F & D Co. v. Aetna Ins. Co.

• Decision Date: 03 March 1982
• Docket Number: No. 105A81,105A81
• Citation: 287 S.E.2d 867,305 N.C. 256
• Parties: F & D COMPANY v. AETNA INSURANCE COMPANY.
• Court: North Carolina Supreme Court

Page 867

287 S.E.2d 867

305 N.C. 256

F & D COMPANY v. AETNA INSURANCE COMPANY.

No. 105A81.

Supreme Court of North Carolina.

March 3, 1982.

Sperry, Scott & Cobb by Herbert P. Scott and John P. Swart, Wilmington, for plaintiff-appellant.

Marshall, Williams, Gorham & Brawley by William Robert Cherry, Jr., Wilmington, for defendant-appellee.

MEYER, Justice.

The marine insurance policy issued to the plaintiff by the defendant insures against physical loss or damage and contains the following provisions under the section entitled "General Conditions":

8. Notice of Accident, Claim or Suit.

(a) In the event of any occurrence which may result in loss, damage or expense for which the Company is or may become liable, the Insured shall give immediate written notice thereof to the Company.

....

10. Payment of Loss. In case of loss, such loss shall be paid within thirty days after written proof of loss and proof of interest in the Yacht shall have been given to the Company; all indebtedness of the Insured to the Company being first deducted.

11. Limit of Time for Suit. No suit or action against the Company shall be maintainable in any court unless, as a condition precedent thereto, the Insured shall have complied with all of the warranties, terms and conditions contained in this policy and unless:

(a) In respect of any claim for physical loss or damage to the property insured under this policy or any charge or expense incurred under Sections "A", "E" or "F" of this policy, such suit or action is commenced within the twelve months next following the date of the physical loss or damage out of which such claim arose.

....

Provided that where any of the above limitations of time is prohibited or invalid by or under any applicable law, then and in that event no suit or action shall be commenced or maintainable unless commenced within the shortest limitation of time permitted under such law.

(Emphasis added.)

The vessel in question sank on 9 October 1976. The plaintiff's action was not filed until 2 March 1978, almost one year and five months after the date of the loss. The defendant's answer set forth nine defenses, including the plaintiff's failure to institute suit on the policy within twelve months following the date of the physical loss or damage out of which its claim arose as required by Paragraph 11 of the General Conditions of the Policy. The plaintiff contends that the provisions of Paragraph 11(a) of the policy of insurance are void under G.S. § 58-31 which provides as follows:

No company or order, domestic or foreign, authorized to do business in this State under this Chapter, may make any condition or stipulation in its insurance contracts concerning the court or jurisdiction wherein any suit or action thereon may be brought, nor may it limit the time within which such suit or action may be commenced to less than one year after the cause of action accrues or to less than six months from any time at which a plaintiff takes a nonsuit to an action begun within the legal time. All conditions and stipulations forbidden by this section are void.

(Emphasis added.)

The Court of Appeals held that Paragraph 11(a), requiring suit to be brought within one year of the date of the loss, does not conflict with G.S. § 58-31, and therefore, because plaintiff did not commence its action within twelve months following the date the vessel sank, the action is barred by the provisions of Paragraph 11 of the policy's General Conditions. By reason of the dissent below, the same assignment of error is before this Court as was before the Court of Appeals, i.e., whether the trial court erred in finding as a fact and concluding as a matter of law that the action was barred by limitations set forth in the policy of insurance and, further, by entering judgment based upon such finding and conclusion.

The plaintiff contends that its cause of action accrued only after the damage estimates became known to the defendant, and defendant, at the end of thirty days thereafter, failed or refused to pay the amount to which plaintiff claimed to be entitled.

Paragraph 8(a) of the General Conditions of the policy provides: "In the event of any occurrence which may result in loss, damage or expense for which the Company is or may become liable, the Insured shall give immediate written notice thereof to the Company." Paragraph 10 provides: "In case of loss, such loss shall be paid within thirty days after written proof of loss and proof of interest in the Yacht shall have been given to the Company; all indebtedness of the Insured to the Company being first deducted." Reading these two policy provisions together, the plaintiff says it had twelve months from the thirtieth day following notice of the loss within which to bring its action.

Apparently, the plaintiff argues that its claim arose thirty days after the marine survey of 8 February 1977 was performed at defendant's request, ¹ to wit, on 10 March 1977. The plaintiff contends that it was not at liberty to file any action against the defendant, and therefore no cause of action "accrued" until the conditions of Paragraph 8(a) and Paragraph 10 of the General Conditions of the policy were met. Contrary to the holding of the majority of the panel of the Court of Appeals, the plaintiff argues that, read in conjunction, the two provisions require that written proof of loss and ownership be filed and that the Company be given thirty days within which to make payment or deny coverage before any cause of action can be maintained against the company. Therefore, the plaintiff's cause of action could not have "accrued" until 10 March 1977, thirty days after the marine survey of 8 February 1977.

In summary the plaintiff contends: (1) using 8 February 1977, the date of the marine survey requested by Aetna, as the date notice of the loss was given to the insurer and allowing thirty days within which the insurer was permitted to pay the loss before suit could be brought, the plaintiff's cause of action accrued on 10 March 1977; (2) plaintiff's suit, filed on 2 March 1978, was instituted within the time permitted by G.S. § 58-31, to wit, within one year of the date the cause of action accrued; (3) the plaintiff's action having been instituted within the time permitted by the statute, the provisions of Paragraph 11(a) are void because they provide a shorter time within which the action must be brought than is permitted by G.S. § 58-31, therefore, (4) the Court of Appeals erred in affirming the trial court's dismissal of plaintiff's action as being time barred.

Our review of the policy of insurance reveals no internal inconsistency among the various requirements of Paragraphs 8, 10 and 11 in the policy's General Conditions. They provide that in order to maintain suit against the company, the insured must (1) give immediate written notice to the company of any occurrence which may result in loss, damage or expense, (2) provide written proof of loss and proof of interest in the insured property to the company, and (3) commence the action within twelve months of the date of the physical loss or damage out of which the claim arose.

Taken alone, subparagraph (a) of Paragraph 11 of the policy clearly requires the insured to commence its action within one year after the physical loss occurs. Just as clearly G.S. § 58-31 provides that if that policy provision provides a lesser period within which suit must be brought than twelve months after the insured's "cause of action accrues" that policy provision is void.

The question is whether there is inconsistency between the requirements of Paragraph 11(a) of the policy and the provisions of G.S. § 58-31. Does the policy require the insured to commence his action within less than one year after its cause of action accrues? We hold that it does, and therefore the policy provision setting the lesser period is void.

Prior to the Revisal of 1905, the wording of the predecessor of G.S. § 58-31 was as follows:

No person licensed to do insurance business under this chapter shall limit the term within which any suit shall be brought against such person to a period less than one year from the time when the loss insured against shall accrue.

1883 N.C.Code § 3076 (emphasis added).

Beginning with the Revisal of 1905, the emphasized language was changed, and reads now as it has since 1905: "after the cause of action accrues." We find no marine insurance case directly on point, so we look to other insurance cases based upon statutes having the same language as that of G.S. § 58-31. Our examination of those cases reveals inconsistencies which can best be explained by occasional reliance on authority of cases decided prior to the change in the statute. The case most often cited for the proposition that the provision limiting the time within which suit may be brought to one year from the date of loss does not conflict with the statute is Muse v. Assurance Co., 108 N.C. 240, 13 S.E. 94 (1891). See Avis v. Insurance Co., 283 N.C. 142, 195 S.E.2d 545 (1973) (all risks policy); Beard v. Sovereign Lodge, 184 N.C. 154, 113 S.E. 661 (1922) (life insurance). ² We point out that in Muse, the statute at issue contained the old language, and therefore there was no conflict between that statute and the policy provision. The apparent conflict was created by the language of the statute contained in the Revisal of 1905.

The Court was faced with this apparent conflict in the case of Heilig v. Insurance Company, 152 N.C. 358, 67 S.E. 927 (1910). The accident insurance policy in Heilig contained a stipulation requiring that suit be brought within one year of the date of the accident. The Court held that the stipulation did not contravene the provisions of Section 4809 of the Revisal of 1905 (predecessor of G.S. § 58-31) requiring that the action be commenced within one year after the cause of action accrues "for the fair and equitable construction of the stipulation is to give the...