Serrano v. Aetna Ins. Co.

• Decision Date: 13 June 1995
• Docket Number: No. 14944,14944
• Citation: 664 A.2d 279,233 Conn. 437
• Court: Connecticut Supreme Court
• Parties: Luz SERRANO v. AETNA INSURANCE COMPANY.

Page 279

664 A.2d 279

233 Conn. 437

Luz SERRANO v. AETNA INSURANCE COMPANY.

No. 14944.

Supreme Court of Connecticut.

Argued Dec. 8, 1994.

Decided June 13, 1995.

William J. Sweeney, Jr., with whom, on the brief, was David M. Fisher, New Britain, for appellant (plaintiff).

Eugene A. Cooney, with whom was Rodd J. Mantell, Hartford, for appellee (defendant).

William F. Gallagher, Cynthia C. Bott, Kurt D. Koehler, New Haven and Thomas J. Airone, Law Student Intern, filed a brief, for Connecticut Trial Lawyers Association as amicus curiae.

Before CALLAHAN, NORCOTT, KATZ, PALMER and LAVERY, JJ.

PALMER, Associate Justice.

This appeal requires us to decide whether § 3 of No. 93-77 of the 1993 Public Acts (P.A. 93-77), ¹ which retroactively modifies the uninsured and underinsured motorist provisions of certain automobile liability insurance policies, comports with the United States and Connecticut constitutions. The plaintiff, Luz Serrano, was insured under an automobile liability policy issued by the defendant, Aetna Insurance Company, that required her to file an uninsured or underinsured motorist claim within two years from the date of the accident. The plaintiff commenced this action for underinsured motorist benefits more than two years from the date of the accident, claiming, inter alia, that her right to commence an action for such benefits had been restored by § 3 of P.A. 93-77. The trial court rejected the plaintiff's claim, concluding that the act's purported modification of the terms of the policy violated the defendant's contractual rights under the United States constitution. Thereafter, the trial court granted the defendant's motion for summary judgment on the ground that the action had not been filed within two years from the date of the accident as required by the policy. The plaintiff appealed from the judgment of the trial court to the Appellate Court, which remanded the case to the trial court for an articulation of the facts and the law underlying its judgment. The trial court rendered its articulation and, thereafter, the case was transferred to this court pursuant to General Statutes § 51-199(b)(2) ² and Practice Book § 4027. We reverse the judgment of the trial court.

The relevant facts are undisputed. On May 23, 1989, the plaintiff, while operating an automobile owned by her mother, sustained injuries resulting from an accident caused by the negligence of the driver of a second automobile (tortfeasor). At the time of the accident, the tortfeasor was covered by an insurance policy with liability limits of $20,000. The plaintiff was insured under an automobile liability policy issued by the defendant to her mother. ³ Under the underinsured motorist provisions of that policy, ⁴ which provided coverage for, inter alia, damages and injuries sustained as a result of the negligence of the owner or operator of an underinsured motorist, the defendant was obligated to pay to the plaintiff all sums, up to a maximum of $100,000, that she would be entitled to recover from the tortfeasor after the plaintiff had exhausted the liability limits of the tortfeasor's policy. ⁵ The policy issued by the defendant also required that an insured bring a claim or suit under the policy within two years from the date of the accident. ⁶

On April 16, 1991, the plaintiff commenced an action against the tortfeasor seeking damages arising from the accident. In the fall of 1991, the plaintiff's claim against the tortfeasor was settled for $20,000, thereby exhausting the liability limits of the tortfeasor's policy. By complaint dated January 13, 1992, the plaintiff instituted this action against the defendant for underinsured motorist benefits. The plaintiff also filed with the defendant a written demand for benefits dated January 30, 1992. The defendant rejected the demand as untimely and, thereafter, moved for summary judgment on the plaintiff's action, claiming that she had failed to file a suit or claim for underinsured motorist benefits within two years of the accident as required by the policy.

Public Act 93-77 took effect on May 20, 1993, during the pendency of this litigation. Section 3 of P.A. 93-77 provides, inter alia, that no claim for underinsured motorist benefits that was pending on December 8, 1992, and in which a settlement had not been reached or a final judgment rendered prior to May 20, 1993, shall be barred by virtue of any policy provision limiting the period for the filing of a claim to less than the three year period, with tolling provisions, allowed under General Statutes § 38a-336, as amended by § 2 of P.A. 93-77. ⁷ The plaintiff claimed that because her action for underinsured motorist benefits was governed by the terms of § 3, the two year limitation period of the policy was unenforceable. The defendant conceded that § 3 of P.A. 93-77, by its terms, applied to the plaintiff's action, ⁸ but argued that its retroactive modification of the terms of the policy violated the defendant's due process and contractual rights guaranteed by the United States constitution.

The trial court found that the plaintiff had not filed an action or claim against the defendant within two years from the date of the accident as required under the policy. ⁹ The trial court further held that because the plaintiff's right to seek underinsured motorist benefits had already expired under the otherwise lawful provisions of the policy, § 3 of P.A. 93-77 operated as a substantial and unjustified impairment of the parties' contractual relationship in contravention of the contract clause of article one, § 10, of the United States constitution. The court therefore refused to apply § 3 of P.A. 93-77 to nullify the two year limitation period of the policy and, accordingly, granted the defendant's motion for summary judgment on the ground that the plaintiff's action was time barred under that policy provision.

On appeal, the plaintiff contends that § 3 of P.A. 93-77 is constitutional and, consequently, that the trial court improperly rendered summary judgment for the defendant on the ground that her action was untimely. ¹⁰ The defendant claims that the trial court correctly held that § 3 violates its contractual rights under article one, § 10, of the United States constitution. The defendant further contends, as alternate grounds for affirmance, that § 3 violates both the due process clause of the fourteenth amendment to the federal constitution, and article first, § 1, of our state constitution. We conclude that § 3 of P.A. 93-77 passes muster under each of these constitutional provisions ¹¹ and, accordingly, we reverse the judgment of the trial court.

I

The plaintiff claims that the trial court improperly concluded that § 3 of P.A 93-77 violates the contract clause of article one, § 10, of the United States constitution. We agree with the plaintiff.

The constitution of the United States, article one, § 10, provides that "[n]o State shall ... pass any ... Law Impairing the Obligation of Contracts...." Although the language of the contract clause speaks in absolute terms, "literalism in the construction of the ... clause ... would make it destructive of the public interest by depriving the State of its prerogative of self-protection." (Internal quotation marks omitted.) Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 240, 98 S.Ct. 2716, 2720, 57 L.Ed.2d 727 (1978); see also Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S. 470, 502, 107 S.Ct. 1232, 1250-51, 94 L.Ed.2d 472 (1987); Connecticut Education Assn., Inc. v. Tirozzi, 210 Conn. 286, 301, 554 A.2d 1065 (1989). The constitutional prohibition against the impairment of contractual obligations, therefore, must be accommodated to the state's interest in safeguarding the welfare of its citizens. Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 410, 103 S.Ct. 697, 703-04, 74 L.Ed.2d 569 (1983); United States Trust Co. v. New Jersey, 431 U.S. 1, 16, 21, 97 S.Ct. 1505, 1514-15, 1517, 52 L.Ed.2d 92 (1977). Thus, states must be allowed to exercise their broad police power to enact general regulatory measures without fear "that private contracts will be impaired, or even destroyed, as a result." United States Trust Co. v. New Jersey, supra, at 22, 97 S.Ct. at 1517. Accordingly, "a statute does not violate the [c]ontract [c]lause simply because it has the effect of restricting, or even barring altogether, the performance of duties created by contracts entered into prior to its enactments." ¹² Exxon Corp. v. Eagerton, 462 U.S. 176, 190, 103 S.Ct. 2296, 2305, 76 L.Ed.2d 497 (1983). Our task, therefore, is to balance the competing private and public interests at stake when the state seeks to adjust existing contractual relationships.

In adjudicating a claim that a legislative enactment runs afoul of the contract clause, we must "first ask whether the change in [the] law has operated as a substantial impairment of a contractual relationship." (Internal quotation marks omitted.) General Motors Corp. v. Romein, 503 U.S. 181, 186, 112 S.Ct. 1105, 1109, 117 L.Ed.2d 328 (1992); see also Energy Reserves Group, Inc. v. Kansas Power & Light Co., supra, 459 U.S. at 411, 103 S.Ct. at 704. Schieffelin & Co. v. Dept. of Liquor Control, 194 Conn. 165, 177, 479 A.2d 1191 (1984). "This inquiry has three components: whether there is a contractual relationship, whether a change in law impairs that contractual relationship, and whether the impairment is substantial." General Motors Corp. v. Romein, supra, at 186, 112 S.Ct. at 1109; see also Energy Reserves Group, Inc. v. Kansas Power & Light Co., supra, at 411, 103 S.Ct. at 704; Allied Structural Steel Co. v. Spannaus, supra, 438 U.S. at 244, 98 S.Ct. at 2722. If upon application of this test it appears that the challenged legislation substantially impairs existing contract rights, the enactment may nevertheless withstand constitutional scrutiny if it serves a significant and legitimate public...