Certified Question, In re

• Decision Date: 26 April 1982
• Docket Number: No. 13,Docket No. 65503,13
• Citation: 413 Mich. 22,319 N.W.2d 320
• Parties: . FORD MOTOR COMPANY, a Delaware corporation, Plaintiff, v. LUMBERMENS MUTUAL CASUALTY COMPANY, an Illinois corporation, and Allendale Mutual Insurance Company, a Rhode Island corporation, Defendants. Calendar Supreme Court of Michigan
• Court: Michigan Supreme Court

Page 320

319 N.W.2d 320

413 Mich. 22

In re Certified Question From the United States District Court For the Eastern District of Michigan FORD MOTOR COMPANY, a Delaware corporation, Plaintiff, v. LUMBERMENS MUTUAL CASUALTY COMPANY, an Illinois corporation and Allendale Mutual Insurance Company, a Rhode Island corporation, Defendants.

Docket No. 65503.

Calendar No. 13.

Supreme Court of Michigan.

Argued Nov. 17, 1980.

Decided April 26, 1982.

Dykema, Gossett, Spencer, Goodnow & Trigg by Richard J. McClear and Joseph F. Lucas, Detroit, for plaintiff, Ford Motor Co.

Denenberg, Tuffley, Thorpe, Bocan & Patrick by John L. Hopkins, Jr. and Ilene Gordon, Southfield, for defendant, Lumbermens Mut. Cas. Co.

Robins, Zelle, Larson & Kaplan by Lawrence Zelle, Mark J. Feinberg and Lynn M. Roberson, Minneapolis, Minn., for defendant Allendale Mut. Ins. Co.; John Hopkins, Denenberg, Tuffley, Thorpe, Bocan & Patrick, Southfield, of counsel.

MOODY, Justice.

Pursuant to GCR 1963, 797.2, ¹ this Court ordered consideration of the following question certified by the United States District Court, Eastern District of Michigan, Southern Division. 409 Mich. 924 (1980).

"Should the statutory standard form fire insurance policy [MCL 500.2832; MSA 24.12832] which includes the following language at line 157:

" '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 months next after inception of the loss'

be construed so that the running of the 12 month period is tolled from the time the insured gives notice of the loss until the insurer formally denies liability?"

We answer the certified question in the affirmative.

The United States District Court set forth the relevant facts in the certificate prepared in conformity with GCR 1963, 797.2(b):

"Ford Motor Company, plaintiff herein, has instituted this action against Allendale Mutual Insurance Company ('Allendale') and Lumbermens Mutual Casualty Company ('Lumbermens') seeking recovery of Three Million Six Hundred Sixty-Seven Thousand Dollars ($3,667,000) for loss and damage suffered by Ford as a result of a March 9, 1977 fire and explosion, involving the 'A' blast furnace located at Ford's Rouge plant in Dearborn, Michigan. At the time of the loss, Ford had standard fire and extended coverage insurance policies with both Allendale and Lumbermens, insuring Ford against physical damage and business interruption loss resulting from specifically named perils, including fire, explosion and damage from the heat of molten metal. Each of the policies insured fifty percent (50%), pro rata, of losses incurred by Ford subject to a Two Million Dollar ($2,000,000) deductible.

"The liability related facts involved in the 'A' blast furnace occurrence of March 9, 1977 are in dispute and it is unnecessary for purposes of this certificate to recite them in any detail. It is sufficient to state that Ford has taken the position that the physical damage and business interruption arising from the March 9, 1977 incident were caused by fire and/or explosion and were, therefore, insured under the Allendale and Lumbermens policies. It is the position of the insurers that the only insured peril causing damage was heat from molten metal, and that damage resulting from that peril did not exceed the Two Million Dollar ($2,000,000) deductible provision in the policies. On that basis, the defendants have denied any liability under the policies to Ford arising out of the loss of March 9, 1977.

"Ford filed the instant suit on August 17, 1978. Thereafter defendants filed separate answers alleging, amongst other defenses, that Ford's suit was barred by the one-year period of limitations contained in the policies. On January 21, 1980, the defendants filed motions for summary judgment claiming that the defendants were entitled to judgment as a matter of law because Ford's suit had not been filed before March 9, 1978. Ford Motor Company claims that the running of the 12 month period of limitations should be tolled from the time it gave notice of the loss to the insurers until liability was formally denied and that suit was timely filed."

The issue presented is whether the statutory standard form policy, like a similar contractual insurance policy, should be construed to permit an intervening tolling of the limitation period.

In The Tom Thomas Organization, Inc. v. Reliance Ins. Co., 396 Mich. 588, 242 N.W.2d 396 (1976), this Court construed an inland marine insurance policy. That policy contained a limitation provision which, although not mandated by statute, is similar to the instant statutory provision. ² We held that the running of the limitation period was tolled from the date the insured gave notice of loss until the insurer formally denied liability.

The Tom Thomas Court predicated its holding on reconciliation of the proof-of-loss and payment-of-claims provisions with the limitation provision of the policy. The effect of the proof-of-loss and payment-of-claims provisions was to substantially shorten the 12-month limitation period for bringing suit. This reconciliation approach was adopted from Peloso v. Hartford Fire Ins. Co., 56 N.J. 514, 267 A.2d 498 (1970).

An examination of Peloso significantly reveals that the New Jersey Supreme Court construed statutory provisions identical to the Michigan standard policy prescribed by statute. ³ We stated in Tom Thomas, 396 Mich. at 593-594, 242 N.W.2d 396:

"The New Jersey Supreme Court, in Peloso * * *, reached what we regard to be a sound result reconciling policy provisions concerning proof of loss and payment of claims with the provision imposing a time limitation for commencement of an action. Suit on a fire insurance policy was instituted 18 months after the date of the fire and 9 months after liability was denied by the insurer. The Court noted that while the policy purported to give the insured 12 months to begin an action, operation of the proof of loss and payment of claim terms significantly shortened that period of time. The Court concluded that the period of limitation was tolled from the time an insured gives notice of loss until the insurer formally denies liability:

" 'In this manner, the literal language of the limitation provision is given effect; the insured is not penalized for the time consumed by the company while it pursues its contractual and statutory rights to have a proof of loss, call the insured in for examination, and consider what amount to pay; and the central idea of the limitation provision is preserved since an insured will have only 12 months to institute suit.' [Peloso, 56 N.J. at 521, 267 A.2d 498.]"

This Court, in Tom Thomas, adopted the analysis of the Peloso court, which reconciled New Jersey's statutory policy provisions, and applied that same analysis to similar contractual policy provisions. Logic requires that we apply the same analysis when faced with Michigan's statutory policy provisions which are identical to the provisions reconciled in Peloso. By permitting the limitation period to be tolled, we reconcile the apparently identical incongruity between the statutory proof-of-loss and payment provisions, and the limitation clause. ⁴

In response, the defendants argue that we should interpret these statutory provisions to preclude any tolling of the limitation period. It becomes evident, however, if we agreed with defendants, that insureds would be forced to read different meanings from substantially similar or identical language in a contractual standard form policy as compared with a statutory standard form policy. Such a result would appear illogical and contradictory. It should be avoided unless the statute commands a different conclusion or analysis from our decision in Tom Thomas.

Thus, the certified question presents an issue of statutory construction and our decision should be guided by legislative intent. ⁵

The defendants contend that the statutory language and the legislative history of the current statute mandate an analysis that would proscribe tolling. They argue that the limitation period may not be tolled because the interpretation of the limitation provision set forth in Dahrooge v. Rochester German Ins. Co., 177 Mich. 442, 143 N.W. 608 (1913), controls the instant question.

In Dahrooge this Court held that the statutory 12-month limitation period began to run on the date of the casualty. ⁶ The Dahrooge Court rejected the arguments that: (1) the cause of action accrued 60 days after compliance with the statutory claims procedures; (2) the conduct of the insurer waived the limitation period or that the insurer was estopped from relying upon the limitation provision; and (3) the saving provisions of the general statute of limitations, 1897 C.L. 9738, saved the cause of action from forfeiture because the latest suit was begun within one year after an earlier suit had failed for want of proper service.

The Dahrooge Court focused upon the "plain, clear, and simple language" of the limitation provision. The narrow reasoning employed by the Dahrooge Court did not attempt to reconcile the obvious incongruity between the proof of loss and payment provisions, and the limitation provision of the statute. Accordingly, Dahrooge did not address the Tom Thomas--Peloso tolling analysis.

To bolster its approach, the Dahrooge Court, recognizing that the Michigan statutory policy was copied from that of New York, quoted a New York Court of Appeals decision, Hamilton v. The Royal Ins. Co., 156 N.Y. 327, 50 N.E. 863 (1898). The Hamilton court concluded that the limitation provision was established by statute. However, the questions of an intervening tolling of the limitation period or the time of commencement of the limitation period were not presented in the Hamilton case. The only question presented was whether a saving provision...