Meadows v. Employers' Fire Ins. Co.

• Decision Date: 15 December 1982
• Docket Number: No. 15252,15252
• Citation: 298 S.E.2d 874,171 W.Va. 337
• Parties: Acel MEADOWS v. The EMPLOYERS' FIRE INS. CO.
• Court: West Virginia Supreme Court

Page 874

298 S.E.2d 874

171 W.Va. 337

Acel MEADOWS v. The EMPLOYERS' FIRE INS. CO.

No. 15252.

Supreme Court of Appeals of West Virginia.

Dec. 15, 1982.

Syllabus by the Court

Under the provisions of the standard fire policy adopted under W.Va.Code, 33-17-2 (1957), the twelve-month time period for bringing suit commences to run when the insurance company notifies the insured in writing that it declines to pay the loss.

Huffman & Huffman, L.C. and Timothy E. Huffman, Charleston, for appellant.

Steptoe & Johnson and E. Loyd Leckie, Charleston, for appellee.

MILLER, Chief Justice:

The appellant in this case, Acel Meadows, brings this appeal to challenge the lower court's dismissal of a suit brought by Meadows against The Employers' Fire Insurance Company. Meadows and the insurer had contracted in 1971 for the latter to insure a building owned by the appellant, and the building subsequently burned on or about April 15, 1972. Meadows' insurance claim was denied on October 17, 1972. On February 21, 1979, he filed suit to collect on the policy. The Circuit Court of Braxton County dismissed the appellant's suit, holding that the action was barred by the twelve-month limitation on actions specified in the fire insurance contract.

The appellant argues two points--first, that we should hold that the general statute of limitations for suits involving written contracts, which provides for a ten-year period of limitation, should apply; and, second, that we should hold that the limitation involved in the standard New York Fire Policy violates public policy under principles of unconscionability. We decline to uphold either ground.

I.

We begin by noting that W.Va.Code, 33-17-2 (1957), provides, in part, that:

"No policy of fire insurance covering property located in West Virginia shall be made, issued or delivered unless it conforms as to all provisions and the sequence thereof with the basic policy commonly known as the New York standard fire policy, edition of one thousand nine hundred forty-three, which is designated as the West Virginia standard fire policy." ¹

The standard policy consists of 165 numbered lines. ² Prior to the enactment of our present statute, the standard fire policy was set out verbatim in W.Va.Code, 33-4-7 (1931). ³ The provisions relating to proof of loss, which begin on line 90 of the current standard fire policy and run through line 165, are virtually identical to the provisions found in W.Va.Code, 33-4-7 (1931), which begin opposite the heading "Requirements in case of loss" and proceed to the end of the statutory policy provisions. In this area, the twelve-month limitation period is set out together with other relevant provisions.

When W.Va.Code, 33-17-2 (1957), was enacted, the Legislature removed the detailed policy language formerly contained in W.Va.Code, 33-4-7 (1931), and simply referred to the New York standard policy. This was part of a comprehensive revision of the insurance chapter, W.Va.Code, 33-1-1, et seq. ⁴ Among the revisions made was the inclusion of W.Va.Code, 33-6-14 (1957), which generally provided that, as to insurance policies delivered in this State, no provision could be made which would limit the time for bringing an action under the policy to a period of less than two years. ⁵ Two specific exceptions were made in this statute. The first concerned marine insurance where the limitation could not be less than one year. The other exception was that the provisions of this statute "shall not apply to the standard fire insurance policy." ⁶

Several things are apparent from this brief statutory review. For a considerable period prior to 1957, the Legislature had, by statute, set out the provisions of the standard fire policy which contained two standard provisions which still exist in today's standard fire policy, i.e. the twelve-month limitation period ⁷ and the loss payable provision. ⁸

In 1967, the Legislature adopted by reference the 1943 New York standard fire policy which contains these two provisions. At the same time, the Legislature changed the statute which had prohibited insurance contracts from reducing the time in which suit could be instituted to a period under one year by extending the period to two years but providing that the standard fire policy was exempt.

Obviously, the Legislature was aware that, as of 1957, the standard fire policy, as set out in W.Va.Code, 33-4-7 (1931), contained a twelve-month limitation period and for this reason the standard fire policy was exempted from the two-year requirement of W.Va.Code, 33-6-14 (1957). Judge Haden reached a similar conclusion in Prete v. Royal Globe Insurance Co., 533 F.Supp. 332 (N.D.W.Va.1982). Finally, we believe that the enactment of W.Va.Code, 33-6-14 (1957), and its forerunner, W.Va.Code, 33-2-29 (1931), both of which dealt with limiting the time for bringing suits, indicates that the Legislature did not intend to have the general contract statute of limitations of W.Va.Code, 55-2-6 (1923), apply to insurance policies.

Furthermore, this interpretation is consistent with our prior case law recognizing that the Legislature, by adopting a standard fire policy, had in effect legislatively set the limitation period contained in the standard policy. This is the result reached in Kirk v. Firemen's Insurance Company of Newark, N.J., 107 W.Va. 666, 150 S.E. 2 (1929), which appears to be the first case decided after the Legislature enacted a standard fire insurance policy form. The insurance company argued in Kirk that the court should abandon its previous position where it had construed similar language of an insurance policy (not legislatively adopted) to mean that the twelve months did not begin to run until sixty days after the submission of the proof of loss. The insurance carrier in Kirk reasoned that with the legislative adoption of the standard policy, the Court was free to make a new interpretation. The Court refused to do this, stating:

"The answer to this proposition is, first, that the general principles of construction apply alike to statutes and contracts, and second, that statutes are to be read in the light of attendant circumstances and the state of the law existent at the time of their enactment. The words of the statute must be taken in the sense in which they were then understood. 25 R.C.L., 959. And this should be especially true when such meaning has been established by judicial interpretation. The Legislature, therefore, in prescribing the New York Standard form of policy is presumed to have adopted the previous interpretations of its provisions by this Court." 107 W.Va. at 668, 150 S.E. at 2.

Although Kirk did not quote the applicable provisions of the standard fire policy, it did note that fire policy provisions were those as amended by 1923 W.Va.Acts Ch. 18. ⁹ The Court in Kirk placed primary reliance on an earlier case, Hogl v. Aachen Insurance Co., 65 W.Va. 437, 64 S.E. 441 (1909), where the Court had dealt with policy language somewhat similar to the statutory language considered in Kirk. The key holding in both cases was that the twelve-month limitation language was not absolute since the policy provided that the company did not have to pay the loss until sixty days after receipt of the proof of loss. In Syllabus Point 1 of Kirk, the law was summarized in this fashion:

"The period of limitation for the institution of suit under the New York Standard fire insurance policy, providing that loss shall be payable sixty days after proof and that no action shall be maintainable unless commenced within the twelve months after the fire, does not begin to run until the accrual of the cause of action, sixty days after the proof of loss."

Oddly enough, this Court has not had occasion since Kirk to consider the standard fire policy limitation for filing suit. The insurance company in the present case maintains that the true statute of limitation, as a result of Kirk and particularly in view of the recent federal district court case, Prete v. Royal Globe Insurance Co., supra, is twelve months plus sixty days. We do not agree.

As previously noted, Kirk recognized in Syllabus Point 1 that the twelve months did not begin until sixty days after proof of loss. What was left unstated in Kirk was that the proof of loss, under the statutory policy provisions existing at the time of Kirk, was required to be sent "within sixty days after the fire, unless such time is extended in writing by this Company." ¹⁰ The same provision exists in the present standard policy. ¹¹ It is apparent from Kirk that with the insured having sixty days to furnish proof of loss and the company having sixty days after receipt of such proof of loss, the tolling period under Kirk could be 120 days.

The Court in Kirk did not consider the complete language of the loss payable clause which provides that "[t]he amount of loss for which this Company may be liable shall be payable sixty days after proof of loss, as herein provided, is received by this Company and ascertainment of the loss is made either by agreement between the insured and this Company expressed in writing or by the filing with this Company of an award as herein provided." (Emphasis added) This language demonstrates that the company's obligation to pay is not triggered solely at the end of the sixty days after the proof of loss is received but also requires an "ascertainment of the loss ... either by agreement" or "by the filing ... of an award." ¹²

This language is apparently designed to protect the company against having to unilaterally accept the amount set out in the insured's proof of loss and authorizes and permits an agreed ascertainment of the loss. Alternatively, the amount of the loss can be determined by an award. The use of the term "award" is explained in the appraisal provision of the standard policy. Under this section, if the insured and the company cannot agree on the amount of loss, either party may trigger the selection of...