Douglass v. American Family Mut. Ins. Co.
| Decision Date | 24 November 1993 |
| Docket Number | No. 92-1601,92-1601 |
| Citation | 508 N.W.2d 665 |
| Parties | Barbara DOUGLASS, Appellant, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellee. |
| Court | Iowa Supreme Court |
Willis J. Hamilton, Hamilton Law Firm, P.C., Storm Lake, for appellant.
Ronald J. Shea, Smith, Grigg, Shea, Klinker & Queck, Primghar, for appellee.
Considered by McGIVERIN, C.J., and LARSON, NEUMAN, ANDREASEN, and TERNUS, JJ.
Barbara Douglass was an insured person under her father's automobile policy written by the defendant, American Family Mutual Insurance Company. The policy provided benefits for damages caused by uninsured motorists but required suit to be filed within two years. The district court granted summary judgment for the insurer on the ground that the suit was beyond that time. We affirm.
The plaintiff was injured in an accident on August 19, 1984, when her car was struck by an uninsured driver. The plaintiff's efforts to collect from the uninsured driver were unsuccessful, and on May 23, 1991, she filed this suit. The sole issue before the district court and on appeal is whether the suit was timely. Specifically, the question is which limitation applies, the ten-year statute for written contracts, Iowa Code § 614.1(5) (1991), or the time limitation of the policy, which provided:
Suit Against Us. We may not be sued unless all the terms of this policy are complied with. We may not be sued under the liability coverage until the insured's obligation to pay is finally determined at the trial or by written agreement of the insured, the claimant and us. We may not be sued under the Uninsured Motorist coverage on any claim that is barred by the tort statute of limitations.
(Emphasis added.)
Our tort statute of limitations is two years. Iowa Code § 614.1(2). However, a direct suit for uninsured motorist benefits is considered to be an action on a contract, not in tort. Lemrick v. Grinnell Mut. Reins. Co., 263 N.W.2d 714, 716 (Iowa 1978); Alan I. Widiss, Uninsured Motorist Coverage: Observations on Litigating over When a Claimant is "Legally Entitled to Recover," 68 Iowa L.Rev. 397, 418-19 (1983); Annotation, Uninsured Motorist Insurance: Validity and Construction of "Other Insurance" Provisions, 28 A.L.R.3d 551, 582-83 (1969).
The question is whether this insurance policy may validly reduce the limitation period from ten years to two. The plaintiff argues that it cannot, that such a provision conflicts with both the uninsured motorist statute, Iowa Code § 516A.1, and the contract statute of limitations under section 614.1(5).
Under general contract law, it is clear that the parties may agree to a modification of statutory time limitations. As one authority has stated,
it is not against the public interest that [the parties] shall ... agree upon a shorter time limit than that fixed by statute if the time agreed upon is not so short as to be unreasonable in the light of the provisions of the contract and the circumstances of its performance and enforcement. Such time limits in insurance policies have often been held valid. These agreements are not at all inconsistent with the purposes underlying the statute of limitations. Those purposes are to prevent the bringing and enforcement of stale claims, involving extra danger of fraud and mistake, unless the debtor has expressed a voluntary assent with the statutory period. An express provision fixing a shorter limit merely hastens the enforcement; and it is not made invalid by being included from the beginning in the contract to be enforced. If held invalid, it must be on the ground that the terms are unconscionable and that unfair advantage has been taken of a claimant whose bargaining position was inferior.
Arthur L. Corbin, 1A Corbin on Contracts § 218, at 311-12. See also Annotation, Validity of Contractual Time Period, Shorter Than Statute of Limitations, for Bringing Action, 6 A.L.R.3d 1197 (1966).
The courts have not attempted to lay down well-defined rules or standards for determining the reasonableness of contractual suit limitations in all cases, and the question of what constitutes a reasonable time usually depends upon the circumstances of the particular case. It appears to be generally recognized that the time allowed should be sufficient to allow the plaintiff to investigate and file his case within the limitation period, and that periods which are so short as to amount to a practical abrogation of the right of action, or which would require plaintiff to bring his action before his loss or damage can be ascertained, are unreasonable. In particular cases it has been held that the applicable contractual limitation period was not rendered unreasonable because it applied to only one of the parties, or because the defendant prepared the contract and submitted it on a "take it or leave it" basis, or because filing suit in another state was necessary, or because other provisions of the contract barred suit during a portion of the limitation period where the remaining time was ample.
Our uninsured motorist statute, § 516A.1, includes no language concerning limitations for bringing suit, but the plaintiff apparently believes that a prohibition against a reduced time limit must be inferred from the statute or the public policy underlying it.
The concept of uninsured motorist coverage originated in a standard endorsement promulgated by the National Bureau of Casualty Underwriters, in 1956, in response to the emerging trend of state legislatures to provide for compulsory liability insurance. Annotation, Insured's Right to Bring Direct Action Against Insurer for Uninsured Motorist Benefits, 73 A.L.R.3d 632, 636-37 (1976).
The purpose of the uninsured motorist provision is to provide to the victim of an accident the same protection that the victim would have had if the negligent tortfeasor had had minimum insurance coverage. See Iowa Code § 516A.1; Lindahl v. Howe, 345 N.W.2d 548, 550 (Iowa 1984).
Of course, if the plaintiff had sued a tortfeasor who did have insurance, she would have to do so within two years. Iowa Code § 614.1(2). An uninsured motorist provision that allows two years to sue, therefore, grants as many rights as the plaintiff would have in the case of an insured tortfeasor.
In the present case, the plaintiff complains that she was not...
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