Oil Serv. Co. v. Detroit Fid.

• Decision Date: 07 February 1928
• Docket Number: (No. 6114)
• Citation: 105 W.Va. 130
• Court: West Virginia Supreme Court
• Parties: Oil Service Company v. Detroit Fidelity & Surety Company

105 W.Va. 130

Oil Service Company

v. Detroit Fidelity & SuretyCompany

(No. 6114)

Supreme Court of Appeals of West Virginia.

Submitted January 25, 1928.

Decided February 7, 1928.

Limitation of Actions Surety's Denial of Liability Gives Rise to Immediate Cause of Action Starting Running of Limitation Provided in Fidelity Bond.

A surety bond executed for the purpose of reimbursing an employer pecuniary loss sustained on account of any act of larceny or embezzlement committed by its employees, provides, as one of the conditions precedent to a right of action thereon, that no suit or action of any kind against the surety for the recovery of a claim under the bond shall be sustainable unless the suit is commenced and the process served within the term of twelve months next after the discovery of any act of larceny or embezzlement on the part of such employees, and further provides that the surety shall have three months within which to pay the loss after being furnished with proof thereof; the denial of liability under the bond by the surety gives rise to an immediate cause of action and starts the running of the time within which suit is required to be brought.

(Fidelity Insurance, 25 C. J. § 21 [Anno].)

(Note: Parenthetical references by Editors, C. J. Cyc. Not part of syllabi.)

Error to Circuit Court, Kanawha County.

Action by the Oil Service Company against the Detroit Fidelity & Surety Company. Judgment for plaintiff, and defendant brings error.

Reversed and remanded.

John Wehrle, P. II. Murphy, and John V. Brennan, for plaintiff in error.

McCabe & Morton, II. L. Snyder, Jr., R. N. Stephens, Jr., and B. G. Kelly, for defendant in error.

Litz, Judge:

The defendant, Detroit Fidelity and Surety Company, complains of a judgment for $2,303.00 against it in favor of the plaintiff, Oil Service Company, in an action of assumpsit on a surety bond, dated November 1, 1924, wherein the defendant (designated as "surety") agrees to reimburse the plaintiff (designated as "employer") any pecuniary loss which it may sustain on account of any act of larceny or embezzlement committed by its employees.

The bond provides, as one of the conditions precedent to a right of action thereon, "that no suit or action of any kind against the surety for the recovery of a claim under this bond, shall be sustainable unless the suit is commenced and the process served within the term of twelve months next after the discovery of any act of larceny or embezzlement" on the part of the employee or employees. The surety is given three months within which to reimburse the employer after it has been furnished proof of loss.

The declaration contains the common counts in assumpsit and a special count, avering that the defendant, in said bond, "undertook to and did become liable to the plaintiff for any act or acts of larceny or embezzlement committed by any of the employees named in the schedule annexed thereto and made a part" thereof; and that on account of acts of larceny and embezzlement committed by Albert Garland Hayes (one of the employees so named) between November 1, 1924, and March 10, 1925, at or about which time the same were discovered, the plaintiff had sustained pecuniary loss in the sum of Three Thousand One Hundred Forty-one Dollars and six cents.

The defendant filed, in addition to the plea of the general issue, three special pleas, one of which states that the plaintiff ought not have or maintain its action, because the same was not commenced and the process served within twelve months next after the discovery of any act of larceny or embezzlement on the part of the employee, Hayes. Proof of loss was filed by the plaintiff June 10, 1925, and suit instituted July 24, 1926. The defendant gave notice to the plaintiff July 8, 1925, denying liability under the bond. The trial court refused not only a peremptory instruction on behalf of the defendant, but also an instruction to the effect that if the defendant notified the plaintiff, denying liability, more than twelve months prior to the institution of the action, the verdict should be for the defendant. The defendant assigns this ruling, among other grounds, as cause for reversal. The plaintiff contends that each instruction was properly refused because (1) the suit was commenced within twelve months from the accrual of the cause of action; and (2) that the plea of the statute of limitations, not being verified by affidavit, was improperly filed.

The theory of the first contention is that as the defendant was entitled to three months in which to pay the claim after proof of loss, the cause of action did not accrue until September 6, 1925. The answer of the defendant is, that notwithstanding the extension of time for settlement after proof of loss, its denial of liability communicated to the plaintiff July 8, 1925, gave rise to immediate cause of action. This proposition is well settled. Continental Insurance Co. v. Wickham, (Ga.) 35 S. E. 287; Millinery Co. v. National Union Fire Insurance Co., (N. C.) 75 S. E. 944; Moore v. Accident etc., Co. (N. C.) 92 S. E. 362; Baltimore Fire Insurance Co. v. Loney, 20 Md. 20; Aetna Insurance Co. v. Maguire, 51 111. 342; Insurance Co. v. Carry, 83 111. 453. It is said that stipulations in policies of insurance providing for payment of loss within a specified time after proofs of loss are furnished and postponing action in the meantime are for the purpose of enabling the insurer before paying the loss to make a full investigation with a view of...