Fratto v. New Amsterdam Casualty Co.

Opinion by

Mr. Justice Eagen,

On January 2, 1962, appellants’ building was destroyed by fire; The building and its contents were insured under policiés issued by various insurance companies,,. nine of which are the present appellees. In April of 1963 appellants commenced two actions in the United States District Court against other- insurance companies not here involved, and on June 21, 1963, they instituted a third féderal action against the nine companies before this Court today. All three federal actions were consolidated for trial. On June 7, 1965, the federal district court handed down an opinion allowing recovery for appellants on their two April 1963 claims, but dismissing the suit against appellees for failure to meet the federal jurisdictional amount. Fratto v. northern Ins. Co. of new York, 242 F. Supp. 262 (W.D. Pa. 1965), affirmed sub nom., 359 F. 2d 842 (3d Cir. 1966). It appears that the federal court raised the jurisdictional issue sua sponte.

Upon learning that the federal court was going to dismiss its action against appellees, appellants, on June 24, 1965, commenced a state action in the Common Pleas Court of Allegheny County. Appellees asserted in new matter that this state court suit was untimely, citing a provision common to all the policies here involved: “Suit. No 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.” Since the loss occurred in 1962 and the present suit was not commenced until 1965, appellees moved for summary judgment under Pa. R. C. P. 1035. The motion was granted, hence this appeal.

It is the position of appellants that summary judgment should not have been granted since appellees are estopped from invoking the one year “statute of limitations” provision of the policies. Appellants contend that by expressly admitting the truth of appellants’ allegation in their federal complaint that the suit satisfied federal jurisdictional requirements, appellees lulled appellants into believing that the claim would be finally settled in the federal forum. Therefore, by the time the federal court dismissed the suit, it was too late for appellants to commence a timely state action. The Frattos thus seek to place this controversy within the line of cases holding that “an insurer will , not be permitted to take advantage of the failure of the insured to perform a condition precedent contained in the policy, where the insurer itself is the cause of the failure to perform the condition.” Arlotte v. National Liberty Ins. Co., 312 Pa. 442, 445, 167 A. 295, 296 (1933); Fedas v. Insurance Co. of Pennsylvania, 300 Pa. 555, 151 A. 285 (1930). Cf. Deemer v. Weaver, 324 Pa. 85, 187 A. 215 (1936).

Appellees counter this argument with the proposition that suits brought in a court without jurisdiction are but a nullity and therefore such an action cannot preclude appellees’ later use of the otherwise valid policy statute of limitations in the present case. Dalzell v. London and Lancashire Fire Ins. Co., 252 Pa. 265, 97 A. 452 (1916); Miller v. Fulton, 206 Pa. 595, 56 A. 74 (1903); Hocking v. Howard Ins. Co., 130 Pa. 170, 18 A. 614 (1889); Keystone Mut. Benefit Assoc. v. Norris, 115 Pa. 446, 8 A. 638 (1887); Both v. Northern Assurance Co., 46 Ill. App. 2d 253, 196 N.E. 2d 389 (1964).

We conclude that the summary judgment against the appellants was proper, because the appellees had a perfect right, under legal and equitable principles, to raise the policy’s period of limitations provision.

The legality of provisions in insurance contracts setting time limits upon the commencement of suits to recover on a policy is well established. Lardas v. Underwriters Insurance Company, 426 Pa. 47, 231 A. 2d 740 (1967). Neither is it disputed that the appellants’ suit in the lower court was brought beyond the policy’s limitation period.

The outcome here is controlled in all respects by the decision of this Court in Hocking v. Howard Ins. Co., 130 Pa. 170, 18 A. 614 (1889). In Hocking, the plaintiff sued within the time limits of the policy, but, at trial, the company asserted that the action was premature (it having been commenced less than 60 days after plaintiff had filed with the company a statement, of loss in contravention of the policy provision giving the insurer a 60 day grace period). The trial court agreed and dismissed, plaintiff’s action. His second suit was held untimely. On appeal, plaintiff argued that the insurer’s failure to raise the prematurity defense in its answer in time to allow plaintiff to. commence a timely action after the 60 day period worked an estoppel of the company’s right to invoke the one year statute of limitations in the second suit. This Court rejected that argument and said: “It is undoubtedly true that any act which tends to mislead the plaintiff, while parties are dealing on friendly terms, to avoid litigation, will be held to be evidence of a waiver of such a limitation as the present; but after suit has been brought, and the parties are dealing at arms’ length, the rule does not apply with the same strictness, and much more positive evidence of actual misleading, if not intent to mislead, is necessary to prove a waiver by estoppel.” (Emphasis supplied.)

In the instant controversy, the appellants have a much weaker argument than that which this Court rejected in Hocking. For in Hocking, the company itself raised the defense which defeated the plaintiff’s first action at the time when the new action would be untimely; here, it was the Federal District Court acting sua sponte, which pointed to the jurisdictional flaw that damned the appellants’ suit. If “positive evidence of actual misleading” did not exist in Hocking, it hardly exists here. For the appellants have not demonstrated in a manner to preclude summary judgment against them, that the appellees knew of the jurisdictional defect in the appellants’ suit, or knew that that court would ultimately dismiss the suit. In view of that barrenness in the appellants’ case, we cannot conclude that the appellees smugly sat back, unconscionably looking at the calendar, and anxiously awaiting the day when the appellants’ rights would have no remedy.

Quite apart from its persuasiveness as precedent, Hocking makes sense. If we were to allow the appellants to commence a new action, in contravention of the policy time-limit, and despite the lack of any convincing demonstration that the appellees purposely mislead the appellants, we would, in effect, be charging the appellees with the responsibility of discovering the mistakes made by the appellants. Even the law’s general tendency to construe technical requirements in insurance contracts against the insurer cannot be distorted to allow that situation. Even in suits on insurance contracts, the processes of the law must gov-■era; even in suits on insurance contracts, enforceable rights can be lost through noncompliance with provisions limiting the time for bringing an action.

One more point requires observation. Even had the appellants demonstrated that the appellees acted purposefully in allowing an ill-fated suit to proceed to its own legal exhaustion in the federal courts, still, there is a question whether a suit would have been timely in the state courts if commenced at the same time as the federal suit; for even the federal suit was started beyond the contract’s time limit.¹

In an affidavit opposing the motion for summary judgment, appellants’ counsel recites that this initial delay in the federal court was the result of negotiations with the company tending toward settlement. A finding that delay was caused by negotiations prompted the federal court to excuse appellants’ lateness in their other two federal actions. However, the federal court never ruled on this delay, in spite of the fact that, the appellees raised it in their federal court answer, since that tribunal dismissed on jurisdictional grounds. Since we hold that the appellees have not estopped themselves from the limitation defense, we need not decide this issue.

Judgment affirmed.

1 As related above, the date of loss was January 2, 1962. Suit was not filed in the federal court until June 21, 1963.