McGlinchey v. Aetna Casualty & Surety Co. , 224 Conn. 133 ( 1992 )

Berdon, J.,

dissenting. I disagree with the majority’s conclusion that the two year contractual limitation for demanding arbitration for underinsured motorist coverage is enforceable.

In Continental Ins. Co. v. Cebe-Habersky, 214 Conn. 209, 571 A.2d 104 (1990), the majority of this court held that General Statutes (Rev. to 1989) § 38-175c (b) (1), now recodified as § 38a-336, prevents an insured from recovering underinsured motorist benefits until after the tortfeasor’s liability has been exhausted. Practically speaking, it may take years of litigation, at trial and on appeal, to exhaust a tortfeasor’s liability. As a result, it is often impossible to comply with this condition precedent to arbitration.¹ The majority addresses these concerns in footnote 7 of its opinion, merely by noting that an insured may bring an action to recover underinsured motorist benefits while litigation against the tortfeasor is pending. The majority’s suggestion adds to the costs of litigation, further burdens our trial courts, and ignores the realities of litigation. Even if the insured’s attorney could demand arbitration ethically,² the insured’s claim for arbitration for underinsured motorist coverage could be summarily disposed of simply because the insured failed to satisfy the condition precedent of exhausting the tortfeasor’s liability. This leads to absurd consequences.

The legislature set forth the public policy of this state when it enacted the statutory scheme to provide for underinsured motorist coverage. It intended that “every insured is entitled to recover for the damages he or she would have been able to recover if the [underinsured] motorist had maintained a policy of liability insurance” equal to the coverage limits of the insured’s policy. Harvey v. Travelers Indemnity Co., 188 Conn. 245, 249, 449 A.2d 157 (1982). The purpose of the legislation was “to provide broad coverage to victims of uninsured [and underinsured] motorists, and . . . [i]t was not the intent of the legislature ... to offer protection with one hand and then take a part of it away with the other.” (Internal quotation marks omitted.) Id., 250-51, quoting State Farm Mutual Automobile Ins. Co. v. Hinkel, 488 P.2d 1151, 1153 (Nev. 1971). Because this court’s holding in Continental Ins. Co. v. Cebe-Haber sky, supra, requires an insured to exhaust a tortfeasor’s policy, a two year contractual limitation for a demand for underinsured motorist arbitration violates the purpose of the legislation and offends public policy.³

The two year contractual limitation in the defendant’s policy cannot stand for another reason. Although the failure to comply with a limitation period in an insurance contract is a defense to an action on the policy, such a contractual provision will not be enforced if there “is a valid excuse for nonperformance.” Monteiro v. American Home Assurance Co., 177 Conn. 281, 283, 416 A.2d 1189 (1979). In the present case, the condition precedent imposed by the majority of this court in Continental Ins. Co. v. Cebe-Habersky, supra, constitutes a valid excuse. Furthermore, the law suspends performance of contractual obligations when performance becomes impractical or its purpose is frustrated. 2 Restatement (Second), Contracts § 269 (1982). It is simply impractical to require an insured to demand arbitration of an underinsured motorist claim before it can be determined whether the tortfeasor’s liability has been exhausted.

The majority’s ruling today allows the insurer to have it both ways. The insured must exhaust every last dollar of the tortfeasor’s insurance in order to be eligible for underinsured coverage, and yet, the insured must initiate arbitration proceedings within a time period that is often insufficient to allow exhaustion of the tortfeasor’s liability.

For the foregoing reasons, I would find that the two year contractual limitation should not be enforced as to underinsured motorist coverage.⁴1 would, therefore, reverse the trial court’s judgment and remand this matter with instructions to deny the defendant’s application to vacate and render judgment on the plaintiff’s application to confirm the award to the plaintiff in the sum of $180,000.

Accordingly, I dissent.

1 Indeed, Justice Shea in his dissent in Continental Ins. Co. v. CebeHabersky, 214 Conn. 209, 214, 571 A.2d 104 (1990), cogently pointed out the following: “The effect of the majority’s holding is to require a victim who has uninsured motorist coverage exceeding the limit of the tortfeasor’s liability insurance to obtain the last dollar of that insurance under the penalty of losing the entire benefit of his uninsured motorist coverage. By requiring the victim to obtain the full amount of the tortfeasor’s liability coverage before proceeding against the uninsured motorist carrier, the majority has erected a barrier to the settlement of liability claims that is likely to have a serious impact upon our overburdened jury trial docket.”

2 Rule 3.1 of the Connecticut Rules of Professional Conduct provides in pertinent part: “A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law.”

3 The majority’s claim that the plaintiff’s public policy argument fails because General Statutes (Rev. to 1987) § 38-27, now recodified as § 38a-290, allows the insurer to include a two year limitation in its policy is not persuasive. Of course, the legislature is the final arbiter of our public policy. Laurel Bank & Trust Co. v. Mark Ford, Inc., 182 Conn. 437, 442, 438 A.2d 705 (1980). Although statutes and regulations that are applicable to uninsured motorist coverage usually apply to underinsured motorist coverage as well, § 38a-290 must be limited to its precise language in this case—that is, it must be limited to apply only to “uninsured” motorist provisions and not “underinsured” motorist provisions. This limited construction makes sense because one who brings a claim for uninsured motorist coverage knows almost immediately whether the tortfeasor has insurance. In contrast, a claim for underinsured motorist coverage involves the more complicated tasks of determining how much coverage is available followed by measures to exhaust such coverage. “Where the terms of the policy are of doubtful meaning, the construction most favorable to the insured will be adopted.” (Internal quotation marks omitted.) Beach v. Middlesex Mutual Assurance Co., 205 Conn. 246, 250, 532 A.2d 1297 (1987), quoting LaBonte v. Federal Mutual Ins. Co., 159 Conn. 252, 256, 268 A.2d 663 (1970). “In construing a statute, common sense must be used, and courts will assume that the legislature intended to accomplish a reasonable and rational result. . . . Statutes must be construed, if possible, that absurdity and mischief may be avoided.” (Citations omitted; internal quotation marks omitted.) Ford Motor Credit Co. v. B. W. Beardsley, Inc., 208 Conn. 13, 20, 542 A.2d 1159 (1988).

4 As noted in footnote 3, uninsured motorist coverage involves different considerations.