Greater Providence Trust Co. v. Nationwide Mut. Fire Ins. Co.

• Decision Date: 14 April 1976
• Docket Number: No. 74-171-A,74-171-A
• Citation: 116 R.I. 268,355 A.2d 718
• Parties: GREATER PROVIDENCE TRUST COMPANY v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY. ppeal.
• Court: Rhode Island Supreme Court

Page 718

355 A.2d 718

116 R.I. 268

GREATER PROVIDENCE TRUST COMPANY v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY.

No. 74-171-Appeal.

Supreme Court of Rhode Island.

April 14, 1976.

[116 R.I. 276] Adler, Pollock & Sheehan, Inc., Peter Lawson Kennedy, Stanley J. Kanter, George L. Chimento, Providence, for plaintiff.

John G. Carroll, Providence, for defendant.

OPINION

KELLEHER, Justice.

This is a suit concerning a fire insurance policy. It is before us on the plaintiff's appeal from a judgment entered in the Superior Court for the defendant, Nationwide Mutual Fire Insurance Company (Nationwide), after a jury-waived trial.

Apex Realty, Inc. (Apex) d/b/a Apex Auto Body, Inc. owned a four-unit apartment house located at 433 Washington Street in the town of Coventry. The apartment house and a next-door garage, which served as the headquarters of Apex's auto body business, were subject to a first mortgage of $35,000 held by Centreville Savings Bank and a second mortgage of $16,641.91, which had been given by Greater Providence Trust Company (Greater Providence). The first mortgage was issued on June 4, 1969, and thereafter, in September 1970, Nationwide issued its fire policy on the apartment house property designating Centreville as the mortgagee. Greater Providence's mortgage was executed and recorded on October 19, 1970. The repair shop and apartment house were located on separate but contiguous parcels of real estate. The shop's address was 439 Washington Street.

On September 23, 1971, a fire destroyed a portion of the apartment house. Nationwide paid the fire loss by issuing a draft dated November 1, 1971, to Apex for $16,492. Shortly after this payment Apex went into receivership and subsequent developments explain the involvement of Greater Providence. The controversy in this appeal centers around the contention that Nationwide under the policy should have paid the mortgagee, Centreville Savings Bank, instead of Apex.

In May 1972, Greater Providence, having received the approval of the Superior Court, foreclosed its mortgage. After successfully acquiring the property with a $4,000 bid, the mortgagee's deed was recorded in June. On July 26 Centreville transferred its mortgage and note to the Greater Providence Deposit Corporation for a consideration of $33,681.43. The deposit corporation was described by its executive vice president as a holding company that owns all the stock in the trust company. On August 1 Centreville assigned all its interest in its fire claim to the deposit corporation. Later, the corporation assigned its rights under the policy to the trust company.

On August 17, 1972, Greater Providence made a demand upon Nationwide for payment of the $16,492 which it claimed should have been paid to Centreville. Thereafter, discussions ensued between Greater Providence's attorney and Nationwide's district claims manager. On September 22, 1972, the manager met with one of Nationwide's attorneys, who, in discussing the claim, pointed out that the 1-year period following the fire in which all claims must be brought under the policy would expire the next day. When Greater Providence's attorney called the claims manager in early October, the manager pointed to the policy and the 1-year stipulation. The attorney, after being informed that there would be no settlement, commenced this suit.

The trial justice, in finding for the defendant, relied upon the 1-year contractual limitation and further ruled that Nationwide was not estopped from asserting this defense. The policy issued by Nationwide contains what is known in the insurance trade as a 'standard' mortgagee clause. The inclusion of such a clause is mandated by G.L.1956 (1968 Reenactment) §§ 27-5-2 and 27-5-3 and creates two separate contracts, one between the mortgagor and the insurer and the other between the mortgagee and the insurer. Old Colony Co-operative Bank v. Nationwide Mut. Fire Ins. Co., 114 R.I. 289, 292, 332 A.2d 434, 436 (1975); Greater Providence Trust Co. v. Nationwide Mut. Fire Ins. Co., 114 R.I. 926, 332 A.2d 784 (1975).

The fact that the policy contains two separate contracts, however, is of no help to Greater Providence. Since its claim emanates from the policy, we look to its provisions which in clear, precise, and all-encompassing language state that '(n)o 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 policy also stipulates that if the insured fails to render proof of loss, the mortgagee, upon notice, shall render proof of loss within 60 days thereafter and shall be subject to the provisions relating to appraisal, time of payment, and of bringing suit. While Greater Providence claims that the dual contract concept frees it from the 1-year proviso, it cites no case which supports this position.

To the contrary, courts which have considered policies containing the identical language to which we have just referred have ruled that both the owner and the mortgagee are bound by the limitation period set forth in the policy. Blanton v. Northwestern Nat'l Ins. Co., 335 F.2d 965, 969 (9th Cir. 1964); Sterling Savings & Loan Ass'n v. Reserve Ins. Co., 63 Ill.App.2d 220, 222, 211 N.E.2d 412, 415 (1965); Miners Sav. Bank v. Merchants Fire Ins. Co., 131 Pa.Super. 21, 27, 198 A. 495, 498 (1938); see also 20A Appleman, Insurance Law § 11616 at 12 (1963 ed.); 18 Couch, Insurance § 75.43 at 733 (Anderson 2d ed. 1968). We are dealing with a uniform, standard form of policy provision, and we can see no reason why the plain language of the policy should receive a construction which differs from that it has received in other jurisdictions. Greater Providence, as assignee of Centreville, was bound by the policy to commence suit within the 12-month period following the fire.

Notwithstanding the application of the 1-year limitation, Greater Providence argues with great vigor that Nationwide's creation of a 'settlement atmosphere' should estop the insurer from relying on this provision. In support of this theory, Greater Providence points to the fact that at some point in their discussions the claims manager failed to abide by his promise that he would furnish the attorney with a copy of the policy. Moreover, Greater Providence contends that once the insurer discovered that the 1-year period was about to lapse, it should have informed Greater Providence that the claim would not be settled. We do not agree with these contentions.

Mere negotiations between the insurer and a claimant cannot alone justify the application of estoppel. If so, settlement negotiations would be frustrated and impeded. Peloso v. Hartford Fire Ins. Co., 102 N.J.Super. 357, 369, 246 A.2d 52, 59 (1968). Therefore, these negotiations will not amount to estoppel unless they are accompanied by certain statements or conduct '* * * calculated to lull the claimant into a reasonable belief that his claim will be settled without suit.' Flagler v. Wessman,130 Ill.App.2d 491, 494, 263 N.E.2d 630, 632 (1970). See Shea v. Gamco, Inc., 81 R.I. 12, 17, 98 A.2d 864, 867 (1953); Lee v. City & County of Denver, 29...