O'DONNELL v. Continental Casualty Co.

116 N.W.2d 680, 263 Minn. 326, 1962 Minn. LEXIS 788

Opinions

Thomas Gallagher, Justice.

Action for $5,000 and interest by Joseph C. O’Donnell and Elizabeth A. O’Donnell against Continental Casualty Company on an accident insurance policy issued by said company upon the life of their brother, James J. O’Donnell, in which they were named as beneficiaries and which provided for payment of the sum of $5,000 in case of the accidental death of the insured. On September 25, 1956, the insured sustained injuries in an automobile accident from which he died the following morning.

Defendant did not deny liability on the policy but failed and refused to make payment to the beneficiaries thereunder, and on March 31, 1959, the present action to recover the proceeds of such insurance and interest thereon was instituted.

Defendant’s only defense was that recovery under the policy was barred because this action had not been commenced within a 2-year limitation period provided in the policy. In addition defendant presently also contends that interest should not have been awarded the beneficiaries since no proof of loss was ever furnished by them and no determination of its liability was made until the trial.

At the close of the testimony, the trial court directed a verdict in plaintiffs’ favor for the face amount of the policy and further directed that interest at the rate of 6 percent per annum should be awarded from and after December 26, 1956, the date upon which the court determined payment on the policy became due.

The policy which was in effect at the time of the accident contains the following provisions material to a determination of the issues presented here:

“Standard provisions

“6. The Company upon receipt of such notice, will furnish to the claimant such forms as are usually furnished by it for filing proofs of loss. If such forms are not so furnished within fifteen days after the receipt of such notice, the claimant shall be deemed to have complied with the requirements of this policy as to proof of loss upon submitting within the time fixed in the policy for filing proofs of loss, written proof covering the occurrence, character and extent of the loss for which claim is made.

“7. Affirmative proof of loss must be furnished to the Company at its said office * * * within ninety days after the date of such loss.

“8. The Company shall have the right and opportunity * * * to make an autopsy in case of death where it is not forbidden by law.

“14. No action at law or in equity shall be brought to recover on this policy prior to the expiration of sixty days after proof of loss has been filed in accordance with the requirements of this policy, nor shall such action be brought at all unless brought within two years from the expiration of the time within which proof of loss is required by the policy.”

Shortly after defendant learned of the death of the insured and while the wake was being held on the day prior to the funeral, the claim manager of its health and accident department demanded of one of the beneficiaries that an autopsy be performed upon the deceased-insured, and directed his attention and that of the beneficiaries’ counsel to the fact that the policy extended this right to the insurer. The claim manager also stated to them that there should be an autopsy because defendant had been informed that the cause of the insured’s death was “a cerebral hemorrhage” which might not be covered by the policy. This beneficiary then informed him that since the funeral was taking place the following morning the beneficiaries did not wish an autopsy performed. Their counsel then advised the claim manager that insured’s death certificate specified that the cause of his death was cerebral hemorrhage “due to trauma or injury.” The claim manager then stated: “We are within our rights demanding the autopsy, and we will not pay the claim unless we get it.” Counsel for the beneficiaries testified that the claim manager also told him at that time that “if you won’t agree to have an autopsy performed then I will get an order of the Court, and have his body exhumed, and we will have an autopsy then.” At no time did the claim manager or anyone acting for the defendant deny liability on the policy. Thereafter, the beneficiaries were never informed by the defendant or any of its representatives that it had abandoned its intention of procuring a court order for the autopsy, or had reached a final determination on the question of its liability, nor were proofs of loss ever furnished by it to the beneficiaries as provided in paragraph 6 of the policy. As indicated above, the present action was commenced on March 31, 1959.

At the close of the trial, in directing a verdict in favor of plaintiffs, the trial court stated:

“* * * Everybody admits that James O’Donnell was accidentally killed on September 26th, 1956; and admits that the plaintiffs are the beneficiaries in the policy; the defendant insurance company admits that it had a policy covering Mr. O’Donnell, and that it was in full force and effect, and the premium had been paid, and admits they knew he was killed; admits that they owed this money and should have paid it promptly, and admits they have no defense whatever morally or honestly to this claim, but they seek to avoid the payment of this debt, which they admit they owe, solely on the ground that the plaintiffs were a little dilatory in commencing the suit to recover money which they never should have been required to sue for. To me this is a rather shocking situation. I have practiced law in this state for over fifty years, and a good portion of that time I was counsel for many insurance companies. I can say I have always been very highly impressed with the insurance business, and I want to say that I never saw an insurance company adopt this kind of an. attitude in the fifty years that I have been in business. * * * Normally insurance companies and other honorable business men do not seek to avoid the payment of their just debts because of a lapse of time to sue, but they assert this defense only against claims which perhaps they hadn’t heard of before, or which they suspect are not honest claims, and there is good need for and there should be limitations of that kind for suits to be brought within a reasonable time, so that the parties can find witnesses and present the facts to the jury. * * * The Court is of the opinion here, however, that under the terms of this policy the time within which to bring suit started to run at the time when the policy required that proofs-of-loss be furnished. Now, if the company had carried out its part of the contract, and had presented proofs-of-loss to be filled out, and they had been filled out, this case would be barred. The company never presented any proofs-of-loss. They never even asked the plaintiffs to offer any proof of the facts. Consequently the time never arrived when under this policy proofs-of-loss were required, and therefore the Court is of the opinion that the defense attempted to be asserted here is not available to the defendants, and it is making no objection to the claim on the merits, so that the Court feels that it is his obligation to instruct the jury to return a verdict in favor of the plaintiffs for the full amount of the policy, with interest at 6% [the specific amount of the verdict was fixed by the court at $6,125, of which $5,000 was principal] * *

Defendant subsequently moved for judgment notwithstanding the verdict or a new trial on the ground that the verdict as directed is contrary to law and not justified by the evidence. From an order denying this motion the present appeal is taken.

We are of the opinion that the evidence presented raised a fact issue as to whether defendant by its conduct had waived or was estopped from asserting as a defense under the policy the provision which required that actions thereunder be brought within 2 years from the expiration of the time within which proof of loss was required by the policy. This court has held that a policy provision giving an insurer the right to demand an autopsy to determine the cause of death of an insured is valid and that refusal to grant a request therefor may defeat an action on the policy provided the request is made within a reasonable time and under reasonable circumstances. Johnson v. Bankers Mutual Cas. Ins. Co. 129 Minn. 18, 151 N. W. 413, L. R. A. 1915D, 1199, Ann. Cas. 1916A, 154; Cavallero v. Travelers Ins. Co. 197 Minn. 417, 267 N. W. 370. See, Annotation, 30 A. L. R. (2d) 837; 29A Am. Jur., Insurance, § 1416. Defendant does not rely upon the refusal of plaintiffs to permit the autopsy as a defense in this action, but asserts that, regardless of the controversy with reference thereto, plaintiffs were bound under Standard Provisions 6, 7, and 14 of the policy to institute their action within 2 years from the expiration of the 90-day period within which they were required to file proof of loss under the policy, which 2 years had expired at the time the present action was instituted.

We feel that the facts outlined might well sustain a finding that defendant, by its conduct with reference to the autopsy, is estopped from asserting as a defense in this action the limitation provisions in Standard Provisions 7 and 14 of the policy. Hie positive statements of its claim manager to plaintiffs’ counsel that an autopsy would be performed after the funeral and that if necessary a court order for such purpose would be obtained might well sustain a finding that in reliance thereon plaintiffs delayed commencement of their action on the assumption that the insurer would make payment under its policy after an autopsy satisfied it that the insured’s death was accidental. In such a situation plaintiffs could well believe that some communication to them from defendant would be made with respect to the autopsy and on the question of its liability which had never been denied. If defendant did nothing along the line of its expressed intent and took no steps to advise plaintiffs as to whether it had abandoned the idea of an autopsy, plaintiffs’ delay in talcing any action upon the policy can scarcely be attributed to any fault on their part. The right to have an autopsy rested entirely with defendant and its inaction thereon and its failure to forward proofs of loss forms to plaintiffs certainly could be found to have justified the latter in hoping that a settlement was contemplated which would eliminate the need for litigation.

It is well settled that an insurer, by its statements or conduct, may waive or be estopped from asserting as a defense to an action on a policy standard or statutory provisions incorporated therein which limit the time within which to commence an action thereunder. Thus, it has been held that such a waiver or estoppel is established by an insurer’s request for delay to permit further investigation, 29A Am. Jur., Insurance, § 1803; or to obtain additional proofs of loss which cannot be furnished until after or near the expiration of the limitation period, Meekins v. Aetna Ins. Co. 231 N. C. 452, 57 S. E. (2d) 777, 15 A. L. R. (2d) 949; Bloodgood v. Massachusetts Benefit Life Assn. 19 Misc. 460, 44 N. Y. S. 563; or by its express or implied admissions of liability, coupled with prolonged negotiations through adjusters during which insured is led to believe that his claim will be settled. Insurance Co. v. Brodie, 52 Ark. 11, 11 S. W. 1016; Allemania Fire Ins. Co. v. Peck, 133 Ill. 220, 24 N. E. 538; Little v. Phoenix Ins. Co. 123 Mass. 380, 25 Am. R. 96. See, also, 41 Yale L. J. 1071; Terpeluk v. Insurance Co. of North America, 189 Pa. Super. 259, 265, 150 A. (2d) 558, 561; Killips v. Putnam Fire Ins. Co. 28 Wis. 472, 482, 9 Am. R. 506, 512.

This court has expressed a like viewpoint. Thus, in Stewart v. Na tional Council, 125 Minn. 512, 515, 147 N. W. 651, 653, this view is expressed as follows:

“* * * Under the provisions of this contract the insurance company, by exercising a right given thereby, namely, that of determining in its own way the question of its liability, may occupy * * * the greater portion or the whole time limited to the insured within which to bring the action, thus materially impairing that right or destroying it altogether. * * *

“* * * The legal effect of the clause, suspending the right of action pending the determination by the association of its liability, is simply to toll the running of the limitation period until that determination is made: The result is far more satisfactory, and seems more consistent with principle, than the suggestion * * * that a failure of the association promptly to act * * * should be held a waiver of that right. To so hold would put the insured to the burden of determining when the right might be deemed waived. The consistent and just rule is to deduct the time occupied by the association under the reserved right from the limitation period.”

Nor would the fact that the limitation provision in the policy is also prescribed by statute prevent application of the doctrine of estoppel with respect thereto. This court has frequently expressed the rule that such provisions are subject to the same principles which are applicable to contracts voluntarily made by the parties. Oppenheim v. Firemen’s Fund Ins. Co. 119 Minn. 417, 138 N. W. 777; Kollitz v. Equitable Mutual Fire Ins. Co. 92 Minn. 234, 99 N. W. 892. See, 29 Am. Jur., Insurance, § 257; see, also, Meekins v. Aetna Ins. Co. 231 N. C. 452, 57 S. E. (2d) 777, 15 A. L. R. (2d) 949.

Based upon the authorities cited, it seems definite that here a fact question arose as to whether the conduct of defendant as above described justified plaintiffs in delaying their action and estopped defendant from relying on such delay as a defense. Likewise the authorities indicate that the question whether an insurer by its conduct is estopped to assert policy provisions in its defense to an action on the policy is for the jury to determine. Kassmir v. Prudential Ins. Co. 191 Minn. 340, 254 N. W. 446; James v. Merchants Life & Cas. Co. 118 , 136 N. W. 582; Meekins v. Aetna Ins. Co. supra; 29A Am. Jur., Insurance, § 1954. It would follow that here the trial court erred in directing a verdict in plaintiffs’ favor, and accordingly a new trial must be granted wherein the jury may be afforded the opportunity of determining the issue described.

Should the jury find in plaintiffs’ favor, plaintiffs would be entitled to recover the principal amount of the policy plus interest thereon from the due date thereof in accordance with policy provisions. Standard Provision 9 provides that indemnity is payable immediately upon receipt of due proof of loss. Standard Provision 7 requires that proof of loss be furnished to the insurer within 90 days after the date of loss. If it is determined that defendant, because of its conduct, is estopped from setting up time limitations with reference to proofs of loss and like provisions as a defense in this action, then it would seem only fair that interest should be allowed on the principal amount due from and after 90 days from the date of the death of the insured. The trial court so instructed the jury and we feel that such instruction was correct.

Reversed and new trial granted.