Shipley v. Columbia Mut. Ins. Co., s. 67517

• Decision Date: 17 June 1986
• Docket Number: Nos. 67517,67032,s. 67517
• Citation: 712 S.W.2d 375
• Parties: Walter Sam SHIPLEY a/k/a Sammy Shipley, Plaintiff-Appellant, v. COLUMBIA MUTUAL INSURANCE COMPANY, Defendant-Respondent. Paul E. WARDEN, Plaintiff-Appellant, v. COLUMBIA MUTUAL INSURANCE COMPANY, Defendant-Respondent.
• Court: Missouri Supreme Court

Page 375

712 S.W.2d 375

Walter Sam SHIPLEY a/k/a Sammy Shipley, Plaintiff-Appellant, v. COLUMBIA MUTUAL INSURANCE COMPANY, Defendant-Respondent.

Paul E. WARDEN, Plaintiff-Appellant, v. COLUMBIA MUTUAL INSURANCE COMPANY, Defendant-Respondent.

Nos. 67517, 67032.

Supreme Court of Missouri En Banc.

June 17, 1986.

Rehearing Denied July 30, 1986.

Lloyd E. Eaker, Clayton, for Warden.

Michael A. Turken, St. Charles, Cullen Cline, Columbia, for Shipley.

Jeffrey O. Parshall, Michael R. Baker, Columbia, for defendant-respondent.

Albert C. Lowes, Kathleen A. Wolz, Cape Girardeau, amicus curiae for Mo. Assn. of Mut. Ins. Cos.

HIGGINS, Chief Justice.

These appeals question applicability of the one-year statute of limitations contained in the former section 380.840, RSMo 1978, (repealed, Laws 1984, p. 665; effective January 1, 1985) to two policies of insurance issued by Columbia Mutual Insurance Company, a farmers' mutual insurance company. Underlying actions to enforce coverage for property loss caused by fire were dismissed on an application of section 380.480. Because appellants challenge the validity of section 380.840, this Court has jurisdiction. Mo. Const. art. V, § 3. Reversed and remanded.

On May 1, 1981, Paul Warden purchased insurance from Columbia Mutual on his dwelling, personal property and other buildings. On May 23, 1981, fire destroyed the insured premises; Columbia Mutual denied coverage. On October 31, 1984, Mr. Warden filed his action to enforce coverage.

On June 1, 1982, Sam Shipley purchased insurance from Columbia Mutual on his home and personal property. On August 20, 1982, fire destroyed the insured premises; Columbia Mutual denied coverage. On May 10, 1984, Mr. Shipley filed his action to enforce coverage.

In response to plaintiffs' actions, defendant pleaded the one-year limitation of section 380.840, on the ground neither petition was filed within one year of the date of the loss. Section 380.840 (repealed 1984) provides:

No suit or action for any loss shall be commenced until such loss becomes due in accordance with the policy, and in no event until sixty days have elapsed after proof of loss has been given the company. No such suit or action shall be sustainable in any court of law or equity unless all the requirements of the policy shall have been complied with, nor unless commenced within twelve months next after the loss. No defense set up or evidence offered by a company in any suit concerning a loss shall render such company liable for damages.

Appellants contend the trial court erred in its judgments of dismissal because: 1) the one-year statute of limitations contained in section 380.840 is void as a special law applying only to farmers' mutual insurance companies in violation of Mo. Const. art. III, § 40; 2) respondent was not organized under sections 380.481-380.570, RSMo 1969, and therefore could not elect to come under the provisions of section 380.840; 3) section 380.591(2), RSMo Cum.Supp.1984, retroactively lengthened the statute of limitations period for nonassessable premium basis policies; and 4) the insurance contracts were unconscionable because the one-year statute of limitations period was buried among the "fine print" policy provisions.

The question is whether the one-year statute of limitations contained in section 380.840 is available in defense of an action by a policy holder against a farmers' mutual insurance company when it insures against loss or damage caused by fire on a nonassessable premium basis.

Historically, farmers' mutual insurance companies have enjoyed a special status under the law. Such companies were originally organized to conduct business in a limited geographical area upon an assessment plan. Traders Mut. Fire Ins. Co. v. Leggett, 284 S.W.2d 586 (Mo.1955). See also Laws 1891, p. 166 (recodified as § 380.500, RSMo 1978 (repealed, Laws 1984, p. 664; effective January 1, 1985)); § 5909, RSMo 1889 (recodified as § 380.490, RSMo 1978 (repealed, Laws 1984, p. 664; effective January 1, 1985)).

In 1953, the legislature adopted a comprehensive act relating to mutual insurance companies. Laws 1953, p. 252 (recodified as section 380.580-380.840, RSMo 1978). Under this Act, members of farmers' mutual insurance companies could incorporate for the purpose of mutually insuring its members. Laws 1953, p. 252, § 2 (recodified as § 380.590, RSMo 1978 (repealed, Laws 1984, p. 665; effective January 1, 1985)). Section 10 of the Act provided that each member of a farmers' mutual insurance company "shall be liable in accordance with the terms of his insurance contract or policy for his pro rata share of the amount necessary to pay all losses and expenses incurred during the time for which his respective policy is in force...." Laws 1953, p. 252, § 10 (recodified as § 380.720, RSMo 1978 (repealed Laws 1984, p. 665; effective January 1, 1985)). Section 9 of the 1953 Act provided:

A company operating under [sections 380.580 to 380.840] may at the time the application for insurance is made or thereafter, collect such fee, initial charge and/or advance assessment or premiums as the directors prescribe and shall collect sufficient assessments or premiums annually, or oftener, to enable it to pay losses and expenses, and, in accordance with the articles of incorporation or bylaws, to create and maintain a safety fund....

Laws 1953, p. 252, § 9 (recodified as § 380.710, RSMo 1959).

Thus a farmers' mutual insurance company operating under the 1953 Act was a company which issued assessable insurance policies to its members; and under the language of section 9, such a farmers' mutual insurance company was also a company which could issue policies on a nonassessable premium basis as the directors prescribed.

In 1963, the legislature amended section 9 of the 1953 Act, Section 380.710, RSMo 1959, to provide:

(1) A company operating under section 380.580 to 380.840 may collect such fee and/or initial charge as the board of directors shall prescribe and shall collect a sufficient amount of money annually, or oftener to enable it to pay losses and expenses, and, in accordance with the articles of incorporation and bylaws, to create and maintain a safety fund. The amount required shall be collected by assessments, except that a company which is qualified to write "miscellaneous" insurance as set out in section 380.620 subdivision 4 may charge and receive premiums on such of its policies as the board of directors may prescribe. Members holding policies issued on the premium basis shall pay the stipulated premium at or before the time when the policy is issued and shall not be liable to assessment. Members holding policies not issued on the premium basis may be charged such advance assessment, payable at or before the time when the policy is issued, as the board of directors may prescribe, but such members shall be liable to further assessment, if any shall be required, in accordance with the provisions of sections 380.580 through 380.840.

See § 380.710(1), RSMo 1978 (repealed Laws 1984, p. 665; effective January 1, 1985).

Respondent contends that, under this section, once a company is qualified to write "miscellaneous" insurance as set out in section 380.620, RSMo 1978, (repealed Laws 1984, p. 665; effective January 1, 1985) then such company may issue nonassessable premium basis policies on any insurable risk as the board of directors may prescribe and still receive the benefits of section 380.840. Appellants counterargue that when a farmers' mutual insurance company undertakes to write nonassessable premium basis policies, then it is limited to writing such policies for "miscellaneous" insurance alone if it is to receive the benefit of the one-year statute of limitations.

Because farmers' mutual insurance companies have enjoyed special status under the law, statutes regulating such companies historically have been more specialized than insurance companies operating under general insurance laws. Traders Mut. Fire Ins. Co., 284 S.W.2d at 589. In apparent recognition of the possible broad effect of section 9 of the 1953 Act, the legislature amended section 380.710 to be more limiting. Prior to the amendment, farmers' mutual insurance companies could collect either premiums or assessments thereby permitting such companies to issue nonassessable premium basis policies without restriction. By its 1963 amendment the legislature narrowed the scope of section 380.710 to collection by assessment with limited exception.

Recognizing the need for a prompt determination and assessment of the losses of members of farmers' mutual insurance companies, the legislature established the one-year statute of limitations for the benefit of such companies operating under section 380.580-380.860. To hold that certain farmers' mutual insurance companies could issue nonassessable policies on any insurable risk, including those risks which would otherwise be covered by assessable policies, would be contrary to the precise rationale for which the shorter statute of limitations was enacted. Such a holding would also serve impermissibly to circumvent the longer statute of limitations applicable to a similar cause of action. The legislature has also authorized farmers' mutual insurance companies to issue certain premium basis policies for the convenience of its members. Such legislation is not intended to be unlimited authority for qualified companies to issue nonassessable policies insuring against risks that were intended to be covered on an assessment basis.

Respondent argues that once a company qualifies to write "miscellaneous" insurance then such company may receive premiums on any of its policies as the board of directors may prescribe. This would, in effect, convert traditional assessable policies to nonassessable policies. Respondent's position relies on the second sentence of the amended section 380.710; however, "[t]he cardinal rule of statutory construction is that the...