Sanchez v. Kemper Ins. Companies
Decision Date | 25 February 1981 |
Docket Number | No. 13,076,13,076 |
Citation | 632 P.2d 343,96 N.M. 466 |
Parties | Nick A. SANCHEZ, Jr., Plaintiff-Appellee, v. KEMPER INSURANCE COMPANIES, Defendant-Appellant. |
Court | New Mexico Supreme Court |
This case arises out of a claim plaintiff-appellee made to his insurance company (defendant-appellant) for damages to appellee's property. Appellant moved for summary judgment which was granted. Appellee moved the court to reconsider its ruling. Upon reconsideration, the court reversed the summary judgment and certified the matter for interlocutory appeal to this Court. We reverse.
The alleged loss to appellee's property occurred on February 13, 1978, and weeks following. On August 17, 1978, appellant rejected appellee's claim. The claim was again rejected on December 26. Appellee brought suit upon the claim on March 9, 1979. Appellant's amended answer alleged the affirmative defense of failure to file suit within one year of the date of loss as required by the insurance contract. The trial judge granted summary judgment upon this defense. Appellee filed a motion to reconsider based upon Foundation Reserve Ins. Co. v. Esquibel, 94 N.M. 132, 607 P.2d 1150 (1980), alleging that under that case an insurance company must show both a substantial breach and prejudice to the insurer before a cooperation clause will be enforced. Appellee contended that the reasoning of Foundation Reserve should be extended to a time-to-sue clause as well. Since appellant insurance company had not shown any prejudice, it was not entitled to summary judgment. The trial court agreed and reversed its prior summary judgment.
Upon appeal, appellee agrees that the sole issue before this Court is whether appellant is entitled to summary judgment where appellee did not bring suit upon his claim within the period of time required by the contract and appellant did not show prejudice caused thereby.
It is the law in most jurisdictions that have considered the question that an insurance contract provision limiting the time within which a suit may be brought after damage occurs is valid and enforceable if the time period is reasonable. Brandywine One Hundred Corp. v. Hartford F. Ins. Co., 405 F.Supp. 147 (D.Del.1975).
The reasonableness of such a contractual provision is usually determined by Donahue v. Hartford Fire Insurance Company, 110 R.I. 603, 605, 295 A.2d 693, 694 (1972).
Reasons for allowing such provisions to stand include public interest in prompt assertion of legal claims. Webb v. Kentucky Farm Bur. Ins. Co., 577 S.W.2d 17 (Ky.App.1978), and the possibility of fraudulent claims arising if a long period is allowed between the occurrence and the initiation of a legal claim. Centennial Insurance Company v. Dowd's, Inc., 306 A.2d 648 (D.C.1973).
In Brandywine, supra, the court noted two public policy reasons why time-to-sue provisions should be enforced. First, such a limitation allows an insurer to avoid uncertainty as to the amount of its liability. Certainly, it could be very burdensome for an insurer to be uncertain of its liability for an indefinite period into the future. Second, such a contractual provision allows stale claims to be cut off.
The New Mexico Court of Appeals considered such a clause in Wiseman v. Arrow Freightways, Inc., 89 N.M. 392, 552 P.2d 1240 (Ct.App.1976), cert. denied, 90 N.M. 9, 558 P.2d 621 (1976). There, the court upheld a one-year limitation clause, stating that appellant had advanced no public policy reason why the time-to-sue provision should not be enforced.
In Foundation Reserve, supra, this Court considered a cooperation provision in an insurance contract. There, the insurance policy provided that the policy would be voided if the insured failed to notify the insurer of an accident, failed to cooperate in defending or settling a claim, or willfully concealed material facts concerning a claim. This Court held that such a cooperation...
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...F. Supp. 147, 151 (D. Del. 1975); L & H Transp., Inc. v. Drew Agency, Inc., 403 N.W.2d 223, 225-26 (Minn. 1987); Sanchez v. Kemper Ins. Cos., 632 P.2d 343, 345 (N.M. 1981); Herman, 928 P.2d at 990-91; Donahue v. Hartford Fire Ins. Co., 295 A.2d 693, 693-94 (R.I. 1972); Brick Church Transmis......