McGlinchey v. Aetna Cas. and Sur. Co.

• Decision Date: 08 December 1992
• Docket Number: No. 14512,14512
• Court: Connecticut Supreme Court
• Parties: Donna McGLINCHEY v. AETNA CASUALTY AND SURETY COMPANY.

Page 445

617 A.2d 445

224 Conn. 133

Donna McGLINCHEY v. AETNA CASUALTY AND SURETY COMPANY.

No. 14512.

Supreme Court of Connecticut.

Argued Sept. 23, 1992.

Decided Dec. 8, 1992.

Berdon, J., dissented and filed opinion.

David C. Shaw, Hartford, for appellant (plaintiff).

Eugene A. Cooney, with whom, on the brief, was Rodd J. Mantell, Hartford, for appellee (defendant).

Joram Hirsch, Bridgeport, and William F. Gallagher, New Haven, filed a brief for the Connecticut Trial Lawyers Ass'n as amicus curiae.

Before PETERS, C.J., and CALLAHAN, BORDEN, BERDON and NORCOTT, JJ.

PETERS, Chief Justice.

The principal issue in this appeal is the enforceability of a provision in a contract for uninsured or underinsured motorist coverage that requires the insured to initiate collection proceedings within a two year period from the occurrence of an automobile accident. The plaintiff, Donna McGlinchey (insured), filed a demand for arbitration of an underinsured motorist claim pursuant to her insurance contract with the defendant, Aetna Casualty and Surety Company (insurer). The arbitrators decided in favor of her claim, but the trial court, in response to a motion to vacate the arbitration award, set the award aside on the ground that the insured's claim was time-barred. The insured appealed to the Appellate Court from the judgment of the trial court vacating the arbitration award. We transferred the appeal to this court pursuant to Practice Book § 4023 and General Statutes § 51-199(c), and now affirm.

The following facts were stipulated by the parties and found by the trial court. On January 24, 1987, the insured, while driving her own vehicle, was injured in a two car accident caused by the negligence of another driver (tortfeasor). At the time of the accident, the insured's uninsured ¹ motorists coverage contract with the insurer provided that "the covered person may make a written demand for arbitration within 2 years of the date of [the] accident." ²

The insured brought a lawsuit against the tortfeasor on October 12, 1988. Through discovery, the insured learned on March 1, 1989, that the tortfeasor's limit of liability insurance was $20,000. On March 9, 1989, the insured demanded, pursuant to the uninsured motorists provisions of her insurance contract, that the insurer submit to arbitration her claim to collect benefits for damages in excess of the tortfeasor's liability limits. ³

A panel of three arbitrators found that the insured had suffered $220,000 in damages, and concluded that she was entitled to recover $200,000 from the insurer after a setoff to account for the $20,000 paid by the tortfeasor. The arbitrators construed the provision in the insurance contract that "the covered person may make a written demand for arbitration within 2 years of the date of the accident" as permissive rather than mandatory. According to the arbitrators' construction, the permissive arbitration provision created a contract that was ambiguous about the status of arbitration demands filed after the expiration of the two year period, and that ambiguity, therefore, had to be resolved in favor of the insured.

In the trial court, the insurer filed an application to vacate the award on the ground that the arbitrators had not enforced the two year time limitation contained in the policy, and the insured filed an application to confirm the award. Because this case involves compulsory arbitration of uninsured motorists coverage, the trial court correctly undertook a de novo review of the arbitrators' conclusions of law. See Lumbermens Mutual Casualty Co. v. Huntley, 223 Conn. 22, 26, 610 A.2d 1292 (1992); American Universal Ins. Co. v. DelGreco, 205 Conn. 178, 191, 530 A.2d 171 (1987). The trial court agreed with the insurer's contention that the two year time limitation unambiguously barred the claim of the insured. The trial court, accordingly, granted the insurer's application to vacate, and denied the insured's application to confirm.

The insured appeals from the judgment in favor of the insurer on three grounds. She claims that: (1) the time limitation in the insurance policy is ambiguous and therefore does not require that a demand for arbitration of the underinsurance claim be made before the expiration of the two year limit set in the policy; (2) even if the time limitation is unambiguous, her demand for arbitration was timely because the limitation period did not begin to run until the tortfeasor's coverage had been exhausted; and (3) a two year limitation, measured from the date of the covered accident, is unenforceable because it is void as against public policy. We are unpersuaded.

I

The insured's first contention is that language in the insurance contract governing arbitration of uninsured motorists coverage is ambiguous and that this ambiguity must be resolved in favor of coverage. Analysis of a claim of ambiguity must proceed from well established rules for contract construction governing the interpretation of insurance contracts. See, e.g., Kelly v. Figueiredo, 223 Conn. 31, 35, 610 A.2d 1296 (1992); Aetna Life & Casualty Co. v. Bulaong, 218 Conn. 51, 58, 588 A.2d 138 (1991). Coverage provisions in an insurance contract are normally to be construed in accordance with the natural and ordinary meaning of the language found therein. Kelly v. Figueiredo, supra; Beach v. Middlesex Mutual Assurance Co., 205 Conn. 246, 249, 532 A.2d 1297 (1987). There is no presumption that language in insurance contracts is inherently ambiguous. Only if the language manifests some ambiguity do we apply the rule that ambiguous insurance contracts are to be construed in favor of insureds and to provide coverage. Kelly v. Figueiredo, supra, 223 Conn. at 37, 610 A.2d 1296; Beach v. Middlesex Mutual Assurance Co., supra, 205 Conn. at 250, 532 A.2d 1297.

The clause that the insured asks us to find ambiguous states that "the covered person may make a written demand for arbitration within 2 years of the date of [the] accident." The linchpin of the insured's argument for ambiguity is the use of the word "may." Because the clause instructs an insured that the insured "may" make a written demand within two years of an accident, without spelling out the consequences of a late demand, the insured maintains that the clause fails unambiguously to provide that coverage will be forfeited upon expiration of the two year time limitation.

The argument advanced by the insured is unpersuasive for a number of reasons. In context, the use of the word "may" is not ambiguous because it merely memorializes the fact that arbitration is an option that an insured is free to elect or to reject. This construction of "may" is consistent with its dictionary definition of granting permission, freedom or ability. See, e.g., Webster's Ninth New Collegiate Dictionary; Black's Law Dictionary (6th Ed.); and see Morris v. Timenterial, Inc., 168 Conn. 41, 43, 357 A.2d 507 (1975); Lee v. Lee, 145 Conn. 355, 359-60, 143 A.2d 154 (1958). The insured has an option to demand arbitration only upon compliance with the explicit and unambiguous constraints of the terms of the option, including the obligation to initiate the arbitration demand within the stated time period. It is fanciful to suggest that the consequence of failure to observe the time constraint is anything other than a lapse of the right conferred by the option. Finally, it is the fact that arbitration is an option for the insured that, without creating ambiguity, obviates any need for an explicit clause denying the right to demand arbitration after two years from the date of the accident. ⁴ 4] We concur, therefore, in the ruling of the trial court that, as a matter of law, there is no ambiguity in the clause limiting the insured's recourse to arbitration to a two year period after the occurrence of a covered accident.

II

The insured next maintains that, even if the arbitration clause unambiguously establishes the period during which the insured may demand arbitration, the limitation period in her case must be deemed to have been tolled until she had a reasonable opportunity to liquidate her claim against the tortfeasor. This contention rests on Continental Ins. Co. v. Cebe-Habersky, 214 Conn. 209, 212-13, 571 A.2d 104 (1990), wherein we held that General Statutes § 38-175c(b)(1), now recodified as § 38a-336, imposes upon an underinsured motorist claimant, before recovering underinsured motorist compensation, the responsibility to exhaust payments for which the tortfeasor is liable.

In this case, the accident occurred on January 24, 1987, the action was commenced against the tortfeasor on October 12, 1988, discovery disclosed the tortfeasor's limited insurance coverage on March 1, 1989, and the tortfeasor's liability was exhausted by payment of $20,000 on August 4, 1989. The insured therefore maintains that she had two years after August 4, 1989, to pursue a demand to arbitrate her underinsured motorist claim against the insurer. We disagree.

Contracting parties are free to adopt an unambiguous contract provision requiring a demand for arbitration to be made "within 2 years of the date of [the] accident." See Monteiro v. American Home Assurance Co., 177 Conn. 281, 286-87, 416 A.2d 1189 (1979). Continental Ins. Co. v. Cebe-Habersky, supra, does not hold to the contrary. The sole issue decided in that case was that, under the applicable statute, an insured had forfeited his underinsured motorist coverage by settling his claim against the tortfeasor in an amount less than the limit of the tortfeasor's liability coverage. The court had no occasion to consider what other limitations the contracting parties might properly impose on access to underinsured motorist coverage. It is worth noting, however, that Continental Ins. Co. v. Cebe-Habersky, supra, refused to countenance a good faith deviation from the statutory conditions imposed upon recovery of underinsured motorist insurance. We see no reason why...