Summary
ongoing communications from insured's broker to insurer regarding coverage position did not render one-year suit limitation clause unreasonable
Summary of this case from Hansen v. Markel Am. Ins. Co.Opinion
02-CV-3504(JMR/FLN)
April 21, 2003
ORDER
This case involves a dispute between an agricultural commodity producer and an international insurance company. Defendant moves for summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure ("Fed.R.Civ.P.").
I. Background
The operative facts are not in dispute. Plaintiff purchased fire and all-risk insurance from defendant to protect a poultry operation. Clause 16 of the all-risk policy provides:
No suit, action or proceeding for the recovery of any claim under this policy shall be sustainable in any court of law or equity unless the same be commenced within twelve months next after discovery by the insured of the occurrence which gives rise to the claim. . . .
This controversy began in Gaylord, Minnesota, on February 24 and 25, 2001, when two of plaintiff's hen barns collapsed after a snowstorm. On February 26, 2001, plaintiff's insurance broker contacted defendant claiming a loss under the all-risk policy.
On March 7, 2001, a structural engineer hired by defendant to investigate this claim wrote to plaintiff concerning barn safety, following an inspection of the hen barns. He highlighted a number of changes to the bracing of the barns which he considered necessary in order to repair the barns and improve safety. He identified inadequate truss bracing as the cause of the "roof snow collapses." In a report dated April 11, 2001, an expert hired by plaintiff described the effect of snow on the barns' trusses and discussed repair for future safety.
Plaintiff was denied coverage by letter dated August 24, 2001. The letter stated: "Allianz Insurance Company has determined the cause of the collapse was due to faulty, defective construction and must, therefore, respectively [sic] deny coverage for the captioned claim. . . . If you have any further information which you feel we should review in relation to our position set forth above, we encourage you to forward this material to our attention for further consideration." Witner All. Ex. B. On September 21, 2001, plaintiff wrote to defendant objecting to the denial of coverage and requesting a copy of any reports prepared by the insurer's experts.
By letter dated October 5, 2001, Allianz reiterated its denial of coverage, attributing the collapse not to the amount and weight of snow, but to a design defect. The insurer stated that "no coverage would be afforded per the policy," and again requested any additional useful information. Witner Aff. Ex. D. Plaintiff's insurance broker continued to discuss the claim with Allianz through December, 2001. When it became apparent defendant would not cover this claim, plaintiff retained counsel and filed this lawsuit on August 7, 2002.
It is Clause 16's restriction of the commencement date for any "suit, action or proceeding . . ." which is at issue here. Clause 17 defines an occurrence as the event or disaster causing damage.
II. Discussion
Summary judgment is appropriate when there are no material facts in dispute, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 246 (1986). Because the facts of this case are undisputed, only questions of statutory and contract interpretations remain. This case is therefore particularly suited to summary judgment. See Progressive Specialty Ins. Co. v. Widness, 635 N.W.2d 516, 519 (Minn. 2001); Kemper Ins. Co. v. Stone, 269 N.W.2d 885 (Minn. 1978).
Minnesota law controls here. The Minnesota legislature has enacted a six year statute of limitations governing contracts, including insurance contracts. See Minn. Stat. § 541.05. Minnesota law also permits parties to a contract to shorten this period, provided no statute prohibits the use of a different limitations period, and that any time fixed is not unreasonable. Henning Nelson Constr. Co. v. Fireman's Fund Ins. Co., 383 N.W.2d 645, 650-51 (Minn. 1986); Hayfield Farmers Elevator Mercantile Co. v. New Amsterdam Cas. Co., 203 Minn. 522, 530; 282 N.W. 265, 269 (Minn. 1938). Plaintiff does not cite any conflicting statute. The question before the Court, then, devolves into a determination of whether the one year limitations period in defendant's all-risk policy is reasonable considering the facts of this case.
The reasonableness of a limitations period within an insurance policy is evaluated on a case-by-case basis. Henning Nelson Constr. Co., 383 N.W.2d at 651. What is acceptable in one case may be unacceptable in another. See Peggy Rose Revocable Trust v. Eppich, 640 N.W.2d 601, 606 (Minn. 2002). Among the factors to be used in determining reasonableness is the amount of time remaining under the limitations clause after the insurer denies a claim. See L H Transp., Inc. v. Drew Agency, Inc., 403 N.W.2d 223, 226 n. 1 (Minn. 1987); Minn. Mut. Fire Cas. Co. v. N. Lakes Constr., Inc., 400 N.W.2d 367, 370-71 (Minn.Ct.App. 1987) (finding internal provision reasonable where insured took no action for three months after denial). The Court also considers whether additional information was needed for the insured's cause of action to mature,Gendreau v. State Farm Fire Ins. Co., 206 Minn. 237, 239; 288 N.W. 225, 226 (Minn. 1939) (finding one-year-after-incident clause reasonable), and whether the parties held equal bargaining power in negotiating the contract. See Freeman v. Skogen, 1993 WL 318927 (Minn.Ct.App. Aug. 24, 1993) (unpublished) (finding six-month limit reasonable where parties held an equal level of bargaining power).
Plaintiff particularly emphasizes the Minnesota Supreme Court's decision in Henning, which found a one year limitations period unreasonable. 383 N.W.2d at 651. In Henning, a foundational wall collapsed on June 21, 1979. Id. at 648. The insured filed a proof of loss with the insurance company that day. The claim was denied on January 7, 1981, more than 18 months after the incident. Id. at 649. The insured sought to have the insurer change its decision, but when its efforts failed, filed suit to recover. Id. at 650. The insurer, relying on the one year limit, sought summary judgment. Id. Summary judgment was granted, and on review, the Minnesota Supreme Court found the trial court's "decision as to reasonableness of the 1-year limitation [was] not clearly erroneous" and affirmed. Id. at 651. Here, plaintiff suggestsHenning is on all fours with this case and argues it bars enforcement of defendant's one year limitations clause.
The Court does not agree. In Henning, the insurer's claim review process did not conclude until after the policy's one year limitations term had expired, thereby making enforcement of the clause unreasonable. Allianz explicitly denied coverage on August 24, 2001. This denial left plaintiff nearly six months in which to initiate litigation before the policy's contractual limitation took affect. While the denial letters contained form language inviting plaintiff to submit additional information, the Court finds both letters are unambiguous denials of plaintiff's claim.
Plaintiff neither argues that defendant's actions somehow estop it from applying the one year provision nor does it suggest defendant waived the one year limit. Plaintiff does suggest, however, that Henning may be dispositive, arguing it amounts to a blanket unreasonableness bar to one-year limitations clauses in all-risk policies. The Court finds this argument to be insubstantial. The suggestion is unsupported by Henning's language or by a review of subsequent Minnesota decisions which make no such connection.
In finding the policy reasonable under these circumstances, the Court notes plaintiff is a highly sophisticated company that worked with an insurance broker. Both plaintiff and its broker "knew and understood the language of the policy." See Olson v. Rugloski, 277 N.W.2d 385, (Minn. 1979), quoted in Minn. Mut. Fire Cas. Co., 400 N.W.2d at 370;Indep. Consol. Sch. Dist. No. 24 v. Carlstrom, 277 Minn. 117, 122; 151 N.W.2d 784, 787-88 (Minn. 1967) (upholding one year limit where parties on equal footing expressly agreed to do so). Given their knowledge, either could have asked defendant to waive the one year period pending their review of the expert report, or filed suit as a prophylactic after either the August 24 or October 5 denial of coverage. When the Court considers the sophistication of the plaintiff and its insurance broker, there is no basis to find the one year clause unreasonable. Plaintiff next asks the Court to determine that it complied with the limitations clause with respect to its claims for business interruption, contingent business interruption, extra expense, and loss of livestock (collectively referred to as "business interruption claims"), which it claims could not have accrued until defendant denied coverage on August 24, 2001. According to plaintiff, the policy's overall one year limitations clause does not bar coverage for these business interruption claims, because this suit was filed within one year of the August 24, 2001, denial. The Court declines to do so.
Plaintiff's position cannot be supported by a fair construction of the insurance policy. Clause 16 of the policy requires the insured to commence litigation within 12 months of the insured's discovery "of the occurrence which gives rise to the claim." Clause 17 of the policy defines occurrence as the event or disaster causing damage; here, the collapse of the hen barns. In order to adopt plaintiff's theory that its business interruption claims were commenced within 12 months of the occurrence, the Court would have to find plaintiff's loss was caused by defendant's decision to decline coverage. The Court cannot adopt this tortured construction of the policy terms. Further, the policy language contemplates and rejects this theory of recovery in Clauses A and B of the Gross Earnings Extension, which bar recovery for business losses when the underlying claim is denied. Witmer Aff. at Ex. A. Because the Court will not adopt construction of the clause contrary to plain language and its terms, plaintiff's entire claim is time-barred by Clause 16.
By way of a fallback position, plaintiff argues Clause 16 is inconsistent with other time limits in the policy. Here, plaintiff points to a clause requiring filing all claims within one year of the occurrence giving rise to coverage. There is no explanation, however, why that clause, or any other, renders the policy's one year limitations period unreasonable. This is not a situation where investigation delayed processing of an insurance claim, thereby making the time limit unpractical and unreasonable. See, e.g., Semmes v. Hartford Ins. Co., 80 U.S. 158, 160-62 (1871) (concluding that United States Civil War made enforcement of internal limitations clause impossible and unreasonable);Pools, Inc. v. Ins. Co. of N. Am., 1988 Minn. App. LEXIS 1137, *4-5 (Minn.Ct.App. Nov. 22, 1988) (unpublished) (finding that difficulty researching cause of pool collapse during a Minnesota winter justified insured's delay and made one year clause unreasonable). Finally, plaintiff asks the Court to grant a continuance under Rule 56(f), which allows discovery where the party opposing summary judgment otherwise cannot present facts sufficient to justify its opposition. See Fed.R.Civ.P. 56(f); Iverson v. Johnson Gas Appliance Co., 172 F.3d 524, 530 (8th Cir. 1999). "This option exists to prevent a party from being unfairly thrown out of court by a premature motion for summary judgment."Id. (citing Celotex Corp., 477 U.S. at 326).
The Court finds no basis to grant a continuance here. Plaintiff has neither explained with any specificity the additional information further discovery might produce relevant to the question of the reasonableness nor shown why summary judgment is premature. The question before the Court is one of contract interpretation. This is a written contract; there is no dispute as to its terms, the date of the occurrence, or the insurance company's letters denying coverage. Absent any indication that discovery would uncover information related to these issues, the Court sees no reason to extend discovery or stay its decision in this case.
III. Conclusion
Based on the foregoing, the Court finds plaintiff's lawsuit is time-barred by the terms of the insurance contract. Accordingly,
Defendants' motion for summary judgment [Docket No. 9] is granted.
IT IS SO ORDERED.
LET JUDGMENT BE ENTERED ACCORDINGLY.