Docket Number: No. 7597-1-II,7597-1-II
• Parties: Warren T. ASHBURN and Delores Ashburn, Appellants, v. SAFECO INSURANCE COMPANY OF AMERICA, Respondent.
• Court: Washington Court of Appeals

Page 692

42 Wn.App. 692

713 P.2d 742

Warren T. ASHBURN and Delores Ashburn, Appellants, v. SAFECO INSURANCE COMPANY OF AMERICA, Respondent.

No. 7597-1-II.

Court of Appeals of Washington,

Division 2.

Jan. 28, 1986.

Review Denied March 21, 1986.

James E. Warme, Calbom, Pond, Falkenstein, Warme & Engstrom, Longview, for appellants.

Donald C. Harrison, Reed, McClure, Moceri, Thonn & Moriarty, Seattle, for respondent.

PETRICH, Judge.

Warren and Delores Ashburn appeal summary judgment dismissing their claim against SAFECO Insurance Company of America, on the ground the Ashburns brought suit to collect for property damage on an insurance policy after expiration of the 12-month limitation of actions period provided in the contract.

The issue raised by the Ashburns is whether the 1-year contractual period of limitation of action on an insurance contract prevails over the statutory period of limitations on contracts even though the insurance company claims no prejudice. We conclude that the 1-year limitation of actions provision in the insurance contract is a valid and enforceable contract provision. Accordingly, we affirm the trial court's decision.

The eruption of Mt. St. Helens on May 18, 1980, caused a series of mud flows that destroyed property of many owners, including the Ashburns. The Ashburns' property had been insured by a SAFECO standard fire insurance policy with extended coverage.

Following the eruption, various parties filed suit to recover under their insurance policies. The suits were dismissed at the superior court level, when the court employed the immediate physical causation rule of Bruener v. Twin City Fire Ins. Co., 37 Wash.2d 181, 222 P.2d 833 (1950), to the express exclusions contained in the policies. At least three of the parties in these suits appealed. In Graham v. PEMCO, 98 Wash.2d 533, 538-39, 656 P.2d 1077 (1983), the Washington Supreme Court reversed the superior court, overruling Bruener v. Twin City Fire Ins. Co. The court adopted an expanded definition of causation and made coverage for those persons damaged by the eruption a jury question.

After the Graham v. PEMCO decision, and 22 months after sustaining the damage, the Ashburns on March 16, 1983 filed suit, alleging that SAFECO had breached its insurance policy contract by refusing to pay their claim. SAFECO moved for summary judgment on the basis that the Ashburns' suit was barred by the 1-year limitation clause in the 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 requirements of this policy shall have been complied with, and unless commenced within twelve months next after the inception of the loss.

The Ashburns first argue that the 1-year limitation provision is invalid because it frustrates their reasonable expectation of coverage in the event of loss. They argue that insurance contracts are to be interpreted with regard to the purpose of the contract and the understanding of the insured. Morgan v. Prudential Ins. Co., 86 Wash.2d 432, 545 P.2d 1193 (1976); Farmers Home Mut. Ins. Co. v Insurance Co. of North Amer., 20 Wash.App. 815, 583 P.2d 644 (1978), cert. denied, 442 U.S. 942, 99 S.Ct. 2885, 61 L.Ed.2d 312 (1979). Here, they maintain that the 1-year limitation unfairly thwarts the expectations of the property owners.

We recognize that the insured expects to be covered in the event of property loss and to be treated with good faith by insurance companies. RCW 48.01.030. The cases of Morgan v. Prudential Ins. Co. supra and Farmers Home Mut. Ins. Co. v. Insurance Co. of North Amer., supra, cited by the Ashburns, all relate to extent of coverage and construe ambiguities in this area in favor of the insured. Here, however, no issue is raised regarding extent of coverage. The policy unambiguously requires that suit be brought within 12 months after a loss.

An insurance contract may include reasonable limitations on liability. Washington courts have upheld the validity of the 1-year limitation in insurance contracts. Hefner v. Great Amer. Ins. Co., 126 Wash. 390, 218 P. 206 (1923); Johnson v. Phoenix Assurance Co. of New York, 70 Wash.2d 726, 425 P.2d 1 (1967); Simms v. Allstate Ins. Co., 27 Wash.App. 872, 621 P.2d 155 (1980). We conclude that the unambiguous contract provision limiting the right of action on the Ashburns' insurance contract does not frustrate the reasonable expectation of the insured and the purpose of the contract.

The Ashburns next contend that the 1-year limitation is void because it conflicts with the 6-year statutory limitation period for written contracts. RCW 4.16.010 ¹ and RCW 4.16.040. Further, they argue that contract provisions, which conflict with the statutory period of limitations, are invalid because they unconstitutionally discriminate against those who are poor and lack knowledge of their rights. Hunter v. North Mason High School and School Dist. 403, 85 Wash.2d 810, 539 P.2d 845 (1975). Such provisions are unfair, they contend, and therefore violate both RCW 48.01.030, which establishes that insurance companies must deal fairly with those they insure, and constitutional provisions dealing with equal protection and privileges and immunities of citizens.

Limitation of actions provisions in a contract prevail over general statutes of limitations unless prohibited by statute or public policy, or unless they are unreasonable. See State Ins. Co. v. Meesman, 2 Wash. 459, 27 P. 77 (1891); 51 Am.Jur.2d, Limitation of Actions § 64 (1970). The Ashburns urge this court to adopt Nebraska's rule that contract limitation of actions provisions which conflict with statutory time periods are void. Dunlop Tire & Rubber Corp. v. Ryan, 171 Neb. 820, 108 N.W.2d 84, 88 (1961). However, a Nebraska statute specifically forbids contractual limitation provisions that vary from the general statute of limitations. R.R.S. 1943 § 44-357. Washington has no such statutory prohibition.

We note that a contract provision may be unenforceable if it conflicts with a specific statutory objective. A Washington court has struck down a policy's 1-year limitation clause appended to the uninsured motorist coverage endorsement. Signal Ins. Co. v. Walden, 10 Wash.App. 350, 517 P.2d 611 (1973), review denied, 83 Wash.2d 1013 (1974). There, the court concluded that the purpose of the uninsured motorist statute, RCW 48.22.030, was to insure that "a claimant shall have the same rights in an uninsured motorist situation as he would have against a responsible third party." Signal Ins. Co. v. Walden, 10 Wash.App. at 353-54, 217 P.2d 611. The adhesion contract there afforded the insured no opportunity to bargain for modifications of the uninsured motorist coverage. Such coverage could only be accepted or rejected as a package. Absent a rejection of such coverage, any attempt to provide less protection than statutorily required was declared to be against public policy. Here, the 1-year limitation of action provision does not undermine the purpose of any statute designed to provide a claimant with a right of coverage. Further, we have found no statute which prohibits the contractual 1-year limitation provision. To the contrary, in providing that limitation of a right of action in an insurance policy may not be less than 1 year from the date of loss, RCW 48.18.200 impliedly authorizes (but does not require) such a period.

The Ashburns assert that limitations shorter than the 6-year statutory time period are unenforceable because they violate the equal protection clause of the Fourteenth Amendment and the privileges and immunities clause, Article I § 12 of the State Constitution. ² Statutory classifications that limit tort rights of action against the government violate equal protection if they fail to meet the appropriate constitutional test. Hunter v. North Mason High School and School Dist. 403, supra; Jenkins v. State, 85 Wash.2d 883, 540 P.2d 1363 (1975). Here, the contract limitation does not violate equal protection or deny to the Ashburns the privileges and immunities guaranteed under Article I, § 12, Wash. Const.,...