Blutreich v. Liberty Mut. Ins. Co.

• Court: Arizona Court of Appeals
• Writing for the Court: BROOKS
• Citation: Blutreich v. Liberty Mut. Ins. Co., 170 Ariz. 541, 826 P.2d 1167 (Ariz. App. 1991)
• Decision Date: 25 July 1991
• Docket Number: CA-CV,No. 1,1
• Parties: Harvey M. BLUTREICH and Anna Marie Blutreich, husband and wife, Plaintiffs-Appellants, v. LIBERTY MUTUAL INSURANCE COMPANY, a corporation, Defendant-Appellee. 89-590.

Page 1167

826 P.2d 1167

170 Ariz. 541

Harvey M. BLUTREICH and Anna Marie Blutreich, husband and wife, Plaintiffs-Appellants, v. LIBERTY MUTUAL INSURANCE COMPANY, a corporation, Defendant-Appellee.

No. 1 CA-CV 89-590.

Court of Appeals of Arizona Division 1, Department A.

July 25, 1991.

Reconsideration Denied Oct. 4, 1991.

Review Denied April 7, 1992. ^*

[170 Ariz. 542] Harry L. Howe, P.C. by Harry L. Howe, Scottsdale, for plaintiffs-appellants.

Cronin & Stanewich by Robert B. Stanewich, Phoenix, for defendant-appellee.

OPINION

BROOKS, Presiding Judge.

Harvey and Anna Marie Blutreich sought a declaratory judgment against Liberty Mutual Automobile Insurance Company concerning the extent of the insurer's obligations under the underinsured motorist provision in their insurance policy. The trial court ruled that the statute of limitations barred the Blutreichs' cause of action and therefore entered judgment in favor of Liberty Mutual.

Only one issue is presented on appeal: When does the statute of limitations begin to run on a cause of action for benefits under an underinsured motorist provision of an automobile insurance policy? The trial court agreed with Liberty Mutual's argument that the limitations period began on the date of the accident. The Blutreichs urge that this was error and maintain that their cause of action accrued only when Liberty Mutual refused to pay benefits. ¹ We agree and therefore reverse.

FACTS

In 1982, Mr. Blutreich purchased an insurance contract from Liberty Mutual in Ohio. The policy covered Mr. Blutreich and members of his family and included underinsured motorist coverage with a limit of $100,000. Shortly thereafter, the Blutreichs moved to Arizona, where, on September 20, 1982, Mrs. Blutreich was involved in an automobile accident with an underinsured motorist. She recovered $15,000 from the other driver's liability carrier and another $15,000 in benefits under an underinsured motorist policy that covered the car that she had been driving.

Not until several years later did Mrs. Blutreich learn that she could make a claim as a covered person under the Liberty Mutual policy. On February 6, 1988, the Blutreichs served Liberty Mutual with a written demand for payment or arbitration.

Liberty Mutual acknowledged that Mrs. Blutreich was a covered person under the policy and also apparently acknowledged that her damages exceeded the $100,000 policy limit. It contended, however, that it was entitled to offset the $30,000 in benefits that Mrs. Blutreich had recovered from other insurers. Accordingly, Liberty Mutual paid Mrs. Blutreich $70,000.

The Blutreichs agreed that Liberty Mutual was entitled to an offset for the $15,000 in underinsured motorist benefits, but not for the $15,000 in liability benefits. They executed a partial release, but made a further demand for payment on or about June 27, 1988, setting a deadline of July 1, 1988. Liberty Mutual refused to pay, and the Blutreichs commenced this action on November 14, 1988. They asserted that Arizona law governed the offset question and moved for summary judgment on that basis. Liberty Mutual responded and cross-moved for summary judgment, arguing that Ohio law should apply and that the statute of limitations barred the Blutreichs' claim for benefits. The trial court granted Liberty Mutual's motion without reaching the offset issue.

DISCUSSION

Arizona follows the majority of states in holding that the limitations period that applies to an action for benefits under an uninsured or underinsured motorist provision is the six-year period for actions founded upon written contracts. See Transnational Ins. Co. v. Simmons, 19 Ariz.App. 354, 507 P.2d 693 (1973); State Farm Mut. Auto Ins. Co. v. Tarantino, 114 Ariz. 420, 561 P.2d 744 (1977); See also Annotation, Automobile Insurance: Time Limitations as to Claims Based on Uninsured Motorist Clause, 28 A.L.R.3d 580 (1969 and Supp.1990). However, no Arizona decision has addressed the question that is now before us, and neither party has drawn our attention to the conflicting authorities from other jurisdictions.

Most of these cases resolve the question rather summarily. Unlike the decisions that use the date of the accident as the starting point, however, those that use an event of breach are well-grounded in general principles of contract law. ²

In 1981, a leading treatise discussing the statute of limitations for uninsured motorist claims included the following observation:

While it now seems clear that contract statute of limitations will be applied by most courts, that still leaves the question of when the statute begins to run. It seems equally clear to this writer that the occurrence of the accident generally will be used by the courts, rather than some event related to the insurance contract such as a demand for payment, the rejection of a claim, the institution of suit on the coverage or request for arbitration, etc.

A. Widiss, A Guide to Uninsured Motorist Coverage § 2.25 (Supp.1981) (footnote omitted). Widiss supported this observation with citations to cases from Florida and North Carolina. See State Farm Mut. Auto. Ins. Co. v. Kilbreath, 419 So.2d 632 (Fla.1982) (cause of action for uninsured/underinsured motorist claim arises on the date of the accident since the right of action stems from the plaintiff's right of action against the tortfeasor); Mendlein v. United States Fidelity & Guar. Co., 277 So.2d 538 (Fla.Dist.Ct.App.1973) (statute begins to run on date of accident, and demand for arbitration must be made within statutory period); Wheeless v. St. Paul Fire & Marine Ins. Co., 11 N.C.App. 348, 181 S.E.2d 144 (1971) (suit may be instituted when insurer becomes obligated to pay--i.e., when insured sustains damages under circumstances entitling him to recover from the owner or operator of an uninsured vehicle ³).

By 1990, Widiss had reevaluated his position:

There is no clear basis for stating when a statute of limitations begins to run in regard to uninsured motorist insurance claims. In most insurance policies, there are no relevant provisions and there has been almost no discussion of this matter in either the appellate cases or the secondary literature. It seems likely that in many instances the date of the accident will be used by the courts. However, it also seems probable that in some contexts courts will use an event related to the insurance relationship, such as a demand for payment, the rejection of a claim, or the rejection of a request for arbitration. Given the almost uniform view among the applicable judicial precedents that uninsured motorist insurance claims are subject to the contract statute of limitations, it would be reasonable for courts to focus on the occurrence which constitutes a "breach of the contract" by the insurer (rather than the occurrence of the event giving rise to the contractual claim for insurance benefits).

A. Widiss, Uninsured and Underinsured Motorist Insurance § 7.12 (2d ed. 1990) (footnotes omitted). By that time, the overwhelming majority of courts that had addressed the question had concluded that the limitations period begins to run upon some event constituting a breach by the insurer. See, e.g., Allstate Ins. Co. v. Spinelli, 443 A.2d 1286 (Del.1982) (no justiciable controversy until insurer denied insured's claim for coverage benefits and so informed insured); Norfleet v. Safeway Ins. Co., 144 Ill.App.3d 838, 98 Ill.Dec. 598, 494 N.E.2d 720 (1986) (cause of action for uninsured benefits accrued when insurer failed to comply with arbitration demand); Yingling v. Phillips, 65 Md.App. 451, 501 A.2d 87 (1985) (breach of contract...