Nat. Refrig., Inc. v. Travelers Indem. Co.

• Decision Date: 29 May 2008
• Docket Number: No. 2007-252-Appeal.,2007-252-Appeal.
• Citation: 947 A.2d 906
• Parties: NATIONAL REFRIGERATION, INC. et al. v. The TRAVELERS INDEMNITY COMPANY OF AMERICA et al.
• Court: Rhode Island Supreme Court

947 A.2d 906

NATIONAL REFRIGERATION, INC. et al. v. The TRAVELERS INDEMNITY COMPANY OF AMERICA et al.

No. 2007-252-Appeal.

Supreme Court of Rhode Island.

May 29, 2008.

Richard E. Fleury, Esq., East Greenwich, for Plaintiff.

Paul S. Callaghan, Esq., Providence, for Defendant.

Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, SUTTELL, and ROBINSON, JJ.

OPINION

Chief Justice WILLIAMS, for the Court.

In this insurance contract case, the plaintiff, National Refrigeration, Inc. (plaintiff), appeals from an entry of summary judgment in favor of the defendant, The Travelers Indemnity Company of America (defendant) after the plaintiff filed a petition to enforce an arbitration clause in the insurance contract. Summary judgment was granted on the grounds that the plaintiff initiated its petition for arbitration years after the time expressly provided for in the contract between the two parties. This case came before the Supreme Court for oral argument on May 7, 2008, pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not summarily be decided. After hearing the arguments of counsel and examining the memoranda filed by the parties, we are of the opinion that this appeal may be decided at this time, without further briefing or argument. For the reasons set forth herein, we affirm the judgment of the Superior Court.

I Facts and Travel

On August 29, 1996, defendant issued an insurance policy (the contract or the policy) to plaintiff, which covered damages to plaintiff's business property, in addition to certain lost income and expenses resulting from that damage. On June 22, 1997, an electrical storm damaged plaintiff's Cybermation Machine, a machine used for cutting and fabricating ductwork in air cooling and heating systems. After the storm, plaintiff filed a claim with defendant for $102,951.54. In 1997 and 1998, defendant issued payments to plaintiff totaling $20,000 and $8,291.91, respectively.

The defendant's decision not to reimburse plaintiff for the full replacement of the machine became a source of contention between the two parties. The plaintiff insisted that it should be reimbursed for the cost of replacing the Cybermation Machine; defendant had reimbursed plaintiff only for the cost of repairing the damaged machine. Four years later, in April 2002, plaintiff requested that defendant reopen the investigation into damages to the machine, in addition to plaintiff's claim for loss of business. Although defendant agreed to reopen the investigation, it denied plaintiff's claims in October 2002. In July 2003, plaintiff sent defendant additional correspondence, again requesting the replacement cost for acquiring a new Cybermation Machine, in addition to reimbursement for the lost profits suffered as a result of the damaged machine.

The plaintiff also informed defendant that it was prepared to invoke the policy's appraisal clause if the parties could not reach an agreement on plaintiff's claims.

The policy's appraisal clause provided that:

"If [the parties] disagree on the value of the property * * * either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge * * *. The appraisers will state separately the value of the property * * * or the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding."

In its reply, in August 2003, defendant informed plaintiff that it would further investigate its claims. By that same correspondence, defendant made clear to plaintiff that its agreement to investigate the claims in no way constituted a waiver of any defenses or rights to which defendant was entitled under the policy. In that same month, defendant denied plaintiff's claim for additional damages and emphasized that it had informed plaintiff in October 2002 that no additional payments would be made for the damage to the Cybermation Machine and that defendant's position had not changed.

In February 2004, plaintiff contacted defendant, requesting an appraisal pursuant to the terms of the contract between the two parties. The defendant denied plaintiff's request, stating that plaintiff had not complied with the policy provisions, including a limitations clause that provided, in relevant part:

"No one may bring a legal action against us under this Coverage Form unless:

"a. There has been full compliance with all of the terms of this Coverage Form; and

"b. The action is brought within 2 years after the date on which the direct physical loss or damage occurred."

Almost a year later, on February 9, 2005, plaintiff filed a petition for arbitration with the Superior Court, seeking to enforce the contract's appraisal clause. Before the case reached trial, the parties filed cross-motions for summary judgment. For its part, defendant contended that the contract's limitations clause barred plaintiff's claim. More specifically, defendant asserted that plaintiff could not maintain an action for appraisal because nearly eight years had passed since plaintiff's Cybermation Machine was damaged — far in excess of the two-year limitations period provided for in the contract. The trial justice agreed and, finding that there were no genuine issues of material fact, he granted defendant's motion for summary judgment while denying plaintiff's motion for summary judgment. The trial justice ruled that the policy's two-year limitations provision applied to lawsuits commenced under the contract's appraisal clause. He further noted that defendant's conduct had not tolled the policy's limitation's clause, as the two-year period had expired long before defendant agreed to reopen the investigation into plaintiff's claims. Therefore, the trial justice ruled, the plain language of the contract between the parties foreclosed plaintiff from thereafter challenging the insufficiency of the reimbursement it had received for damages more than seven years earlier. The plaintiff timely appealed to this Court from the trial justice's grant of defendant's motion for summary judgment.

II Analysis

On appeal, plaintiff argues that the trial justice erred in ruling that plaintiff's petition for arbitration was time-barred under the plain language of the contract and that defendant's actions had not tolled the limitations period. The defendant, by contrast, asserts that the contract's two-year limitation for commencing legal action with respect to damages under the policy applies to petitions for arbitration and that, therefore, plaintiff's petition was not timely. The defendant further asserts that it did not assure plaintiff that a settlement would be forthcoming, nor did its actions induce plaintiff's late filing.

A Standard of Review

"This Court reviews a grant of summary judgment de novo, applying the same standards as the motion justice." Smiler v. Napolitano, 911 A.2d 1035, 1038 (R.I.2006) (citing Andreoni v. Ainsworth, 898 A.2d 1240, 1241 (R.I.2006)). "Summary judgment is appropriate when no genuine issue of material fact is evident from `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' and the motion justice finds that the moving party is entitled to prevail as a matter of law." Id. (quoting Super. R. Civ. P. 56(c)).

B Contract Terms

The plaintiff first protests that the contract provision that requires the commencement of legal actions within two years of the property damage or loss does not apply to its petition for arbitration. The defendant, however, contends that the trial justice properly recognized that plaintiff's petition for arbitration of the appraisal dispute is a legal action that was time-barred under the policy's terms.

"It is well established that `[w]hen interpreting the contested terms of [an] insurance policy, we are bound by the rules established for the construction of contracts generally.'" Metro Properties, Inc. v. National Union Fire Insurance Co., 934 A.2d 204, 208 (R.I.2007) (quoting Zarrella v. Minnesota Mutual Life Insurance Co., 824 A.2d 1249, 1259 (R.I.2003)). Therefore, "[t]he rights and liabilities of the parties to an insurance contract are to be ascertained in accordance with the terms as set forth therein." DiIorio v. Abington Mutual Fire Insurance Co., 121 R.I. 689, 694, 402 A.2d 745, 747 (1979) (citing Donahue v. Hartford Fire Insurance Co., 110 R.I. 603, 295 A.2d 693 (1972)). When affording the terms of the policy their plain and ordinary meaning, this Court looks not to "what the insurer subjectively intended, but rather [to] `what the ordinary reader and purchaser would understand [the terms] to mean.'" Metro Properties, Inc., 934 A.2d at 208 (quoting Zarrella, 824 A.2d at 1259). Finally, this Court has held that a "limitations period in an insurance policy is a term to which the parties are specifically bound." DiIorio, 121 R.I. at 694, 402 A.2d at 747 (citing Greater Providence Trust Co. v. Nationwide Mutual Fire Insurance Co., 116 R.I. 268, 355 A.2d 718 (1976)).

The limitations clause set forth in this contract provides, in relevant part that: "[n]o one may bring a legal action against us under this Coverage Form unless: * * * `b. The action is brought within 2 years after the date on which the direct physical loss or damage occurred.'" (Emphasis added.) However, the contract itself fails to define "legal action," and although this Court has likewise never defined the term, therefore it is clear to us that a petition for arbitration is a type of legal action.

In defining the term "action," Black's Law Dictionary notes the following:

"An action has been defined to be an ordinary proceeding in a court of justice, by which one party prosecutes another party for the enforcement or protection of a right,...