Leone v. Aetna Cas. & Sur. Co., 78-1905

• Citation: 599 F.2d 566
• Decision Date: 25 June 1979
• Docket Number: No. 78-1905,78-1905
• Parties: Joseph LEONE, Jr., Appellant, v. The AETNA CASUALTY & SURETY COMPANY, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 566

599 F.2d 566

Joseph LEONE, Jr., Appellant, v. The AETNA CASUALTY & SURETY COMPANY, Appellee.

No. 78-1905.

United States Court of Appeals Third Circuit.

Argued March 22, 1979.

Decided June 8, 1979.

As Amended June 25, 1979.

David A. Koss, Philadelphia, Pa., and F. Emmett Fitzpatrick (argued), Philadelphia, Pa., for appellant.

Cozen, Begier & O'Connor, Robert R. Reeder (argued), Philadelphia, Pa., for appellee.

Before GIBBONS and HUNTER, Circuit Judges, and MEANOR, ^* District Judge.

OPINION OF THE COURT

MEANOR, District Judge.

This is an appeal from a judgment which granted defendant Aetna's motion to dismiss the complaint upon the ground that it was barred by the twelve month suit limitation clause contained in the Pennsylvania statutory fire insurance policy. 40 P.S. § 636(2). Leone v. Aetna Life & Cas. Co., 448 F.Supp. 698 (E.D.Pa.1978).

Plaintiff's verified complaint was filed in the Philadelphia Court of Common Pleas on November 16, 1977. Following removal to the district court, Aetna, without filing an answer, moved to dismiss for failure to state a claim upon which relief could be granted pursuant to Rule 12(b)(6), Fed.R.Civ.P.

The complaint seeks recovery on a fire policy. It alleges that on April 30, 1976, Aetna issued to plaintiff's assignor a two month binder of insurance with fire coverage in the amount of $150,000. On May 15, 1976, fire damage was incurred in the amount of $128,043.14. Aetna was duly notified and on June 22, 1976 proofs of loss were filed. Aetna investigated the loss, and, on November 30, 1976, in writing, notified plaintiff "that there is no claim which is compensable under the terms and conditions of the policy of insurance which you have made claim under."

It is essential to emphasize at the outset that we are dealing with a judgment entered on the face of the complaint without affidavits and without discovery. It is the settled rule that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). See also Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972). ¹ The question to be answered thus becomes whether the assertions of the complaint, given the required broad sweep, would permit adduction of proofs that would provide a recognized legal basis for avoiding the statutory bar.

The complaint, in paragraph twelve thereof, states the following On or about October 12, 1976, Defendant, by its duly authorized agent, did advise Plaintiff and Plaintiff's agent that Defendant was continuing to investigate the cause of said loss, because Defendant had reason to believe that the loss incurred was caused by the wilfull (sic) act of Plaintiff, which allegation Plaintiff then and there denied, but which Defendant continued thereafter to allege, despite continued denial by Plaintiff.

The primary reliance of the district court was upon Lardas v. Underwriters Insurance Co., 426 Pa. 47, 231 A.2d 740 (1967). Lardas, standing alone, does support the result below. However, we find that Diamon v. Penn Mutual Fire Insurance Co., 247 Pa.Super. 534, 372 A.2d 1218 (1977), when read in light of paragraph 12 of the complaint, requires reversal.

In Diamon, The court reversed a grant of summary judgment in favor of an insuror which had been based upon the twelve month suit limitation clause of the Pennsylvania standard fire insurance policy. 40 P.S. § 636(2). Diamon involved two bases upon which the insured there was given an opportunity to avoid the impact of the limitation clause. We find that one of those theories is applicable to this complaint as we read it.

In Diamon, the insured was prosecuted at the insuror's instance for filing a false proof of loss. The precise contention was that the insured had removed furniture from his home before the fire, but had claimed destruction of the furniture as a loss thereafter. Following conviction, the insured dug up burned remnants of the furniture and was granted a new trial. The district attorney was then given leave to enter a Nolle prosequi. The insured waited until the end of the five year criminal statute of limitations and then brought suit on his fire policy.

The Superior Court held that the insuror's mistaken charge of criminal liability tolled or suspended the twelve month suit limitation clause. The court was unable to say on the record before it whether events had transpired that would again start the running of the limitation period. That issue was left for exploration upon remand.

The question arises whether, under Diamon, an insuror's good faith but erroneous charge of criminal conduct will suffice to toll the limitation period when there is no initiation of a criminal proceeding. On this issue we come to the conclusion that a good faith charge of criminal conduct will not toll the limitation period unless a criminal action is begun. We base this upon the Diamon Court's handling of Abolin v. Farmers American Mutual Fire Insurance Co., 100 Pa.Super. 433 (1930). The following statement appears in that case as it is quoted in the Diamon opinion:

The most that the (insured) could show was that five or six months after the fire, and months before the limitation in the policy became effective, when the (insured) asked whether the company was going to pay his claim he was told by the managers that they had not decided whether they would pay him or arrest him, apparently for being concerned in the burning of the insured property. There was certainly nothing in this statement that was by way of inducement to withhold bringing suit, or that evidence any intention on the part of the company to waive this provision of the contract.

Diamon, supra, 247 Pa.Super. at 542, 372 A.2d at 1222, Quoting Abolin, supra, 100 Pa.Super. at 436.

Following the above quotation from Abolin, the Diamon Court states:

It is apparent from this statement that if the company had told the insured that it had decided to have him arrested, and if in fact (as here) he had been arrested, there would have been such an "inducement to withhold bringing suit" as would have suspended the limitation clause.

Diamon, supra, 247 Pa.Super. at 542, 543, 372 A.2d at 1222.

Thus far we have reviewed only the facts and legal discussion contained in Parts I and II A and B of the Diamon opinion. The matter of the good faith of the insuror's accusation is not touched upon in those sections of the opinion. In light of the Diamon Court's treatment of Abolin, we believe that it is the law of Pennsylvania that a mere accusation of criminal conduct by an insuror against its insured, made in good faith, and with no steps taken by the insuror toward criminal prosecution, does not effect a tolling or suspension of the suit limitation clause. Since we have nothing before us to indicate that Aetna went beyond stating that plaintiff caused the loss by his willful act, the portions of the Diamon opinion we have discussed are of no avail to him. ²

Part III of the Diamon opinion, however, affords a potential basis upon which plaintiff may avoid Aetna's assertion of the suit limitation clause. In this part of the opinion the Court, citing among other cases, Bowers v. Camden Fire Insurance Association, 51 N.J. 62, 71, 237 A.2d 857, 861 (1968) and Gedeon v. State Farm Mutual Automobile Insurance Co., 410 Pa. 55, 59, 188 A.2d 320, 322 (1963), stresses the duty of utmost good faith and fair dealing which an insuror owes its insured. Placing reliance upon Gruenberg v. Aetna Insurance Co., 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973), the Diamon Court adopted a rule that an insuror's bad faith accusation of criminal conduct on the part of an insured, or such an allegation engendered by a negligently conducted investigation, would toll the suit limitation clause. We believe that the contentions of paragraph 12 of the plaintiff's complaint, given the required liberal reading, would be sufficient at a trial to place in issue the good faith of Aetna's assertion of criminal conduct as well as the question whether that accusation, if false, resulted from an improperly conducted investigation. It is to explore this issue that we reverse and remand. We stress again that we deal here only with a pleading. We do not imply that a question of fact exists on the question whether conduct of Aetna has tolled the suit limitation clause. We only hold that the plaintiff must be given an opportunity to attempt to establish a fact question on this issue. ³ By the same token, we express no opinion that some event exists that began the period anew if it was at any time tolled. This may be an issue to be dealt with upon remand. ⁴ The judgment of the district court will be reversed and the matter will be remanded for further proceedings not inconsistent with this opinion.

JAMES HUNTER, III, Circuit Judge, dissenting:

I do not believe that the Diamon case, which is the sole basis for the majority's decision to reverse the judgment of the district court, accurately represents Pennsylvania law. Moreover, even if Diamon were a correct statement of Pennsylvania law, appellant's complaint does not make sufficient allegations to come within the Diamon rule. Accordingly, I dissent.

I

This Court is, of course, not obligated in a diversity case to adopt the most recent decision of a lower state court as the law of the state, irrespective of whether that decision is consistent with earlier rulings of the state supreme court. Instead, as we noted in National Surety Corp. v. Midland Bank, 551 F.2d 21 (3d Cir. 1977), our task is to "determine how the (state) Supreme Court would decide the question before us." Id. at 28; See Commissioner v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 18 L.Ed.2d 886 (1967).

At issue in this case is the effect to be given a statutorily...