Case Title: Allstate Insurance Company v. Spinelli

Citation: 443 A.2d 1286

Docket Number: 

State: delaware

Court: Delaware Supreme Court

Date: 1982-03-22T00:00:00Z

Document:
443 A.2d 1286 (1982)
ALLSTATE INSURANCE COMPANY, a corporation duly existing under the laws of the State of Delaware, Defendant Below, Appellant,
v.
Clyde SPINELLI, Sr., Plaintiff Below, Appellee.

Supreme Court of Delaware.
Submitted December 18, 1981.[*]
Decided March 22, 1982.
Dennis D. Ferri (argued), of Becker & Ferri, P. A., Wilmington, for appellant.
Stephen B. Potter (argued), and James R. Leonard, of Potter & Carmine, P. A., Wilmington, for appellee.
Before HERRMANN, Chief Justice, DUFFY, McNEILLY, QUILLEN and HORSEY, Justices, constituting the Court en banc.
HORSEY, Justice, for the Court, with DUFFY, Justice, concurring:
This appeal concerns the determination of the applicable statute of limitations over claims for "uninsured vehicle coverage" required *1287 under 18 Del.C. § 3902(a).[1] The Court of Chancery found plaintiff's claim to be contractual in nature. From this finding, the Court ruled that the applicable statute of limitations was 10 Del.C. § 8106,[2] which prescribes a three-year limitations period. The Court then ruled that under § 8106 plaintiff's claim for uninsured vehicle coverage benefits would not accrue against plaintiff's automobile's insurance carrier, Allstate Insurance Company, until the "uninsured motorist status of the tortfeasor is ascertained." Hence, the three-year limitation period of § 8106 did not begin to run until that date. Applying those rulings to the facts of the case, the Chancellor found the suit to have been timely filed and denied Allstate's motion to dismiss. We affirm the judgment below.
We conclude that an action by an insured against his automobile insurance carrier to recover uninsured motorist benefits essentially sounds in contract rather than in tort. Hence, the timeliness of a suit for uninsured motorist benefits is controlled by § 8106, our statute of limitations applicable to actions for breach of contract, rather than 10 Del.C. § 8119, our limitations statute controlling tort claims for personal injury.[3] We also agree with the Chancellor that the instant suit was timely filed. However, we disagree with the Chancellor as to when the three-year limitation of § 8106 begins to run on an uninsured motorist benefit claim. We hold that such a cause of action does not accrue, and hence the limitation of § 8106 does not begin to run, until the insurer denies coverage and notifies its insured of rejection of any claim for such benefits.
On August 28, 1976, Clyde Spinelli, Sr. (plaintiff) was injured in an automobile accident when his vehicle operated by his wife was struck in the rear by a vehicle driven by Eugene Gilday (Gilday). The purported insurer of the automobile driven by Gilday was Kemper Insurance Company (Kemper). Spinelli's vehicle was insured by Allstate Insurance Company (Allstate) with Spinelli the named insured. The policy included *1288 coverage for damages caused by "uninsured motorists."[4]
More than 20 months after date of accident, Spinelli filed a personal injury suit against Gilday in Superior Court. Negotiations ensued between plaintiff and Kemper (Gilday's purported insurer). However, Kemper's attorney deferred entering a court appearance for Gilday until November 30, 1978. But 13 days later, Kemper, on December 13, 1978, disclaimed third-party liability coverage on the automobile that Gilday was operating at the time of the accident.
Spinelli continued to pursue his pending suit against Gilday and in March, 1979 obtained a default judgment against Gilday. In September, 1979, following an inquisition as to damages, Spinelli was awarded a judgment of $16,000 against Gilday. In October, 1979, after the judgment proved to be uncollectible, Spinelli, for the first time, informed Allstate of Gilday's uninsured status. Spinelli also sought information as to the uninsured motorist provisions of his Allstate policy, though apparently without making a formal demand upon Allstate for uninsured motorist coverage benefits.
On December 10, 1979 (39 months after date of accident), Spinelli filed suit in Superior Court against Allstate for recovery under his policy of uninsured motorist benefits. The parties then agreed to stay the suit and to arbitrate their dispute under the arbitration provisions of the Allstate policy.[5] However, before an arbitration hearing could be held, Allstate withdrew from arbitration, answered Spinelli's complaint, and moved for judgment on the pleadings on its limitation defenses. Allstate relied primarily on the two-year limitation of § 8119 but contended, in the alternative, that if the action were controlled by § 8106, the suit was also time-barred because the cause of action accrued on the date of Spinelli's injury, the date of the accident.
Spinelli then filed this action in the Court of Chancery seeking an order compelling arbitration and staying the Superior Court proceedings, including determination of Allstate's pending motion for judgment on the pleadings. Allstate countered by moving to dismiss the Chancery suit as barred by either §§ 8119 or 8106.
As stated, the Chancellor denied the motion and ruled: first, that the claim was based on a contract right rather than a tortious injury; and therefore the three-year contract limitation of § 8106 controlled; and second, that liability accrued and hence the statute began to run not on the occurrence of the accident but upon "the ascertainment of the uninsured status of the tortfeasor." Allstate then appealed. The only issue before us is the timeliness of Spinelli's suit.
Allstate claims the Court of Chancery committed legal error as to both issues: (1) the applicable statute of limitations controlling Spinelli's claim for uninsured motorist benefits; and (2) the date when Spinelli's cause of action accrued and the statute of limitations began to run on his claim. As to *1289 the applicable statute, Allstate contends, as stated, that Spinelli's claim is based upon personal injury. Hence, Allstate argues that the applicable statute of limitations is 10 Del.C. § 8119 because it controls all actions for damages based on claims for personal injury.[6] Allstate argues that this Court's 1978 decision in Nationwide Insurance Company v. Rothermel, Del.Supr., 385 A.2d 691 (1978), calls for, if not requires, this result. In Rothermel, this Court ruled that suits based on claims for personal injury protection (PIP benefits) are controlled by the time limitation of 10 Del.C. § 8119 and not that of § 8106. Allstate argues that this Court's ratio decidendi in Rothermel applies with equal force to accidents for uninsured motorist benefits. Hence, it contends, Spinelli's claim for uninsured benefits based on personal injury should also be controlled by the time limitations of § 8119.
As to the second issue, when Spinelli's cause of action accrued and the statute began to run on his claim, Allstate contends that under § 8119 the claim is clearly time-barred because it was not brought within two years of the date of the accident and Spinelli's alleged injuries. In the alternative, Allstate argues that even if § 8106 were found to be the governing statute of limitations, Spinelli's suit is still time-barred because the three-year limitation of § 8106 should also run from the date of accident-injury.
On the first issue, Spinelli understandably responds that the Court of Chancery correctly determined § 8106 to be the appropriate statute of limitations controlling his claim for uninsured motorist benefits. Spinelli reasons, as did the Court below, that an uninsured motorist claim is founded in contract, not tort; that is, the claim exists only by reason of the provisions of his insurance policy with Allstate. Hence, Spinelli argues, since the action is based on a bargained-for promise, the timeliness of the action should be governed by the contract language of 10 Del.C. § 8106.
On both issues, Spinelli responds that Rothermel's reasoning as applied to PIP benefits is not pertinent to a claim for uninsured motorist benefits. Rothermel reasoned that since an insurer's subrogation rights against a tortfeasor are subject to the two-year limitation period of § 8119, an insured's suit for PIP benefits should also be subject to the same limitation period. Spinelli argues that Rothermel either should be overruled or is distinguishable. We agree that Rothermel is distinguishable and should not control the limitation questions here presented relating to uninsured motorist coverage benefits.[7] However, we cannot agree that our decision in Rothermel should be overruled.
We conclude that a suit for recovery of uninsured motorist benefits is more nearly *1290 akin to a contract claim than a tort action and, hence, should be controlled by our contract rather than our tort statute of limitations. Thus, we hold that the three-year limitation period of § 8106 determines the timeliness of this suit for recovery of uninsured motorist benefits. We hereby adopt the view held by the majority of jurisdictions  that actions based on uninsured motorist coverage claims are actions ex contractu and as such are controlled by the applicable contract statute of limitations. See, 7 Appleman, Insurance Law and Practice, § 4331 (2d Ed. 1962); see also, Annot., 28 A.L.R.3d 580 (1969).[8]
Chancellor Marvel explained the majority view as follows:
We approve and adopt the Chancellor's reasoning for concluding that uninsured motorist coverage claims should be controlled by 10 Del.C. § 8106 rather than 10 Del.C. § 8119.
We conclude that claims for PIP benefits are indeed distinguishable from claims for uninsured motorist benefits, in several significant respects. For instance, as Rothermel holds, a claim for PIP benefits becomes operable or assertable as a statutory right under 21 Del.C. § 2118(a) immediately upon injury or loss. And the claim is intended to be promptly paid following an accident by an insurer to an injured occupant of the insured vehicle  in accord with the underlying purpose of such "no-fault" personal injury protection benefits. The payor-insurer, through subrogation, then acquires an immediate right to sue the third-party tortfeasor for recovery of such payments. And, as Rothermel noted, the insurer's subrogation right over against the tortfeasor is also *1291 subject to the same two-year limitation of § 8119.[9]
In contrast, uninsured motorist statutory benefits (under 18 Del.C. § 3902(a)) are not embraced within the no-fault concept of an immediately assertable right, as Rothermel found to be the intent of 21 Del.C. § 2118(a). Indeed, a claim for uninsured motorist benefits, by its very nature, becomes "operative", not upon the occurrence of a motor vehicle accident, but only after the claimant-insured has established that he/she is "legally entitled to recover damages from [the] owners or operators of [the] uninsured or hit-and-run motor vehicle." (See footnote 1 above.)[10]
Further, while a PIP claim arises against the insurer as a direct result of an accident, an uninsured motorist claim is only indirectly related to the accident itself. Pickering v. American Employers Insurance Company, supra. Here, Spinelli, under the terms of Allstate's policy, had no assertable claim against Allstate for uninsured motorist benefits until: (1) he had established his legal right to recover damages from Gilday for personal injury (and any property losses); and (2) Gilday's status was determined to be that of an uninsured motorist or the operator of an uninsured automobile within the meaning of Allstate's policy. Until those two conditions were met, Spinelli lacked standing to assert a claim against Allstate for uninsured motorist benefits.[11]
Moreover, under the statutory definition of "uninsured motor vehicle" within 18 Del.C. § 3902(c),[12] a tortfeasor's uninsured status may result from insolvency of the insurer as late as one year after the accident. And, under Allstate's policy, an uninsured driver is defined as including an "underinsured tortfeasor"  a status which could not be established until a judgment is obtained by the insured against a third-party tortfeasor.
In summary, the two types of coverage serve entirely different purposes. PIP benefits are designed to assure "prompt payment *1292 to an injured party for medical expenses and lost earnings and property damage," De Vincentis v. Maryland Casualty Co., Del.Super., 325 A.2d 610, 612 (1974); while "[u]ninsured motorist coverage is designed to protect innocent, injured persons who are unable to obtain recompense from negligent tortfeasors." Abramowicz v. State Farm Mutual Insurance Co., Del.Super., 369 A.2d 691, 694 (1977); Booth, supra. Thus, as stated, we conclude that while PIP benefit claims are controlled by 10 Del.C. § 8119, uninsured motorist benefits claims are controlled by 10 Del.C. § 8106.
We think the answer to the remaining question  when a cause of action for uninsured motorist benefits accrues and the three-year limitation of § 8106 begins to run  logically follows from the contract nature of the action.
The Chancellor ruled that Spinelli's cause of action for breach of contract accrued upon Spinelli's "ascertainment of the uninsured status of the tortfeasor." We disagree.
Under general principles of contract law, the time limitation of a contract claim limitation statute begins to run from the date of breach of contract. Worrel v. Farmers Bank of Dela., Del.Supr., 430 A.2d 469 (1981); Pioneer Nat. Title Ins. Co. v. Child Inc., Del.Supr., 401 A.2d 68 (1979); Artesian Water Co. v. Lynch, Del.Ch., 283 A.2d 690 (1971); Pioneer Nat. Title Ins. Co. v. Sabo, Del.Super., 382 A.2d 265 (1978); Rudginski v. Pullella, Del.Super., 378 A.2d 646 (1977); 51 Am.Jur.2d., Limitation of Actions § 126 (1970).
Established contract case law thus recognizes that until a breach occurs, there is no justiciable controversy under the contract (here a policy) upon which a party may sue. So long as the parties to a contract perform in accordance with the bargained-for obligations, no party has cause to complain. It is only when one party contends the other party has ceased to perform in violation of the contract that a justiciable controversy exists.
Here, we conclude that a justiciable controversy did not arise until Allstate denied Spinelli's claim for coverage benefits and so informed Spinelli. The record indicates that that occurred sometime in November, 1979. Hence, Spinelli's suit against Allstate filed the following month was timely filed under § 8106.
Affirmed.
COVERAGE SS  Uninsured Motorists Insurance
Allstate will pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury, sickness or disease, including death resulting therefrom, hereinafter called "bodily injury", sustained by the insured or property damage, caused by accident and arising out of the ownership, maintenance or use of such uninsured automobile.
No default judgment against any known person or organization alleged to be legally responsible for the bodily injury or property damage shall be conclusive, as between the insured and Allstate, as to the establishment of legal liability or of the amount of damages to which the insured is legally entitled.
Definitions of words used under this Section
DUFFY, Justice (concurring):
I concur in the judgment of the Court.
[*]  Supplemental briefing, following argument, was not completed until Feb. 9, 1982.
[1]  18 Del.C. § 3902(a) reads in full as follows:

"(a) No policy insuring against liability arising out of the ownership, maintenance or use of any motor vehicle shall be delivered or issued for delivery in this State with respect to any such vehicle registered or principally garaged in this State unless coverage is provided therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured or hit-and-run motor vehicles for bodily injury, sickness or disease, including death, or personal property damage resulting from the ownership, maintenance or use of such uninsured or hit-and-run motor vehicle. Except, that no such coverage shall be required in or supplemental to a policy where rejected in writing, on a form furnished by the insurer describing the coverage being rejected, by an insured named therein, or upon any renewal of such policy unless the coverage is then requested in writing by the named insured. The coverage herein required may be referred to as `uninsured vehicle coverage.'"
[2]  10 Del.C. § 8106 states:

"§ 8106. Actions subject to 3 year limitation.
No action to recover damages for trespass, no action to regain possession of personal chattels, no action to recover a debt not evidenced by a record or by an instrument under seal, no action based on a detailed statement of the mutual demands in the nature of debit and credit between parties arising out of contractual or fiduciary relations, no action based on a promise, no action based on a statute, and no action to recover damages caused by an injury unaccompanied with force or resulting indirectly from the act of the defendant shall be brought after the expiration of 3 years from the accruing of the cause of such action; subject, however, to the provisions of §§ 8108-8110, 8119 and 8127 of this title."
[3]  10 Del.C. § 8119 reads in full as follows:

"No action for the recovery of damages upon a claim for alleged personal injuries shall be brought after the expiration of 2 years from the date upon which it is claimed that such alleged injuries were sustained; subject, however, to the provisions of § 8127 of this title."
[4]  See Appendix A for the pertinent provisions of the Allstate insurance policy concerning uninsured motorist coverage.
[5]  The arbitration provision of the Allstate policy reads in full as follows:

"Arbitration. If any person making claim here-under and Allstate do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured automobile because of bodily injury to the insured or do not agree as to the amount of payment which may be owing under this coverage, then, upon written demand of such person, the matter or matters upon which such person and Allstate do not agree shall be settled by arbitration in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Such person and Allstate each agree to consider itself bound and to be bound by any award made by the arbitrators pursuant to this coverage."
[6]  We understand that Spinelli's third-party claim against Gilday was confined to personal injuries and did not include a property damage claim. Further, we note that neither party addresses the issue as to what statute of limitations would control a mixed claim for personal injury and property damages asserted under Allstate's uninsured motorist coverage. (See footnote 3.)
[7]  The panel of this Court which previously heard this appeal concluded otherwise; that is, that Spinelli's uninsured motorist claim should be subject to the two-year limitation of § 8119; and that his claim accrued, for purposes of the running of the statute, from the date of the motor vehicle accident causing his injury. Two objectives and one reservation underlay that decision. The objectives were: (1) to apply the same (two-year) limitations rule to all motor vehicle related claims for personal injury, whether tort claims asserted against a third party or policy claims asserted against a claimant's own insurer, either for PIP benefits (Rothermel) or for uninsured motorist benefits (this case); and (2) to have the time limitation on all such claims run from the same date  the date of the motor vehicle accident, an easily ascertainable date that would also get all such claims in court reasonably promptly. The reservation was: the lack of a persuasive argument for a time limitation and accrual of action distinction between claims for PIP benefits and claims for uninsured motorist coverage benefits. However, with the benefit of further briefing and reargument, the Court en Banc now concludes that the panel decision was in error.
[8]  The majority rule has been applied in: Hartford Accident & Indemnity Company v. Mason, Fla.Ct.App., 210 So. 2d 474 (1968); Booth v. Fireman's Fund Insurance Co., La.Supr., 253 La. 869, 218 So. 2d 580 (1969); DeLuca v. Motor Vehicle Accident Indemnity Corp., N.Y.Ct. App., 17 N.Y.2d 76, 268 N.Y.S.2d 289, 215 N.E.2d 482 (1966); Pickering v. American Employers Insurance Company, R.I.Supr., 109 R.I. 143, 282 A.2d 584 (1971); Schleif v. Hardware Dealer's Mutual Fire Insurance Company, Tenn.Supr., 218 Tenn. 489, 404 S.W.2d 490 (1966); Franco v. Allstate Insurance Company, Tex.Supr., 505 S.W.2d 789 (1974); Sahloff v. Western Casualty & Surety Company, Wis. Supr., 45 Wis.2d 60, 171 N.W.2d 914 (1969). Contra: Ford v. Nationwide, D.Del., C.A. No. 78-21 (unreported decision, June 13, 1979), applying 10 Del.C. § 8119; Vaughn v. Collum, Ga.Supr., 236 Ga. 582, 224 S.E.2d 416 (1976); Brown v. Lumbermen's Mutual Casualty Company, N.C.Supr., 285 N.C. 313, 204 S.E.2d 829 (1974); State Farm Mutual Automobile Insurance Company v. Wharton, Nev.Supr., 88 Nev. 183, 495 P.2d 359 (1972).
[9]  In Rothermel, Justice McNeilly, speaking for the majority, stated, in support of its ruling that a PIP suit claim filed more than two years from the date of accident was barred by § 8119:

"This conclusion is consistent and harmonious with the two-year limitation period controlling the insurer's right of subrogation, based as it is upon the statute of limitations applicable to the injured party's tort claim, i.e., § 8119. It would create an unreasonable anomaly to hold that a claim against an insured for no-fault benefits arising out of a personal injury is subject to a different and longer limitations period than the insurer's subrogation right against a tortfeasor . . . This result, we believe, is unreasonable and could not have been the legislative intent." 385 A.2d 693
[10]  Further, an uninsured motorist claim may be for property damages rather than, or in addition to, a claim for personal injury. If so, § 8119 would presumably not control the time limitations of the suit or determine when the cause of action accrued. [If Spinelli's uninsured motorist claim against Allstate had been for both personal injury and property damages, it would seem incongruous to argue that each claim should be governed by a different statute of limitations.]
[11]  In this respect an uninsured motorist claim may also be characterized as being in the nature of a derivative or secondary claim on an indemnity bond for failure of the tortfeasor (the primary obligor) to pay a legally imposed liability. Compare, Rumsey Electric Co. v. Univ. of Del., Del.Supr., 358 A.2d 712 (1976).
[12]  18 Del.C. § 3902(c) states:

"For the purposes of this section the term `uninsured motor vehicle' shall be deemed also to include, subject to the terms and conditions of such coverage, an insured other motor vehicle where:
(1) The liability insurer of such other motor vehicle is unable because of its insolvency to make payment with respect to the legal liability of its insured within the limits specified in its policy; and
(2) The occurrence out of which such legal liability arose took place while the uninsured vehicle coverage required under subsection (a) above was in effect; and
(3) The insolvency of the liability insurer of such other motor vehicle existed at the time of or within 1 year after such occurrence.
Nothing contained in this subsection (c) shall be deemed to prevent any insurer from providing insolvency protection to its insureds under more favorable terms."