Willey v. United Mercantile Life Ins. Co.

• Decision Date: 12 July 1999
• Docket Number: No. 19,600.,19,600.
• Citation: 128 N.M. 98,990 P.2d 211
• Parties: Jerry W. WILLEY, Plaintiff-Appellant, v. UNITED MERCANTILE LIFE INSURANCE COMPANY, a credit life insurance company, Defendant-Appellee.
• Court: Court of Appeals of New Mexico

990 P.2d 211

128 N.M. 98

Jerry W. WILLEY, Plaintiff-Appellant, v. UNITED MERCANTILE LIFE INSURANCE COMPANY, a credit life insurance company, Defendant-Appellee.

No. 19,600.

Court of Appeals of New Mexico.

July 12, 1999.

M.J. Keefe, Albuquerque, for Appellant.

Colbert N. Coldwell, El Paso, TX, for Appellee.

OPINION

HARTZ, Judge.

{1} Jerry W. Willey appeals a summary judgment dismissing his claim against United Mercantile Life Insurance Company (United) with respect to a credit life and disability policy (the Policy). The district court ruled that Willey's claim was barred by the three-year limitations period set forth in NMSA 1978, § 59A-22-14 (1984), and incorporated into the terms of the Policy. On appeal Willey contends that Section 59A-22-14 is not applicable, that the three-year limitations period in the Policy is invalid because it is contrary to public policy, and that the applicable limitations period is therefore the six-year period for breach-of-contract actions, NMSA 1978, § 37-1-3 (1975). He also contends that even if the contractual three-year limitations period is otherwise applicable, United is estopped from relying on the contractual provision because of its failure to deliver the Policy to him before expiration of the limitations period. We hold that the three-year limitations period in the Policy is valid. But then, after pointing out that Section 59A-22-14 is not a statute of limitations, we hold that Willey presented a prima facie case of estoppel, thereby precluding summary judgment on the record before us. We reverse and remand for further proceedings.

I. BACKGROUND

{2} On June 24, 1991, Willey executed a promissory note (the Note) to Western Bank of Las Cruces, New Mexico, in the principal amount of $23,998.23. The Note was payable in twenty-three monthly installments of $450 beginning July 25, 1991, and a final payment on June 25, 1993, of the unpaid principal plus accrued interest. The interest was to accrue at the greater of ten percent or two percent over the Wall Street Journal Prime Rate, to be adjusted daily. To ensure that loan payments would continue if he were to die or become disabled, Willey obtained credit life and disability insurance from United on the day he executed the Note. The single premium of $879.28 was paid with loan proceeds. The insurance had an effective date of June 24, 1991, and an expiration date of June 25, 1993.

{3} Willey became disabled. United paid disability benefits from December 3, 1991, to June 25, 1993. Willey contends that United refused to make the balloon payment due on June 25, 1993.

{4} Apparently, Willey later obtained a new loan with Western Bank to pay the remainder due on the Note, but he was unable to keep up with the payments and received notices of default from the bank. Eventually he obtained legal advice. On February 14, 1997, an attorney wrote United on his behalf, requesting an explanation for its failure to pay the amount sought by Willey. United continued to assert that it did not owe Willey any money, and Willey filed the complaint in this action on September 11, 1997.

{5} On October 23, 1997, United filed its answer to the complaint, a counterclaim for attorney fees, and a motion to dismiss. The motion argued three grounds for dismissal. First, it contended that the complaint was untimely under the following provision in the Policy:

Legal Actions. No legal action may be brought to recover on this Policy within 60 days after written proof of loss has been given as required by this Policy. No such action may be brought after three years from the time written proof of loss is required to be given.

A separate provision of the Policy requires that proof of loss be given within 90 days of the loss. Second, the motion contended that the policy was a type of health insurance governed by what it termed a three-year "statute of limitations" set forth in Section 59A-22-14, and that the claim was barred by the statute. Third, it contended that the Policy did not cover the balloon payment. Willey responded that the Policy was a type of life insurance governed by NMSA 1978, § 59A-20-25 (1987), which he read as requiring that any limitations period in the Policy be at least five years. He also claimed that the Policy covered the balloon payment.

{6} After receiving the briefs, the district court conducted a hearing on United's motion. The court then requested simultaneous supplemental briefs on the interplay between the limitations-of-actions provision in the Policy and the sections of the Insurance Code relating to limitations of actions for insurance policies. In his supplemental brief Willey for the first time contended that United was estopped from relying on the three-year limitations period in the Policy because of United's failure to deliver the Policy to him.

{7} The district court issued its letter decision on April 7, 1998. The court stated that Willey's action was barred by the statutory limitations period. The court directed counsel for United to prepare the order. The summary judgment, which was entered on June 4, dismissed Willey's complaint but made no mention of United's counterclaim for attorney fees. Cf. Kelly Inn No. 102, Inc. v. Kapnison, 113 N.M. 231, 239-40, 824 P.2d 1033, 1041-42 (1992)

(judgment is final and may be appealed despite failure to award attorney fee).

II. DISCUSSION

A. Validity of Limitations Period in Policy

{8} As previously stated, the Policy contained the following provision:

Legal Actions. No legal action may be brought to recover on this Policy within 60 days after written proof of loss has been given as required by this Policy. No such action may be brought after three years from the time written proof of loss is required to be given.

Willey has not challenged United's position that this provision would bar Willey's claim if the provision is valid and if United is not estopped from enforcing it. But see Geyerhahn v. United States Fidelity & Guar. Co., 724 A.2d 1258, 1261-62 (Me.1999); Panepinto v. New York Life Ins. Co., 90 N.Y.2d 717, 665 N.Y.S.2d 385, 688 N.E.2d 241 (1997). First, we discuss the validity of the provision.

{9} One ground for invalidity of the provision would be that it violates a statute. In district court Willey initially contended the three-year limitations period in the policy was rendered invalid by Section 59A-20-25(A), which states in pertinent part:

No policy of life insurance shall be delivered or issued for delivery in this state if it contains any of the following provisions:

(1) a provision for a period of not [sic] less than five years within which an action at law or in equity may be commenced after the cause of action shall accrue[.]

(Willey apparently assumed that paragraph (1) states the opposite of what was intended; that is, he read the paragraph as if the word not is a scrivener's error.) But in his supplemental brief in district court Willey conceded that Section 59A-20-25(A) does not apply to the Policy. The standard policy provisions set forth in Article 20 of the Insurance Code (Chapter 59A of the New Mexico Statutes Annotated, see NMSA 1978, § 59A-1-1 (1993) (chapter title)) do not apply to "any provision of a life insurance policy or contract supplemental thereto relating to disability benefits." NMSA 1978, § 59A-20-3(B) (1984). Willey has not pointed to any other statutory provision that would prohibit the three-year limitations period in the Policy.

{10} In the absence of a statutory prohibition, "provisions in insurance policies which limit the period within which suit may be brought after damage occurs are valid and enforceable if the time period is reasonable." Young v. Seven Bar Flying Serv., Inc. 101 N.M. 545, 547, 685 P.2d 953, 955 (1984). In our view, the three-year limit is reasonable. Even though the general limitations period for actions on a contract is six years, see § 37-1-3(A), our Supreme Court has recognized a twelve-month time-to-sue provision on a policy insuring against theft. See Young, 101 N.M. at 547-48,

685 P.2d at 955-56. Willey has not cited any authority indicating that a three-year limitations period on a disability policy is unreasonably short.

{11} Moreover, the three-year limitations period has the imprimatur of our Legislature. Article 22 of the Insurance Code applies to policies of individual health insurance. See NMSA 1978, § 59A-22-1 (1984). The Insurance Code defines health insurance as

insurance of human beings against bodily injury, disablement or death by accident or accidental means, or the expense thereof, or against disablement or expense resulting from sickness or old age, or covering as to both accident and sickness, and every insurance appertaining thereto, together with provisions operating to safeguard contracts of health insurance against lapse in event of strike or layoff due to labor disputes.

NMSA 1978, § 59A-7-3 (1984) (emphasis added). Section 59A-22-14 sets forth a standard limitations provision for contracts for individual health insurance:

There shall be a provision as follows:

No action at law or in equity shall be brought to recover on this policy prior to the expiration of sixty days after written proof of loss has been furnished in accordance with the requirements of this policy. No such action shall be brought after the expiration of three years after the time written proof of loss is required to be furnished.

This language is virtually identical to the language in the limitations provision of the Policy. Thus, our Legislature has clearly determined that a three-year limitations period in a disability policy is reasonable.

{12} United would have us go one step further. It contends that Section 59A-22-14 constitutes a statute of limitations that governs Willey's action against it. On that point, however, we disagree with United. The language of Section 59A-22-14 appears to be mandatory. But NMSA 1978, Section 59A-22-3 (1984), which is entitled "Required provisions," pr...