General Elec. Credit Corp. v. Home Indem. Co., 66377

• Decision Date: 16 September 1983
• Docket Number: No. 66377,66377
• Citation: 168 Ga.App. 344,309 S.E.2d 152
• Parties: GENERAL ELECTRIC CREDIT CORPORATION v. HOME INDEMNITY COMPANY.
• Court: Georgia Court of Appeals

Page 152

309 S.E.2d 152

168 Ga.App. 344

GENERAL ELECTRIC CREDIT CORPORATION v. HOME INDEMNITY COMPANY.

No. 66377.

Court of Appeals of Georgia.

Decided Sept. 16, 1983.

Rehearing Denied Oct. 7, 1983.

H. Joseph Chandler, Jr., Savannah, for appellant.

Charles W. Barrow, Savannah, for appellee.

QUILLIAN, Presiding Judge.

Plaintiff, the named lienholder in a loss payable endorsement forming a part of an insurance contract covering certain property owned by the named insured, brought this action on the insurance contract and in tort against the defendant insurance company, for losses to property covered by the insurance contract. By an amendment to its answer, defendant raised the defense that plaintiff's complaint is barred by a term in the insurance contract requiring that suit be brought within 12 months of the loss.

Defendant filed a motion for summary judgment based on the bar of the 12-month contractual limitation. Plaintiff responded to the motion by briefs, affidavit and exhibits in order to show that the insurance contract was made, issued and delivered in a sister state (either Alabama or Florida) between parties located in a sister state to cover property located in a sister state. Plaintiff contended that since the contract was made in a sister state and there were no significant contacts with the State of Georgia, the law of the sister state controls to determine the validity of the 12-month term of limitation in the insurance contract.

In support of this argument, plaintiff referenced the law of Alabama and Florida, which hold that such a term in the insurance contract requiring that the suit be brought within 12 months of the loss is invalid in those states. Both Alabama and Florida have statutes that invalidate any term in a contract that attempts to shorten the applicable statute of limitation for bringing suit. Accordingly, plaintiff contended that the 12-month term in the insurance contract was invalid where the contract was made, and suit was timely brought within the applicable state statute of limitation.

The trial court granted the defendant's motion for summary judgment, finding that Georgia public policy required application of Georgia law and since the complaint was not filed within 12 months of the loss, suit was barred. Plaintiff appealed.

The following facts which appear from the record were consented to by the defendant in brief to this court. See Rule 15(b)(1). On September 30, 1978, defendant, The Home Indemnity Company, through its agent, J.R. Prewitt and Associates, Inc., located in Birmingham, Alabama, issued an insurance contract to Bryson Environmental Services, Inc., located in Dolomite, Alabama, which covered two trucks and the "Woma" model pumps installed on each truck, which were located in Alabama. Plaintiff, General Electric Credit Corporation, located in Jacksonville, Florida, held a security interest in the trucks and pumps. A loss payable endorsement to the insurance contract was executed naming plaintiff as loss payee for the trucks and pumps.

Due to certain defaults under the terms of documents establishing plaintiff's security interest, plaintiff initiated efforts to repossess the secured property. On August 10, 1979, plaintiff took possession of the trucks which had been outfitted with the "Woma" pumps. At that time, plaintiff discovered that the "Woma" pump installed on each truck had been stolen. Thereafter, plaintiff made timely demand upon defendant for loss of said pumps under the insurance contract. Defendant denied liability and claimed that the insurance contract was cancelled effective July 10, 1979, at the request of the insured. The plaintiff, as loss payee, alleged it received no notice of any cancellation of the insurance contract which would have expired under its own terms on September 30, 1979.

The loss payable clause in the policy, naming plaintiff, provided that: "The Company reserves the right to cancel said policy at any time as provided by its terms, but in such case the Company shall notify the lienholder when not less than ten days thereafter such cancellation shall be effective as to the interest of said lienholder therein and the Company shall have the right, on like notice, to cancel this agreement."

Since plaintiff contended it was not notified of cancellation as required by the insurance contract, plaintiff alleged in its complaint that such cancellation was not effective and the contract remained in effect until its expiration date. As an alternative cause of action in tort, plaintiff alleged in count II of its complaint that the defendant's negligent failure to notify plaintiff of the alleged cancellation of the insurance contract caused plaintiff to suffer loss. Held:

In the case sub judice the insurance contract contains a provision which reads: "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." This contract was entered into in Alabama between the insurer The Home Insurance Company, apparently a New York Corporation, through its authorized representative J.R. Prewitt & Associates, Inc. located in Birmingham, Alabama, naming as insured Bryson Environmental Services, Inc. of Dolomite, Alabama. The policy contained a loss payable clause naming the plaintiff whose address was Jacksonville, Florida.

Alabama has a statute which reads: "Except as may be otherwise provided by the Uniform Commercial Code, any agreement or stipulation, verbal or written, whereby the time for the commencement of any action is limited to a time less than that prescribed by law for the commencement of such action is void." Florida has a similar statute which provides: "Any provision in a contract fixing the period of time within which an action arising out of the contract may be begun at a time less than that provided by the applicable statute of limitations is void." Alabama's statute of limitations on insurance contracts is six years; Florida's statute of limitations is five years. Therefore, the provision of the contract is void in both states.

However, Georgia has no statute preventing parties from contracting to limit the time within which an action on an insurance policy may be brought. In fact, the Georgia cases have held: "A shorter period than the statuable period for the institution of suits, by agreement of the parties in their contract, violates no principle of public policy, provided the period fixed be not so unreasonable as to raise a presumption of imposition or undue advantage in some way." Brown and wife v. The Savannah Mutual Ins. Co., 24 Ga. 97(2). Accord, Underwriters' Agency v. Sutherlin, 55 Ga. 267; Melson v. Phenix Ins. Co., 97 Ga. 722, 25 S.E. 189; Darnell v. Fireman's Fund Ins. Co., 115 Ga.App. 367, 154 S.E.2d 741. As expressed in General Ins. Co. of America v. Lee Chocolate Co., 97 Ga.App. 588, 103 S.E.2d 632: "The policy contained a provision providing that no suit or action on the policy for the recovery of any claim could be maintained unless commenced within twelve months next after inception of the loss. The loss occurred on July 23, 1955. The suit on the policy was filed on August 9, 1956, more than one year after the loss. Such a provision in a policy is valid and binding on the parties thereto [cits.] and is a condition precedent to a recovery on the policy. Graham v. Niagara Fire Ins. Co., 106 Ga. 840, (1) , 32 S.E. 579."

We are therefore presented with a conflict of law question: Where a provision in an insurance contract is void in the state where made and where there are substantial contacts, but the provision is not void in the state where enforcement is sought, which law is applicable?

The plaintiff urges that the provision as a part of the contract should be governed by the laws of the state where made--the lex loci--or where there was to be substantial performance; that this question involves the validity of the provision and is substantive not procedural in nature. The defendant argues that the remedy upon a contract is regulated by the lex fori; that where a statutory limitation bars the remedy, the lex fori governs and suit must be brought within the time prescribed by the law of the state where relief is sought. The defendant argues that recognition of a twelve month limitation by the parties is a matter of Georgia public policy which favors the freedom of parties to contract as they please. Therefore, it is urged that the Alabama and Florida statutes declaring invalid provisions limiting the time within which actions may be brought are contrary to Georgia public policy and should not be enforced in this state.

1. Since such issue was the focal point of the trial court's decision and would be the determinative factor in this case, we first consider the matter of Georgia's public policy. The public policy of this state as expressed by the legislature is that actions on contracts shall be brought within six years. OCGA § 9-3-24 (Code Ann. § 3-705). Thus a party has six years within which to bring suit on an insurance policy. Burton v. Metropolitan Life Ins. Co., 48 Ga.App. 828, 173 S.E. 922; Smith v. State Farm, etc., Ins. Co., 152 Ga.App. 825, 264 S.E.2d 296. Reversed on other grounds, State Farm Mutual Automobile Ins. Co. v. Smith, 245 Ga. 654, 266 S.E.2d 505.

We are not persuaded by the insurance company's advocacy of a "paramount policy" favoring freedom of contract. See e.g. Mutual Life Ins. Co. v. Durden, 9 Ga.App. 797, 800, 72 S.E. 295; Brown v. Five Points Parking Center, 121 Ga.App. 819, 821, 175 S.E.2d 901. The right to contract as one wishes is not absolute but has been circumscribed by other equally vital rights and considerations of policy. Certainly with regard to "adhesion" contracts, other factors often take precedence. 16 Am.Jur.2d 129, Contracts, § 79. See ...