### IN THE COURT OF APP EALS OF TENNESS EE AT NAS HVILLE S ep te m be r 3, 200 3 S es sio n BRI CK CHURCH TRANSMI SSI ON, INC. v . SOU THER N P ILOT IN SU RA NC E C O. Appeal f romthe Chancer y Court for Davidson Cou nty No. 02-1734-II, Car ol L. McCoy, Chancellor

No. M2002- 02778-COA-R 3-CV - F iled Novem ber 25, 2003

I nsured, Plaintiff/Appellant, f iled suit under a policy of commer cial insuranc e alleg ing a loss by theft that was c overe d by

the policy . Def

endant/Appe llee filed a T en n essee Rule of Civil P roce dure 12.02(6) Motion to Dismiss based upon expi ration o f t he two y ear period in which suit could be broug ht under the te rms of the policy

. The trial court g rante d the motion to dismiss, and we af firm the ac tion of the cha ncellor. Tenn. R. App . P . 3 Appeal as of Right; Judgme nt of th e Chancer y Court Aff irm ed and Rem anded
W I L L I AM B. C A IN , J ., delivere d the opinion of the court, in which P A T R IC IA J . C O T T RE LL , J . and , J AM ES L . W EA T H ERFORD , S R . J .,joined.
Kei th J ordan and Theodora Pappas, Na shville, Tennessee , for the a ppellant, B rick Churc h Transmission, I nc. Alan Mar k Sowell and M. Kristen Selph, Na s h v i l l e, Te nnessee , for the a ppellee, Southern Pilot I nsuranc e Co.
OP IN ION Plaintiff, Bric k Church Transmission, I nc., oper ated a transmission repair busine ss at 1206A Brick C h u rch Pi ke in Nashville, Te nnessee . Def endant, Southern Pilot I nsuranc e Company , a subsidiary of Southern G u ar an t y

I n s u ra n ce C o m p an y , i s s u ed i t s p o l i cyn u m b er0 0 C P P 4 7 0 9 8 t o Br ick Chu rc h T rans mis sio n, I nc ., sa me be ing a c omm e rc ia l pr op e rt y po lic y ins uring the bu sin e ss a g a ins t c e rt a in l os se s. Du ri ng the e ve nin g ho ur s o f D e c e mbe r 12, 19 99 , Plai nti ff a lle g e d tha t it ’s bu sin e ss establishment at 1206A B rick Churc h P i k e wa s b u rglarized ca using a theft loss that was insured u n d e r t h e p o l i c y.-2-

Plaintiff filed timely

notice of its loss with Defe ndant and, on Ma rch 20, 2000, r ece ived a l et t erfr o mDe fe n d an tad v i s i n g: This is to advise y ou that the circ umstances of t his loss are still under ac tive investigation.
We sha ll continue to make eve ry eff ort to conclude our investig ation and to take f inal action on y our cla im as soon as possible. The purpo s e o f this letter is to advise y ou that we a re unde rtaking the continued investigation with a full and complete rese rvation of a ll rights af forde d us under the p o l i c y o f i n s u r a n c e i s s u e d t o B r i c k C h u r c h T r a n s m i s s i o n b y t h i s c o m p a n y. On Ap ri l 4, 20 00 , Pl a int if f, a c tin g thr ou g h it s p ri nc ipl e ow ne r, Ho zel l A nd e rs on , f ile d it s sw orn p ro of

of los s w ithDe fe nd a nt.
On J une 27, 2000, Anderson re ceive d a letter from counse l for De fendant reque sting that he su bmi t to a n or a l e xami natio n pu rs ua nt to te rm s of the po lic y a nd re qu e sti ng that he bring wi th h im fo r e xami natio n th e fo llo wi ng do c ume nts : 1

. De t ai l ed p er s o n al an d b u s i n es s fe d er al i n co m e ta x re t u rn s fr o m1 9 9 1 t h ro u gh 1999.
2. Copies of all y ear end financ ial statements including, but not limit ed to, the acc ountant’s/CPA’s report, ba lance sheets, i n come state ments, cash f low statements, sup plemental information and schedule s, and footnotes fr om 1991 throug h 1999.
3. Mo nth ly

inc ome state me nts fr om 1 99 1 th ro ug h p re se nt.
4. Mo nth ly

a ndqu art e rl y

ba la nc e sh e e ts f

ro m 19 91 thr ou g h p re se nt. 5

. C o p y

o f d et ai l ed d ep re ci at i o n / fi x e d a s s et s ch ed u l es fr o m1 9 9 1 t h ro u gh pr e se nt.
6. Phy sic a l in ve nto ri e s f ro m 19 91 thr ou g h p re se nt.
7

. De t ai l ed i n fo rm at i o n o n an y l o an s o r n o t es p ay ab l e f ro m1 9 9 1 t h ro u gh p re s en ti n cl u d i n g:

- amount borrowe d

- payment history

- monthlypay ment

- security ag ree ment

- maturity

date

- loan application-3- - interest rate

- cre ditor
8. Copies of bank state m ents and cancele d chec ks for a ll accounts fr om 1991 thr ou g h p re se nt.
9. A copy of t he ca sh rec eipt journal, sales journa l, acc ounts rece ivable journa l and/or a ny

books and re cords in which rec eipts and/or sales are rec orded f rom 19 91 thr ou g h p re se nt.
10

. Sa le s in vo ic e s f

ro m 19 91 thr ou g h p re se nt.
11. A copy

of the c ash di sbursement journal, acc ounts pay able journa l and/or any books and re cords in which pur chase s and/or expenses ar e re corde d from 19 91 thr ou g h p re se nt.
12

. Pur c ha se a ndsu bc on tr a c tor inv oic e s f

or 19 91 thr ou g h p re se nt.
13. Copies of any

books, ledg ers, journa ls and/or any other reco rds wher e inv e nto ry de ta il a nd

/or ba la nc e s a

re re c or de d f

ro m 19 91 thr ou g h p re se nt.
14. Copies of the g ener al ledg er and/or any other summary journals/ledg ers f

rom 19 91 thr ou g h p re se nt.
1 5

. C o p i es o f th e wo rk i n g tri al b al an ce s fo r t h e y ea rs en d i n g fr o m1 9 9 1 t h ro u gh pr e se nt.
16

. A c op y

of y e ar e nda dju sti ng e ntrie s f ro m 19 91 thr ou g h p re se nt.
17

. Ye ar e nda c c ru a ls f or the y e ars e nd e d f

ro m 19 91 thr ou g h p re se nt.
18

. Pa yro ll j ou rn a l f

ro m 19 91 thr ou g h p re se nt. 19

. Qu art e rl y

payro ll t a x re turns - f

orm 94 1 - fr om 1 99 1 th ro ug h c ur re nt.
20

. State wi thh old ing a ndun e mpl oyme nt r e turns fr om 1 99 1 th ro ug h p re se nt.
21

. Mo nth ly

sa le s ta x re turns sin c e the inc e pti on of the bu sin e ss. 2 2

. C o p i es o f a l l d o cu m en t at i o n s u p p o r t i n g ca s h p ai d o u t s fr o m1 9 9 1 t h ro u gh pr e se nt.
23

. A c op y

of a ll e qu ipm e nt andbu ild ing le a se s.-4-

24

. L ist

of a ll s up pli e rs a ndthe c re dit te rm s. 25

. Cop ie s o f a ll the do c ume nts in y ou r a c c ou ntant’ s/C PA’ s f ile and/or his po sse ssi on fr om 1 99 1 th ro ug h p re se nt.
On June 11 , 2 00 2, Pla intif f f ile d s uit to reco ver unde r the po lic y . D e fe nd a nt f ile d it s Tenne ssee Rul e of Civil Procedur e 12.02(6) Motion to Dismiss on Aug ust 7, 2002, ex hibiting to the Motion a certified copy

of policy number 00CPP47098 and rely ing upon the provision of the policy p ro v i d i n g: B. LEGAL ACTION AG AINST US No one may

bring a leg al ac tion ag ainst us under thi s Coverag e Part un le ss: 1

. T h er e h as b e e n f

u l l co m p l i an ce wi t h al l t h e t er m s o f t h e C o v er age Part; and
2

. T h e a c t i o n i s b ro u gh twi t h i n 2 y ea rs af t ery o u fi rs th av e k n o wl ed ge of the “ loss.”
On S eptember 30, 2002, Plaintiff filed its Response to Defe ndant’s Motion to Dismis s, filing t h er ew i t h t h e A ff

i d av i to f H o z el l An d er s o n , p ro v i d i n g: 1. My

name is Hozell Anderson, and I am the princ i p al owner and operator of a busine ss known as B rick Churc h Transmission, I nc. 2. On De c e mbe r 12 , 1 99 9, that bu sin e ss w a s b ro ke n in to, a ndc e rt a in tr a de too ls w e re take n f

ro m th e pr e mis e s. 3. I re po rt e d th e los s to the Me tr op oli ta n Po lic e De pa rt ment a ndto repr esentatives of Southern Gua ranty I nsuranc e Company , with w hom I had sec ured theft loss insurance

. 4

. A f

te r in it ia l d is c u s s io n s w ith a n a d ju s to r , B o n n ie Y o w , I

s u b mitted a P roof of L oss on April 4, 2000. On J une 27, 2000, I was mailed a

letter fr om Mr. Alan Sowell, an attorney in Nashville, wh i ch re q uested the submission to him of c omp re he ns ive bu sin e ss r e c or ds , the bu lk of wh ic h w e re no t im me diate ly a va ila ble to me. 5. Despite my best eff orts, I had not bee n able to sec ure a ll the information re quired, a nd in the s ummer of 2001, I first soug ht leg al re prese ntation on the c la im. 6. My

c ou ns e l w a s in the pr oc e ss o f c omp ili ng the re qu e ste d d oc ume nts when the se cond annive rsary of the bre ak-in a nd theft loss occur red. 7. Du ri ng thi s e nti re pe ri od , I ma de g oo d fai th en de a vo rs to c oo pe rate wi th S ou the rnGu aranty

I ns ur a nc e Compa ny

in m e e tin g its de ma nd s.-5- 8. F urthe r a ff

ia nt s a y e th n ot. The case was hear d on October 4, 2002 on Def endant’ s Motion to Dismis s an d P l ai ntiff’s R es p o n s e t h er et o re s u l t i n g i n an Or d ero f O ct o b er1 4 , 2 0 0 2 , p ro v i d i n g:

This cause came on to be hea rd on the 4th day of Oc tober, 2002, be fore the Honora ble Carol McCoy , Chance llor for Part I I of t he C hance ry Court for Da vidson Cou n t y , T ennesse e, upon the De fendant’s Motion to Dism iss. After state ment of counsel a nd, in consideration of the entire rec ord, the Court wa s of the opinion that the Pla int if

f faile d to fi le su it a g a ins t the De fe nd a nt wi thi n tw o (2 ) y e ars of the date of the loss as required bythe policy , and ther efor e, g rante d the Def endant’ s Motion to D ism iss

. I T I S TH ERE F OR E, OR DE RED, AD JUDG ED AN D D ECR EE D that th is cause is hereby

dismiss ed. The Court Costs are taxed a g ainst the Plaintiff for which l e te x e c u t i o n i s s u e i f

n e c e s s ar y. The c ase is before this Court on the tec hnical re cord a lone, see Te nn e sse e Rul e of Ap pe llate Pr oc e du re 24 (a ), the re be ing no ste nographic r e c or d a ndno state me nt o f the e vid e nc e pu rs ua nt t o Appellate Rule 24( c). N othing e lse appe ars in the tec hnical re co rd save the documents discussed above. A Rule 12.02(6) motion to dismis s is not inhi bited in the same mea sure a s a demurr er at common law. A demurrer could not “spea k,” meaning that it could not introduce into t he re cord a new f act not disclos ed b y

the fa ce of

the complaint. Go re v . Te nn . D e p’ t. o f Co rr. , No. M2002- 02640-COA-R3-CV, 2003 WL 22289944 (Tenn.Ct.App.Oc t. 6, 2003). A R ule 12.02(6) motion can “spea k,” but when it does so, it is converted into a Rule 56 moti o n fo r sum mary judgme nt by

the e xpre ss t e rm s o f R ule 12 .0 2, wh ic h p ro vid e s: I f, on a motion asserting the de fense numbere d (6) to dismiss f o r fa i l ure to state a claim upon which re l ief c an be g rante d, matters outside the plea ding a re pr esente d to and not excl u d ed by

the court, the motion shall be treated a s one for summary judgme nt and disposed of a s provided in R u l e 5 6 , and all parties shall be g iven rea sonable opportunity

to present a ll material made pertinent to such a motion by Rule 56.
Th e po lic y

of ins ur a nc e , n ot h a vin g be e n e xhibi te d to the Complaint its e lf, d id n ot b e c ome a part of the Complaint p u rs u an t to Rule 10.03. The Rule 12.02(6) Motion ca nnot “speak” by exhibi ting the policy

of insuranc e that is e x trane ous to the Complaint wit hout effe cting a conve rsion of the Rule 12.02(6) Motion into a motion for summary judgme nt, where in all parties “sha ll be g iven re a so na ble op po rtun ity

to p re se nt a ll m a te ri a l ma de pe rt ine nt t o su c h a mot ion by Rul e 56 .” Th us , the door is opene d for c onsideration of the Ander son Af fi d av i t i n response to what is now De fe nd a nt’ s Ru le 56 Mo tio n f or Sum mary

Judg me nt.-6-

Whil e the c ontrolling que stion on appeal is still a question of l aw, it is now a Rule 56 question rather

than a Rule 12.02(6) question. The Rule 12.02(6) ques t i o n i s whether or not the co mp lain t, w ith o u t a n y c o n s id e r a ti o n o f e xtr a n e o u s mate r ia ls , f a il s to “ s tate a c laim u p o n which re lie f c a n b e g rante d. ” Te nn . R. Civ . P. 12 .0 2( 6) ; se e als o Le ag ue Ce nt. Cre dit Un ion v . M

otte rn , 660 S.W .2d 787 (Tenn.Ct.App.1983). A Rule 56 motion, however, a ddresse s not the alleg ations of the complaint, but the merits of the litigation. Fo wle r v. Ha ppy Go od ma n F am ily , 575 S.W .2d 496, 498 (Tenn.1978) . The que stion here is not whether the alleg ations of the complaint ar e suff icient to state a c ause of

action but “what material fa cts are actua lly and in good fa ith controverte d.” Te nn. R. Civ. P . 56.05. Since the policy

of insuranc e in issue first appe are d in the case as an e x hibit to t he Motion to D ism iss fi le d A ug us t 7, 20 02 , th e pr ov isi on s o f Rul e 12 .0 2 c on ve rt e d the Mo tio n at th a t ti me to a Motion for Summary

J udg ment under Rule 56. The nonmoving pa rty is, th u s , entitled to the be ne fi t of “ re a so na

ble op po rtun ity to pr e se nt al l mate ri a l mad e pe rt ine nt t o s uc h a mot ionby

Rul e 56 .” Te nn . R. Civ . P. 12 .0 2. Th e hear in g o n th e Mo tio n w a s ti me ly he ld, sin c e mor e than th irty day s had ela

psed betwe en the Aug ust 7, 2002 filing of the M o t ion to Dismi ss and the Oc tober 4, 20 02 he ari ng the re on . Te nn . R. Civ

. P. 5 6. 04 . T he no nmo vin g pa rt y is, fu rthe r, e nti tle d to su bmi t aff idavits in opposit ion to the Motion a nd to ma ke further discovery if such is ne cessa ry . See Tenn. R. C iv. P. 5 6. 06 ; By rd

v . H all , 847 S.W .2d 208, 215 (Tenn.1993)

. I n this case , there is no statement of undisputed fa cts filed pursua nt to Rul e 56.03.
The failure to comply

with the specific s of Rule 56 are rende red harmless if the re cord be fore the court clearly

shows that the nonm oving party cannot remedy a defec t fata l to his cause of action. Craven v. Lawson , 5 34 S.W. 2d 65 3 (T e nn .1 97 6)

. I n this c a se , the no nmo vin g pa rt y didno t se e k to take a dd iti on a l di sc ov e ry

a ft e r fi lin g the Se pte mbe r 30, 20 02 Af fi da vit of Ho zel l A nd e rs on , a ndthi s Affida vit its elf is fatal to Plainti ff’ s case under Certain Underwriter’s at Lloyd’s of London v. Tr a nscarriers, Inc. , 1 0 7 S

. W

. 3 d 4 9 6 (T en n . C t

. Ap p . 2 0 0 2 ), u n l es s P l ai n t i ff ca n fi n d s o m e w ayar o und that case

. Tenne ssee has long held that an insuranc e policy provision establishing a n ag ree d limit ations p eriod within which suit may be filed a g ainst the company is valid and enfor cea

ble. Guthrie v. Conn. Indem. Ass’n , 49 S.W. 82 9, 83 0 ( Te nn . 1 89 8) ; Hill v. Home I ns. Co. , 125 S.W .2d 189, 192 (Tenn.Ct.App.1938). By

way of modification to a policy provision that provides for the limit ation to b egin wi th the a c tua l lo ss, the su pr e me c ou rt ha s h e ld that w he re su c h p oli c y a lso c on ta ins a provision for a se ttlement period after the loss during which the insured is prohibited from bringing suit under the poli cy , the commencement of the l imitation period is extended until the expi ration of the settlement immunityperiod. Boston Marine Ins. Co. v . Scales , 49 S.W . 743, 747 (Tenn.1898)

. I f the insura nce c omp an y aff irmatively

denies the insure d’s claim bef ore the expiration of the settlement of loss immunit y period, the c ontrac tual limit ation of actions provision c ommences to run upon the date of

such denia l. See Ce rtain Underwriter’s , 107 S.W .3d at 502.
Th e fa c tua l si tuatio n in th is c a se c los e ly pa ra lle ls Certain Underwriter’s . I n that case , the insured suff

ere d two losses on May

3, 1998 and June 1, 1998, respec tively . Timely proof of loss was-7-

filed, but the cla im was neither a cce pted nor denied during the twelve month contr actua l limi tation period. In November

of 1999, Certain Underwriter’s filed a de clar atory judgme nt action see king a dec laration of whether

or not it was re quired to provide cover ag e for the claims. I n J une of 2000, Tra ns c ar rie rs fi le d it s c ou nte r- c omp la int a lle g ing br e a c h o f c on tr a c t a ndse e kin g re c ov e ry . T his c ou nte r- c omp la int

wa s me t by a mot ion fo r sum mary jud g me nt by the ins ur e r a sse rt ing that th e su it was time bar

red unde r the twe lve months lim itation period. The “settlement of l oss” provision of the Certain Underwriter’s policy provided:
17 . SE TT LEM EN T O F L OSS

. Al l adj us te d claims sh a ll be pa id or ma de g oo d to the I nsured within six ty

(60) day s after

prese ntation an d ac ce ptance of satisfac tory proof of interest and loss at the office of the Company

. No loss shall be paid or made g oo d if the I ns ur e d h a s c oll e c te d th e sa me fr om o the rs . Certain Underwriter’s , 107 S.W .3d at 498.

Under this “settlement of loss” provision, Ce rta in U nd e rwr ite rs h a d a p e r i o d o f

s i x t y d a ys from and afte r the filing of the proof of loss within which either to pay or deny the claim. I f it denied the claim, the lim itations period of the pol icy would beg in to run upon denial. As in the case at ba r, ho we ve r, the ins ur a nc e c omp a ny ne ith e r pa id nor de nie d re sp on sib ili ty fo r the los s. Th e c ou rt he ld that the limit ations period in the policy commence d to r un at the end of the six ty day settlement of loss period.
I n holding that a cause of action ac crue s upon denial, the c ourts did not alter the contractual limitations period or re write the c ontrac t so that denial is require d befor e an insure d may

bring an ac ti o n against t he insurer . To requir e denia l of a c la im be fo re a c aus e [of

] a c tio n c ou ld a c c ru e wo uld pe rm it the ins ur e r t o me re ly sit on a c la im a nddo no thi ng . Rathe r, su c h ca se s hav e re c og nize d th a t it is i ne qu ita

ble for the insurer to e ffe ctively shorten the period in which a c ause of action could be maintained by

g ranting itself a period in which it is i mm u n e fr o m s uit while the limit ations period is slipping aw ay . Boston Marine , 4 9 S. W. a t 74 7. Th e imm un ity period therefor e post pones t he accr ual of the i nsured’ s action. Hi ll , 125 S.W .2d at 192. Once the ac tion has acc rued, the limit ations period begins to run. I f an insure r neither pay s nor denies a

claim broug ht by

its insured, a suit ag ainst the insurer may be sustained upon e x piration of the se ttlement of loss/im mu n i t y p er iod. Id

. Acc ording ly , the contra ctual statute of limit at i ons beg ins to run upon denial of lia bil ity or up on e xpir a tio n o f the imm un ity pe ri od , w hic he ve r c ome s f ir st.

. . . . The c ontrac tual l i m i t at ions period in a contr act of insurance beg ins to run when the insured’s cause of action acc rues. Notwithstanding lang uag e in the policy that the cause of a ction must be broug ht within so m any months of oc curr ence of the-8-

los s, a se ttl e me nt of lo ss pe ri odwh ic h g ive s th e ins ur a nc e c arrie r s o many day s in which to settle the c laim, thereby rende ring the i nsurer

immune from suit, postpones acc rual of the insured’s a ction until the ex piration of the se ttlement of loss period. Denial of the claim by

the insurer

results in a wa iver of the settlement of loss period, and thus the insured’ s cause of action acc rues upon denial. When the insurer ne ither pay s nor denies a claim within the s ettlement of loss period, it is no longer immune fr om s uit a ndthe ins ur e d’ s c aus e of act ion a c c ru e s. Th us the lim itatio ns pe ri odis trig g ere d either by

denial of the claim by the insurer or by expiration of the settlement of los s p e ri od , w hic he ve r c ome s f ir st. Certain Underwriter’s , 107 S.W .3d at 499-500, 502.
Th e c or re sp on d i n g p r o v i s i o nr e l ati v eto “ los s p a y me nt” in the Sou the rnPilo t Po lic y pr ov ide s: “We will give notice of our intentions withi n 30 day s afte r we rec eive the sworn proof of loss.” The sworn proof

of loss was filed on A pril 4, 2000, and, as in Certain U n d erwriter’s , Southern Pilot neither paid the loss nor denied liability under the policy

within the thirtyday

“loss payment” period. The policy

limit ation period commence d to run on May 4, 2000 and had e x pired prior to the filing of the suit on J une 11, 2002.
Plaintiff s ee k s t o es cape the ef fec t of Ce rta in U

nd e rwr ite rs by

expanding the sc ope of Alcazar v. Hay es , 982 S.W .2d 845 (Tenn.1998) (dea ling with insured’ s failure to comply with the notice provisions of a U. M

. policy ) t o make that case apply to the limit ation of ac tion provisions of th is p o li c y . A l ca z ar

was a suit bya passe ng er riding in the trunk of an automobile for

injuries sustained in an ac cident and a claim under

the provisions of an uninsure d motorist sec tion of a policy of ins ur a nc e . In th a t c a se , no tic e of the a c c ide nt wa s no t pr ov ide d to the ins ur a nc e c omp a ny un til app ro xima te ly

on e y e ar a ft e r the a c c ide nt. Prior to Alcazar , Tenne ssee had consistently followed the traditional common law a pproac h that notice wa s a condition prec edent to recove ry under the policy

and that no showing of pre judice wa s n e c e ssa

ry . Q uo tin g fr om Appleman on Insuranc e , § 4.30 (2nd Ed.1996), th e s u p re m e c o urt state d th e ratio na le fo r s uc h r ule a s f oll ow s: The purpose of a policy

provision requiring the insured to g ive the compa ny prompt no tic e of a n a c c ide nt or c la im is t o g ive the ins ur e r an o pp ortun ity to m ake a

tim e ly and adequate investigation of all the circumstances. An adequate investig ation often cannot be made whe re notice is long de lay ed, bec ause of the possible remova l or lapse of me mory

on the part of witnesses, the loss of opportunity for e x amination of the phy sical surroundings and making photogr aphs t here of for use at the tria l, and the po ssi bl e op e ratio n o f f

ra ud , c oll us ion , o r c up idi ty . Su c h a re qu ir e me nt t e nd s to pr ote c t th e ins ur e r a g a ins t f ra ud ule nt c la ims , a nda lso a g a ins t in va lidc la ims ma de in g ood faith. I f the insure r is g iven the opportunity for a timely investigat i o n, rea sonable c ompromises and settl ements m ay be made, there by avoiding prolong ed and unnec essary

litigation.-9-

Alcazar , 982 S.W .2d at 849.
Af te r t ra c ing in g re a t de ta il the tr e nda way fr om the c omm on la w r

ule a ndtow arda

ru le rec og nizi ng that the insuranc e policy is a contra ct of a dhesion d ra fted by the insurer , the Alcazar c ou rt ov e rr ule d p ri or Te nn e sse e c a se s a nda do pte d a stand ardinv olv ing tw o q ue sti on s: 1. “Did the insure d provide timely notice in ac cordance w ith the contrac t? ” Id. at 856. 2. “I f not, did the insured c arry its burden of proving that the insurer was not pre

judiced by

the delay ? ” Id.
The A lc azar co u rt specific ally overr uled Ha rtf

or d A c c ide nt I

nd e mn ity Co. v . Cre as

y , 530 S.W .2d 778 (Tenn.1975) , and Phoenix Cott o n Oi l C o . v. Roy al Indemnity Co. , 205 S.W . 128 (Tenn.1918) , apply ing a

g ener al principle pr onounced by this Court fiftyy ear s ear lier.
I t is a gen er al p ri nciple, pervading the law of all forms of insurance , that policies shal l b e l ibera lly construed in f

avor of the insured. This bec ause c ourts do not shut their ey es t o rea lities; t hey know that the policy

is a contra ct of “ adhes ion,” i.e. not one whic h the part i es have rea ched by mutual neg otiation and conce ssion, not one which truly expresses any ag ree ment at which they have a rrived, but one which has been fix ed by the insurer and to which the insure d must adhere , if he c hooses to have insurance. Brandt v. Mut. Bene

fit Health & Acc ident Ass’n , 202 S.W .2d 827, 831 (Tenn.Ct.App.1947).
A t t e m p t i n g t o ap p l y Alcazar to a co ntr a c tua l limitatio n of ac tio ns pr ov isi on in a po lic y wo uld prese nt the sam e n ea r insurmountable obstacle as would be pr esente d in try ing to a pply it to a s t a t u t o r y l i m i t a t i o n o f

a c t i o n s p r o v i s i o n . T h e f i rs t Alcazar

question would be whe ther or not the insured filed his ac tion within t he contr actua l limi tation period. I n this case, the answe r i s “no.” T he next questi on would be whe ther or not the insured could c arry its burden of proving that the insurer wa s n ot p re

jud ic e d b y

the failu re to t ime ly

fi le the a c tio n. Th is wo uldse e m to be a n impo ssi ble burden f or the plaintiff to c arry since a statute of limitations “confer s a positive rig ht” on the defe ndant. C.A . H

ob bs , J r. , I nc . v . B ra ina rd , 919 S.W .2d 337, 339 (Tenn.Ct.App.1995). Reported c ase la w is sparse addre ssing the issue of prejudice in a statute of limitations or a policy limit ation analy sis. The Common W ealth Court of Pennsy lvania obser ved:
The fir st arg ument which Ap p ell ants make is that since Marc h of 1995, Philadelphia has prepa

red its c ase as if the f

eder al claims we re pa

rt of this suit and t h e r e f o r e , P h i l a d e l p h i a

s u f f e r s n o p r e j u d i c e f r o m r e i n s t a t i n g th e f

e d e r a l c l a i m s . In response , Philadelphia notes that it was only prudent fo r i t t o p repare to mee t the fede ral c laims because it could not be absolutely certain g iven the vag arie s of the law, that the tria l court would rule that the fede ral c laims were time barre d.-10- Ap p el l an t s ’ a rgu m en tre gar d i n g p re j u d i ce t o P h i l ad el p h i a i s a r ed h erri n g. Pr e jud ic e is si mp ly no t pa

rt of the a na ly sis to d e te rm ine wh e the r a c la im i s ti me barr ed by the statute of limitations or not

. Either the time limi tation has run or it has not r u n . I f it has run, a suit ca nnot be initiated even if there is no prejudice d e mo n s tr a te d

. S ee , e.g., W ilkes-Barre Gene ral Hospital v. Lesho , 62 Pa.Cmwlth. 222, 435 A.2d 1340, 1343 (1981)( “pre judice is not a c o n s i d eration in mos t case s wher e the ba

r of the statute of limitations m ay apply . . . .”).
Ve te ns hte in v. Cityof P hil ad e lph ia , 755 A.2d 62, 66 (Pa.Cmmw.Ct.2000), appeal denied , 764 A.2d 1071 (Pa. Nov.27,2000). The Supreme C ourt of Minnesota f ace d the issue of pre

judice re lative to the limitation of action provision in a po l i cy o f i n s u ranc e in L & H Transport, Inc. v. The Dre w Agency, Inc. , 403 N.W.2d 223 (Minn.1987). I n that case , the supreme court fir st affirme d a court of appe als’ finding that the limitation clause barr ed a suit under the pol icy only if the insurer could show pre

judice. On rehe aring , the supreme court re verse d itself and made clea r the distinction between notice provisions in a policy

and limitation of actions provision.
I n L & H Transport, Inc. v. Dre w Agency, Inc. , 369 N.W.2d 608 (Minn.App.1986), the Court of A ppeals he ld that the failure of an i n s u re d to bring suit ag ainst its ins urer

within the period provided for bya suit limi tation clause in the policy barr ed a suit to rec over unde r the pol i cy o n l yif the insurer could show prejudice . By

order we a ffirme d that decision. L & H Tr a n sport, Inc. v. D rew Agenc y, Inc

. , 38 4 N. W.2 d 4 35 (M inn .1 98 6) . We g rante d a pp e lla nt C hu bb a ndSon s’ petition for re hearing for the purpose of revie wing that order . We conclude that our or de r w a s in c or

re c t a ndwe wi thdra w i t. T he de c isi on of the Cou rt

of Ap pe a ls i s re ve rs e d inpa

rt a nda ff ir me d inpa

rt

.

. . . . The L & H -Chubb insurance policy contained a suit limitation c lause whic h pr ov ide d th a t “ [n]o su it, a c tio n or pr oc e e din g fo r the re c ov e ry of a ny c la im u nd e r this policy shall be sustainable in a ny court of la w or e quity unless the same be commence d within twelve (12) m onths nex t after discovery

by the I nsured of

the oc c ur re nc e wh ic h g ive s rise to the c la im * * * .” I n thi s c a se , the a c c ide nt g ivi ng ri se to L & H’s claim occur

red and was discovered by L & H on J uly 22, 1982; however , L & H did not commence suit ag ainst Chubb until J uly 12, 1984.
T h e C o u r to f

A p p e a l s h o l d i n g t h a t b e c a u s e C h u b b w a s n o tp r e j u d i c e d b y L & H’ s f a ilu re to b ri ng su it withinthe lim itatio n p e ri od , L & H c ou ld s til l bring su it ag ainst Chubb rested on that court’s e arlier decision in Loram M

aintenance of W

ay, In c . v . Co ns oli da te d R ail

Cor p ., 354 N.W.2d 111 (Minn.App.1984), pet. for review d enied (Minn. J anuary

11, 1985). I n Loram , th e Co u r t o f A p p e a ls , a d d r essing the-11-

issue of whe ther a

suit li mitation clause in th e i n surer ’s policy barr ed a suit by

the insured, held that suit was barr ed only if the insurer

could show pre

judice. Id . at 114. Although w e dec li n ed to review the Loram decision, in Henning Nelson Const. Co. v. Fireman’ s Fund Am. Life Ins. Co. , 383 N.W.2d 645 (Minn.1986), we addre ssed the same issue–whether a suit limi tation clause in the insure r’s policy barr ed a suit by

the insured. We held that prejudice to the insurer w as not a prope r c on sid e ratio n; r a the r, the ru le is that a su it l imi ta tio n c laus e wi ll b ar an u nti me ly su it if the clause does n o t co n fl i ct with a spec ific statute and if the limitation period provided for

is not unreasona

ble in leng th. Henning , 383 N.W.2d at 650-51.
Un de rs ta nd ably , the Cou rt of Ap pe a ls de c isi on in Henning, He nning Nelson Const. C o. v. Fireman’ s Fund Am. Life Ins. Co. , 361 N.W.2d 446 (Minn.App.1985), relied upon Loram fo r i ts h old ing that the ins ur e r mus t sh ow pr e jud ic e be fo re a

su it limit ation clause will work to bar a suit. I n our dec ision in Henning , we spoke to the Court of Appea ls reliance on Loram

. We held i t to be incorrec t on the g round that in Loram the Court of Appe als “wa s consideri n g the ef fec t of the injured pa

rty ’s failure to file a notice of loss with the insurance c ompany within the limi tation period presc ribed by

contra ct.” Henning , 383 N.W.2d at 650, n. 6 (emphasis in orig inal).
We f ind that w e incorre ctly

distinguished the Loram c a se in o ur de c isi on in Henning

. Loram and He n n i ng addre ssed the same issue–whether a suit limi tation clause in an ins uranc e poli cy will bar a suit by the insured c ommenced outside of the lim itatio n pe ri od

. To the e xten t Loram is inconsistent with our decision in Henning , Loram is wrong ly

decide d.
The Loram holding r esulted fr om a conf usion of notice limitation clauses with suit l imitation clauses. The rule s in Minnesota are that wh en an insuranc e c laus e re qu ir e s notice of a claim to be g iven within a ce rtain period, failure to g ive notice within that period absolves the i nsurer of l iability only if the fa ilure pre judices the insurer

. Reliance Ins. Co. v. St. Paul Ins. Co. , 307 Minn. 338, 239 N.W.2d 922 (1 97 6)

. Whe n a n in su ranc e c laus e re qu ir e s su it to be broug ht within a certain period, f a i l u r e t o b ri n g su it w ith in th a t p e r io d b ar s s u it if th e li mi tati o n c la u s e d o es not c o n f li c t w ith a s p e c if

ic s tatu te a n d is n o t u n r e a s o n ab le in le ng th. He n ning , 383 N.W.2d 645 (Minn.1986).
The Court of Appea ls de cided this ca se base d on Loram and since Henning controls, we w ithdraw our origina l order, L & H Tra ns po rt , 384 N.W.2d 435 (Minn.1986), and r ever se that portion of the Court of Appeals de cision inconsistent with Henning

. L & H Tr an sp or t , 403 N.W.2d at 224, 225-26.I t s houl d be not ed t hat T enn es s ee cour t s ha ve t wi ce decl i ned t o ext end t he Al caz ar ra tio n a l. See G r i f f i n v. 1 Shel t erM ut

. Ins . Co. , 1 8 S .W .3 d 1 9 5 (T e n n .2 0 0 0 ) (d e a ling w ith a sta tute ); Pope v. Le nt y & H eal t h, PLLC , 87 S. W

. 3d 8 9 (T enn. C t

. A p p . 2 0 0 2 ) ( d i st i ngui shi ng be t ween o ccurrence po l i ci es and cl ai m s- m ad e p o l i ci es)

. -12- I n Hospital Support S er vice s v. Kempe r Group , 889 F.2d 1311 ( 3rd Cir.1989), the c ourt a dd re sse d Pe nn sy lvania

la w on thi s su bje c t in a

div e rs ity jurisd ic tio n c a se . N oti ng that th e Sup re me Co u r t o f Pe n n s y lv ania in B rakem an v. Potomac Ins. Co. , 371 A.2d 193 (1977), ha d invoked a pr e jud ic e e le me nt int o the e qu a tio n in vo lvi ng a po lic y no tic e pr ov isi on a ndthat th e c a se ha d le d to a va ri e ty of op ini on s, bo th in the c ou rt s o f P e nn sy lvania a ndin f e de ra l c ou rt s si tti ng in P e nn sy lvania on diversity

jurisdiction cases, a s to the question of extending the pr ejudice r equire ment to policy limit ation of ac tion clauses, the c ourt held that such e x tension was improper

.

Thus, the only member of this Court to consider the issue has e x presse d the vie w that Br

ake ma n’ s se c on d th e or e tic a l ba sis –th a t the pu rp os e of the no tic e of

los s clause is t o preve nt prejudice to the insurer–c annot justify application of the prejudice rule to limitation of suit clause s. We ag ree and believe the better view is that the Brakem an ru le do e s n ot a pp ly to limi tation of suit clauses. Ne ither of the purported justifications for Brakem an’s d e p ar tu r e f

r o m a s tric t c o n tr a c tu a l a

p p r o a c h apply to s u it

li mi tati o n s c la

u s e s . We rec og nize that “[s] uch clauses wer e complete ly acc eptable and en fo rceable at common law without any demonstration of pre

judice.” Ha mi lto n Ba nk v. E x po rtImport Bank of U.S. , 6 3 4 F. S u p p . 1 9 5 (E

. D. P a. 1 9 8 6 ). Un d er t h e s we ep i n g l an gu age of Brakem an , many

c laus e s a rg ua bly c ou ld b e he ld t o b e un e nf or c eabl e abs ent a showing of pre

judice. We, the ref

ore, hesitate to hold that limit ation of suit clauses can be enfor ced only

in the absenc e of prejudice to the car rier. Further, a s we find the p u rp o s es of the notice and suit limi tations clauses diff er, the theore tical justifications for re quiring prejudice in the notice clauses at issue in Brakem an are not apt with respec t to lim itations of suit clauses. See B randywine , 405 F.Supp. at 151.
Ho sp . S up

po rt S e rv s. , 889 F.2d at 1316. Apply ing D elawa

re la w, the F eder al Di s tr

ic t Court in Br

an dy win e 10 0 Co rp . v . H

ar tfo rd Fi re Ins. Co. , 405 F.Supp. 147 (De l.1975), ref used to extend the prejudice element of a failure to g ive notice so as to also e ffe ct a pr ejudice r equire ment before enf orce ment of a limitation of action provision of the policy . Said the court: “The purpose of the former i s to avoid pre judice; the latter is simply a contr actua l modification of the statute of limitation.” Brandywine , 405 F.Supp. at 151.
I f Al c az ar is to be expanded to introduce a “pre judice” an al y s i s into li mitation of actions pr o v is io n s , s tatu to r y

o r c o n tr a c tu a l, s u c h e xp a n s io n mu s t c o mef r o m th e Su p r e me Co u r t of T e n n e s s e e o r

f r o mt h e G e n e r a l A s s e m b l y. 1A t ri al co urt m i ght wel l requir e t he i nsur er t o jus t i f y t he exp ansi ve scop e o f t he June 27 , 2 0 0 0 l et t er r el at i ng 2
t o p ro d uc t i o n o f

d o cu m en t s. -13- Pla int if f/Ap pe lla nt n e xt as se rt s th a t th e po lic y pr ov isi on re la tiv e to “ fu ll c omp lia nc e ” wi th the terms of the policy

is ambiguous a nd puts the insured in an impossibl e position. First the insured must complywith the extens i v e d o cu m ent production demand containe d in the insurer’ s letter of J une 2 7 , 2 0 0 0

. T h e n h is a c ti o n mu s t b e b r o u g h t w ith in tw o y e ar s a f te r th e e xp ir a ti o n of the se ttl e me nt i mmu nity

pe ri od . In h is b ri e f P la int if f a sse rt s: I n d ra ft ing thi s p ro vis o, the I ns ur e r/Ap pe lle e c le arly createdtw o s e pa rate c on dit ion s w hic h a n in su re d mu st c omp ly wi th b e fo re be in g e lig ibl e to f ile su it a g a ins t hi s in su re r u nd e r the te rm s o f the c on tr a c t. The importanc e of the “full complianc e” phr ase in the policy is t h at i f an insured wa s attempting to c omply with the demands of the insure r but was una ble to, a n in su re d w ou ld b e in a qu and rya s to ho w t o g e t r e lie f - - e ith e r k e e p try ing to comply with the insurer’ s demands [which might put one over the two y ear period] or sue the insure r while not being in full c ompliance. Howeve r, if the insure d sues wh ile no t be ingin “ fu ll c omp lia nc e ,” it i s a fo rg on e c on c lus ionthat th e I ns ur e r w ill file a Motion to Dismiss on t he g round that the Insured f iled suit ag ainst the insurer w i t h o u tb e i n g i n f

u l l c o m p l i a n c e - - a s i s m a n d a t e d b y t h e p o l i c y t e r m s . E i t h e r w a y, acc ording to the insurance policy , an insured w ould lose.
Th e dif fi c ulty wi th this po sit ion is that it a ssu me s a n in c omp a tibil ity be tw e e n th e “ fu ll compliance ” provision of the policy and the limit ation of action provision. The “ full compliance ” pr ov isi on of

the po lic y do e s not pr ov ide a n exte ns ion to the se ttl e me nt immu nity pe ri od

. No r i s it the pr e ro g a tiv e of

the ins ur e r t o d e cid e th e qu est ion of wh e the r o r n ot the ins ur e d is in f ull compliance

. 2 Finally , Plaintiff asserts that the i nsurer should be estopped to rely on the l imitation of ac tion provision of the pol icy

. The recor d befor e the Court establishes no basis for estoppel. The r ecor d shows no action at a ll by either pa rty betwee n the J une 27, 2000 l et t er by the insurer

demanding production of doc uments and the e x piration of the limitation of action period on May 4, 2002. The discussion by

this Court i n Fairway Village Condominium Assoc iation, Inc . v. Connec ticut Mutual Life Insurance Co. , 9 3 4 S

. W

. 2 d 3 4 2 (T en n . C t

. Ap p . 1 9 9 6 ) i s en l i gh t en i n g.

I t is well-settled in Tennesse e l aw t h at a pa rty , by its conduct, may

be estopped to re ly on the statute of limit ations. Sparks v. M etropolitan Governme nt of Nas hv ill e an d D av ids on Cou nty , 771 S.W .2d 430, 433 (Tenn.A pp.1989). [W here by ] promis es or appea ranc es one party is induc ed to believe that the other pa

rty is going to pay

a cla im or oth erwise satisfy the c la ims of the fi rs t pa

rty , a ndin re lia nc e on that re pr e se ntatio n the fi rs t party delay s filing suit [within] [si c] the applicable statute of-14- lim itatio ns , th e pa

rty makin g the re pr e se ntatio ns ma y be e sto pp e d to raise the statute of limitations as a defe nse. Id. Plaintiffs have pled f

acts in t heir complaint which arg uably support a finding of estoppel. For purposes of determining whether summary judgme nt was prope r, we are oblige d pursuant to By rd to d o a s th e tr ia l c ou rt di d andtr e a t Pla int if fs ’ a lle g a tio ns a s tr

ue a nda ssu me fo r the mom ent that Plaint if fs we re lul le d in to [i n]activity [si c] by the Defenda nts’ repr esentations and ac ts betwee n Fe bruary 13, 1979, and June 6, 1980. Taking such alleg ations as t rue, we must then determine how long the Plaintiffs had to file their c laim afte r t he period of estoppel ended. There is no clear a ns we r u nd e r Te nn e sse e la w. Un de r som e a uth oriti e s, a pa rt y is a llo we d a

re a so na ble time in which to file claim af ter the e stoppel ends, and un d er o ther authority , the e sto pp e l c on tin ue s, fo llo wi ng the e xpir a tio n o f the statut ory pe ri od , un til the pa rt y is allowed a period e qual to the statutory period for

the commenc ement of an action. Duncan v . Gaffney M

fg. Co. , 214 S.C. 502, 53 S .E.2d 396, 399 (1949); 51 Am.Jur.2d Limitat ion of Actions § 437 (1970).
Pla int if fs ur g e us to a do pt a

ru le wh e re by

a pa rt y lul le d int o in a c tio n is e nti tle d to a day -f

or -d a y tol lin g of the statut e of

lim itatio ns . T hu s, un de r P la int if fs ’ su g g e ste d r

ule , a pa rty , who se cause of

a c tio n h a s a c c ru e d a ndwh o is lul le d in to inaction by

the re prese ntations of another party for 45 day s, would be entitled to an additional 45 day s to bring suit at the end of the orig inal statutory period. Plaintiffs arg ue that such a

rule would b e faire r and w ould be more e x act than a rule whic h re qu ir e d a

c ou rt to d e te rm ine wh e the r a

pa rt y ha d a re a so na ble tim e to b ri ng su it. Notwithstanding Plaintiffs’ a rg uments, we believe that the be tter-r easone d rule is the one f

ollowed by

a majority

of jurisdictions, which hold that the eff ect of such an e stoppel is not to s top the running of the statute or to cre ate a new date for its c omm e nc e me nt. I ns te a d, un de r the ma jority ru le , if a re a so na ble tim e to f

ile su it within the statutory

period e x ists after the circ umstances inducing delay have c ease d, a party sho u l d n o t b e estoppe d from plea ding the bar of the statute. Glennan v. Lincoln Inv. Corp. , 11 0 F .2 d 130 (D. C.C ir .1 94 0) ; Property 10-F , Inc. v . Pack

& Process, I

nc. , 2 65 A. 2d29 0 ( D. C.1 97 0) ; Lobrovich v. Ge orgison , 144 C al

. App.2d 567, 301 P.2d 460 (1956); 51 Am.J ur.2d Limitat ion of Actions § 437 (1970). Fairway Village Condo , 934 S.W .2d at 346.
The r ec o rd s hows no ac tion by Southern Pilot I nsuranc e Company desig ned to lull the insured to sleep and, indee d, no action of a ny kind by the insuranc e compa ny

afte r the letter

of June 27, 2000. More than 22 months elapse d betwee n the J une 27, 2000 letter and the expiration of the lim itatio n p e ri odpr ov ide d b y the po lic y . T he re c or d d oe s n ot s up po rt the a sse rt ion s o f e sto pp e l.-15-

Th e jud g me nt o f the tr ial cou rt is in a ll r e sp e c ts a ff ir me d, a ndc os ts a

re a sse sse d a g a ins t Ap pe lla nt.

___________________________________ WI LL I AM B. CAIN, J UDGE