L & H Transport, Inc. v. Drew Agency, Inc.
| Citation | 403 N.W.2d 223 |
| Decision Date | 03 April 1987 |
| Docket Number | No. C6-85-104,C6-85-104 |
| Court | Supreme Court of Minnesota (US) |
| Parties | L & H TRANSPORT, INC., Respondent, v. The DREW AGENCY, INC., defendant and third party plaintiff, Respondent, v. CHUBB AND SONS, INC., third party defendant, petitioner, Appellant, L & H TRANSPORT, INC., Respondent, v. CHUBB AND SONS, INC., petitioner, Appellant. |
Syllabus by the Court
When an insurance policy contains a suit limitations clause which requires suit to be brought within a certain period, failure to bring suit within that period bars suit unless the limitation clause conflicts with a specific statute or is unreasonably short.
Douglas R. Archibald, Minneapolis, for appellant.
John L. Prueter, Minneapolis, for L & H Transp., Inc.
David A. Pailly, Minneapolis, for The Drew Agency, Inc.
Considered and decided by the court en banc without oral argument.
In L & H Transport, Inc. v. Drew Agency, Inc., 369 N.W.2d 608 (Minn.App.1986), the Court of Appeals held that the failure of an insured to bring suit against its insurer within the period provided for by a suit limitation clause in the policy barred a suit to recover under the policy only if the insurer could show prejudice. By order we affirmed that decision. L & H Transport, Inc. v. Drew Agency, Inc., 384 N.W.2d 435 (Minn.1986). We granted appellant Chubb and Sons' petition for rehearing for the purpose of reviewing that order. We conclude that our order was incorrect and we withdraw it. The decision of the Court of Appeals is reversed in part and affirmed in part.
This case arose out of an accident which occurred on July 22, 1982. On that day a concrete beam fell off an L & H Transport truck and shattered; the beam was worth $7,514.91, and L & H spent $5,893.09 cleaning up the accident. At the time of the accident, L & H was insured under a cargo marine insurance policy issued by Chubb and Sons; the policy had been written by the Drew Agency, an independent insurance agency. The insurance policy contained a 1-year suit limitation clause. Chubb paid L & H $7,514.91 for the loss of the beam but refused to pay the $5,893.09 cleanup cost, claiming that the policy did not cover cargo cleanup expenses.
In October 1982, L & H commenced suit against the Drew Agency alleging that Drew had failed to provide L & H with cargo insurance which included cleanup coverage; L & H asked for judgment against Drew in the amount of $5,893.09 plus interest.
In May 1983, Drew filed a third-party complaint against Chubb. Drew's complaint alleged that it had provided L & H with cargo insurance from Chubb and that L & H had alleged a loss under the policy for which Chubb has denied coverage. Drew's complaint asked for judgment in its favor on the ground that the cargo policy did provide coverage for cleanup expenses.
On July 2, 1984, a settlement conference was held, and it was agreed that the issue of whether Chubb's policy provided cleanup coverage was a legal issue which would be submitted to the court at that time.
On July 12, 1984, L & H commenced a separate action against Chubb. L & H's complaint alleged that contrary to the parties' intentions at the time of contracting, the policy issued by Chubb failed to provide cleanup coverage. L & H asked that the policy be reformed so as to conform to the intention of the parties, and that L & H be awarded judgment against Chubb in the amount of $5,893.09 plus interest.
On September 5, 1984, the trial court found as a matter of law that the Chubb policy did provide cleanup coverage. Because L & H's action against Drew rested on the theory that Drew failed to provide the coverage it promised and because the court's ruling found that Drew did provide the coverage requested, the court dismissed L & H's action against Drew.
In October 1984, L & H filed four motions: in its action against Drew, (1) for a new trial or, in the alternative, for an amended order, and (2) for leave to amend its complaint to add Chubb as a defendant; (3) in its action against Chubb, for summary judgment; and (4) for an order consolidating its action against Drew and its action against Chubb. Chubb moved for summary judgment dismissal of the action brought against it by L & H on the ground that the suit was barred by the 1-year suit limitation clause contained in the policy. In December 1984, the trial court denied L & H's motions, and it granted Chubb's motion on the ground that L & H had failed to commence suit against Chubb within the 1-year limitation period.
On appeal, the Court of Appeals held that the trial court did not err in granting summary judgment for Drew or in denying L & H leave to amend its complaint to add Chubb as a defendant. We agree with the Court of Appeals and affirm its decision with respect to these issues. The Court of Appeals also held that the trial court erred in ruling that L & H's suit against Chubb was barred by the 1-year suit limitation clause in the policy; it is this portion of the Court of Appeals decision which we erroneously affirmed in our previous order.
The L & H-Chubb insurance policy contained a suit limitation clause which provided that "[n]o suit, action or proceeding for the recovery of any claim under this policy shall be sustainable in any court of law or equity unless the same be commenced within twelve (12) months next after discovery by the Insured of the occurrence which gives rise to the claim * * *." In this case, the accident giving rise to L & H's claim occurred and was discovered by L & H on July 22, 1982; however, L & H did not commence suit against Chubb until July 12, 1984.
The Court of Appeals holding that because Chubb was not prejudiced by L & H's failure to bring suit within the limitation period, L & H could still bring suit against Chubb rested on that court's earlier decision in Loram Maintenance of Way, Inc. v. Consolidated Rail Corp., 354 N.W.2d 111 (Minn.App.1984), pet. for review denied (Minn. January 11, 1985). In Loram, the Court of Appeals, addressing the issue of whether a suit limitation clause in the insurer's policy barred a suit by the insured, held that suit was barred only if the insurer could show prejudice. Id. at 114.
Although we declined to review the Loram decision, in Henning Nelson Const. Co. v. Fireman's Fund Am. Life Ins. Co., 383 N.W.2d 645 (Minn.1986), we addressed the same issue--whether a suit limitation clause in the insurer's policy barred a suit by the insured. We held that prejudice to the insurer was not a proper consideration; rather, the rule is that a suit limitation clause will bar an untimely suit if the clause does not conflict with a specific statute and if the limitation period provided for is not unreasonable in length. Henning, 383 N.W.2d at 650-51.
Understandably, the Court of Appeals decision in Henning, Henning Nelson Const. Co. v. Fireman's Fund Am. Life Ins. Co., 361 N.W.2d 446 (Minn.App.1985), relied upon Loram for its holding that the insurer must show prejudice before a suit limitation clause will work to bar a suit. In our decision in Henning, we spoke to the Court of Appeals reliance on Loram. We held it to be incorrect on the ground that in Loram the Court of Appeals "was considering the effect of the injured party's failure to file a notice of loss with the insurance company within the limitation period prescribed by contract." Henning, 383 N.W.2d at 650, n. 6 (emphasis in original).
We find that we incorrectly distinguished the Loram case in our decision in Henning. Loram and Henning addressed the same issue--whether a suit limitation clause in an insurance policy will bar a suit by the insured commenced outside of the limitation period. To the extent Loram is inconsistent with our decision in Henning, Loram is wrongly decided.
The Loram holding resulted from a confusion of notice limitation clauses with suit limitation clauses. The rules in Minnesota are that when an insurance clause requires notice of a claim to be given within a certain period, failure to give notice within that period absolves the insurer of liability only if the failure prejudices the insurer. Reliance Ins. Co. v. St. Paul Ins. Co., 307 Minn. 338, 239 N.W.2d 922 (1976). When an insurance clause requires suit to be brought within a certain...
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