Schreiber v. Pennsylvania Lumberman's Mut. Ins. Co.

• Decision Date: 30 April 1982
• Citation: 498 Pa. 21,444 A.2d 647
• Court: Pennsylvania Supreme Court
• Parties: Julius SCHREIBER & Bertha, H/W, Appellants, v. PENNSYLVANIA LUMBERMAN'S MUTUAL INSURANCE COMPANY.

Page 647

444 A.2d 647

498 Pa. 21

Julius SCHREIBER & Bertha, H/W, Appellants, v. PENNSYLVANIA LUMBERMAN'S MUTUAL INSURANCE COMPANY.

Supreme Court of Pennsylvania.

Submitted Sept. 15, 1981.

Decided April 30, 1982.

[498 Pa. 22] Dennis L. Friedman, Philadelphia, for appellants.

David Sorin, Philadelphia, for appellees.

OPINION OF THE COURT

ROBERTS, Justice.

Appellants Julius and Bertha Schreiber appeal from an order of the Superior Court affirming an order of the Court of Common Pleas of Philadelphia granting the motion of appellee Pennsylvania Lumberman's Mutual Insurance Company for judgment on the pleadings. Appellants' sole contention throughout these proceedings has been that the one-year limitation of suit provision contained in their policy of fire insurance should not bar appellants from bringing suit on the policy over two years and two months after their alleged loss unless appellee insurance company can demonstrate that it has been prejudiced by appellants' delay. We find this contention to be without merit and, accordingly, affirm. ^*

On November 12, 1975, appellants allegedly lost certain items of personal property in an internal heater explosion. Appellants notified appellee insurance company of the loss on November 15, 1975, and on November 28, 1975, appellants delivered an accounting of this loss to appellee. On February 2, 1978, some twenty-six months later, appellants filed a complaint in assumpsit against appellee, alleging simply that appellants had provided appellee with a full accounting of their loss and that appellee had not reimbursed them as required by the insurance policy.

In its answer, appellee alleged that payment had been refused because appellants had "failed to prove the losses alleged" and "failed to adequately prove the damages alleged." In addition, by way of new matter, appellee contended that appellants' cause of action was barred by the one-year limitation of suit clause contained in the insurance policy.

Appellants did not answer this new matter, and on June 20, 1978, judgment on the pleadings was entered in favor of appellee. Appellants then filed a motion for reconsideration, which was granted. On September 12, 1978, appellants answered appellee's affirmative defense, alleging only that the one-year limitation of suit provision could not bar their suit because appellee had alleged no prejudice to itself from appellants' two-year delay. The trial court rejected this argument and again entered judgment on the pleadings for appellee. A unanimous panel of the Superior Court affirmed, and this Court granted allowance of appeal.

In Brakeman v. Potomac Insurance Co., 472 Pa. 66, 371 A.2d 193 (1977), this Court held that a policyholder's failure to abide by a provision in an automobile insurance contract requiring timely notice of claims would not bar suit on the policy absent a showing of prejudice by the insurer. Appellants argue that Brakeman mandates a similar conclusion with regard to the statutory limitation of suit provision at issue here.

Contrary to appellants' assertion, the rationale of our decision in Brakeman is not applicable to the present case. In Brakeman, the insurer had chosen to include in its automobile insurance policy a provision requiring that,

"[i]n the event of an accident, occurrence or loss, written notice ... shall be given by or for the insured to the company or any of its authorized agents as soon as practicable."

In examining this provision and the reasons for its inclusion in the policy, this Court stated "An insurance contract is not a negotiated agreement; rather its conditions are by and large dictated by the insurance company to the insured."

472 Pa. at 72, 371 A.2d at 196. Because the above provision requiring notice "as soon as practicable" was included at the exclusive discretion of the insurer, this Court found the provision to be in the nature of a contract of adhesion. Thus this Court departed from precedent and held that an insurer must prove that it has been prejudiced by an insured's late notice before it can successfully invoke such a provision as a defense to a claim.

In contrast, the limitation of suit provision in appellants' fire insurance policy was not "dictated by the insurance company to the insured." Rather, the Legislature has mandated that every policy of fire insurance issued in this Commonwealth shall contain the proviso that

"[n]o suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity ... unless commenced within twelve months next after inception of the loss."

Act of May 17, 1921, P.L. 682, § 506, added August 23, 1961, P.L. 1081, § 1, 40 P.S. § 636. Such a statutory requirement can hardly be termed a "contract of adhesion," imposed unfairly by the stronger party upon the weaker. Rather, it represents a legislative determination of a reasonable period within which suits must be brought, a careful balancing of the interests of both insurers and insureds. The validity of this statutorily mandated limitation of suit provision has been consistently upheld. See, e.g., General State Authority v. Planet Insurance Co., 464 Pa. 162, 346 A.2d 265 (1975); Lardas v. Underwriters Insurance Co., 426 Pa. 47, 231 A.2d 740 (1967).

We have recognized that in certain circumstances, a limitation of suit provision will not be permitted to bar a delayed suit: "a provision of this nature may be extended or waived where the actions of the insurer lead the insured to believe the contractual limitation period will not be enforced." General State Authority v. Planet Insurance Co., supra, 464 Pa. at 165 n.6, 346 A.2d at 267 n.6. See Commonwealth v. Trans America Insurance Co., 462 Pa. 268, 341 A.2d 74 (1975). Here, however, despite ample opportunity to do so, appellants have at no time alleged that any conduct of appellee, either active or passive, was in any way responsible for appellants' delay of over two years in commencing their action on the policy. In these circumstances, the court of common pleas properly granted appellee's motion for judgment on the pleadings, and the Superior Court properly affirmed. See Goldman v. McShain, 432 Pa. 61, 247 A.2d 455 (1968).

Order affirmed.

FLAHERTY, J., files a concurring opinion.

NIX, J., files a dissenting opinion.

FLAHERTY, Justice, concurring.

I agree with the rationale expressed in the dissent authored by Mr. Justice Nix, but concur in the result reached by the majority in this case. The relationship between the parties is contractual, and, notwithstanding the legislatively dictated term in the contract of insurance, equitable principles apply to this as well as other terms, and, indeed, the expectations based on the realities of custom and practice are to be considered. I would join the well-reasoned Dissenting Opinion were the pleaded facts sufficient to invoke the principle which it declares, but, in my view, the record has precluded me from doing so.

NIX, Justice, dissenting.

The issue raised in this appeal is whether a suit limitation provision in a contract of fire insurance should be enforced to prevent the insured from seeking relief where the record fails to disclose any evidence that the "delay" has prejudiced the insurer and where the effect of the section would frustrate the reasonable expectation of payment of the insured. For the reasons that follow, I am of the view that the Shreibers should have been allowed to maintain their suit for recovery under the terms of the policy.

In this record, it is uncontroverted that the Schreibers, the insured, fulfilled all of the conditions precedent under the terms of the existing policy to receive compensation for their loss. They had entered into the contract with the insurer for coverage for the type of loss sustained in this case, their premium was paid in full, and they had complied with the policy terms in prompt notification of the loss and submission of the proof of loss. The record does not reflect that prior to their institution of suit the insurer had in any way communicated to the insured that the claim would be rejected or that the information supplied to it, by the Schreibers, was in any way deficient or inadequate.

An appropriate analysis of the consideration of the issues raised in the instant appeal must begin with an understanding of the nature of a suit limitation clause. Our law provides for statutes of limitation which represents a societal determination that at some point in time individuals should have their exposure to liability terminated and that stale claims are inherently unfair to those required to defend against them. Estate of Gasbarini v. Medical Center of Beaver County, Inc., 487 Pa. 266, 409 A.2d 343 (1979); Insurance Company of North America v. Carnahan, 446 Pa. 48, 284 A.2d 728 (1971); Ulakovic v. Metropolitan Life Ins. Co., 339 Pa. 571, 16 A.2d 41 (1940). The law has also recognized that parties have a right in their contractual dealings to further limit the time during which resort to the courts may be had to resolve a dispute that arises from their contractual relationship. General State Authority v. Planet Ins. Co., 464 Pa. 162, 346 A.2d 265 (1975); Lardas v. Underwriters Ins. Co., 426 Pa. 47, 231 A.2d 740 (1967); Hocking v. Insurance Co., 130 Pa. 170, 18 A. 614 (1889); Northwestern Ins. Co. v. The Phoenix Oil and Candle Co., 31 Pa. 448 (1858). See also, Riddlesbarger v. Hartford Ins. Co., 7 Wall. 386, 19 L.Ed. 257 (1869); Southern Express Co. v. Caldwell, 21 Wall. 264, 22 L.Ed. 556 (1875). The difference between the legislatively designed limitation of suit and that contracted between the parties is that the former represents a societal judgment as to when the right of suit should no longer be permitted. In the latter instance, it merely represents the agreement of the parties based on the normal considerations attendant in contractual relationships.

Contractural limitation of suit provisions are, like all other terms...