Opinion ID: 848613
Heading Depth: 2
Heading Rank: 1

Heading: background: judicial tolling as applied to private insurance contracts and statutory form insurance policies

Text: The germination of the idea that a judicial tolling doctrine should be applied to § 3145(1) can be traced to this Court's 1976 decision in Tom Thomas Organization, Inc. v. Reliance Ins. Co. [5] Rather than a statutory provision, Tom Thomas concerned a contractual provision in an inland marine policy of insurance limiting the time for bringing suit under the policy to twelve months after discovery by the insured of the occurrence which gives rise to the claim. Noting that this Court had long enforced such policy limitations as written, [6] the Tom Thomas Court nevertheless rejected this prevailing rule in favor of the judicial tolling approach taken by the New Jersey Supreme Court in Peloso v. Hartford Fire Ins. Co., [7] which held that the twelve-month limitation of actions provision in a statutory form insurance policy [8] was tolled from the time an insured gave notice of loss until the insurer formally denied liability. The Peloso court, opining that statutory proof of loss and payment of claim provisions operated to shorten the time for bringing suit, stated that tolling the limitations period would ensure that the insured was not penalized for the time consumed by the company while it pursues its contractual and statutory rights to have a proof of loss, call the insured in for examination, and consider what amount to pay .... [9] In adopting wholesale the approach of the Peloso court, this Court in Tom Thomas stated that doing so was necessary in order to reconcile the twelve-month policy limitation with other policy provisions that incorporated [s]ubstantial delays [10] into the claim process: The insured is generally allowed 60 to 90 days to file proof of loss. The insurer is generally given another 60 days to pay or settle the claim. Notwithstanding diligence by both parties at all stages of the claim procedure, considerable time often elapses before the insured learns whether the insurer will pay. Even if the insured promptly reports a loss to his insurance agent, discussions concerning resolution of the claim may take weeks. Additional time often passes before the insurance company provides a form for filing proof of loss. Even then the insured does not know whether it will be necessary to start an action; under the policy in this case, payment is not required until 60 days after acceptance by the insurer of the proof of loss. No time limit for acceptance is imposed. [11] Thus, the Tom Thomas Court held that the insured's action, which was filed more than twelve months after the date of the loss, but less than twelve months after the insurer denied liability, was not barred by the twelve-month policy limitation. [12] In In re Certified Question (Ford Motor Co. v. Lumbermens Mut. Cas. Co.), [13] this Court extended the Peloso/Tom Thomas tolling doctrine to Michigan's statutory standard form fire insurance policy, former MCL 500.2832, which then provided that [n]o suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within twelve months next after inception of the loss. Noting that § 2832 contained proof-of-loss and claim payment provisions identical to those contained in the New Jersey statutory policy form at issue in Peloso, [14] this Court held that [l]ogic requires that we apply the same analysis when faced with Michigan's statutory policy provisions which are identical to the provisions reconciled in Peloso. By permitting the limitation period to be tolled, we reconcile the apparently identical incongruity between the statutory proof-of-loss and payment provisions, and the limitation clause. [15] The Ford Court rejected the defendants' argument that our 1913 decision in Dahrooge v. Rochester German Ins. Co. [16] was controlling and had expressly repudiated judicial revision of the terms of the statute. In Dahrooge, this Court had refused to engraft onto the terms of the statutory standard fire insurance policy then in effect [17] a judicial tolling provision that would have tolled the commencement of the twelve-month limitations period until sixty days after the filing of the proof of loss: Standard policies similar to that before us have been adopted, and their use made compulsory by statute in many States. It has been repeatedly held, in passing on their various provisions, that they should be construed according to the plain meaning of the language used, and that the trend of authority is towards enforcing the legislative command when clearly expressed, rather than to nullify and modify by strained constructions. The provision that an action cannot be sustained unless commenced within twelve months next after the fire is very plain, clear, and simple language. If it was the legislative intent that this should have other than the natural meaning, it would have been a simple matter to have so provided. [18] Rather than explicitly overruling Dahrooge, the Ford Court distinguished that case on the basis that its narrow reasoning ... did not attempt to reconcile the obvious incongruity between the proof-of-loss and payment provisions, and the limitation provision of the statute. Accordingly, Dahrooge did not address the Tom Thomas-Peloso tolling analysis.    Since our focus today must fairly encompass all interwoven statutory provisions, we cannot subscribe to a narrow analysis which unduly emphasizes a single statutory provision. While the limitation provision commands that the insured has a clear 12 months to institute suit, the proof of loss and payment clauses shrink this period.    ... The statutory standard policy provisions are reconciled, as was stated in Peloso, 56 N.J. at 521, 267 A.2d 498, to reach a fair resolution of the statutory incongruity. The period of limitation begins to run from the date of the loss, but the running of the period is tolled from the time the insured gives notice until the insurer formally denies liability. [19] Justice Ryan, joined by Chief Justice Coleman, opined in dissent that there existed no justification for writing into the Michigan statutory form of fire insurance policy the tolling provision which the Court has announced today. [20] Justice Ryan noted that in once again subscribing to the approach of the villain in the piece, Peloso, the majority completely disregards, indeed rejects, the plainly expressed intent of the Legislature in favor of the appearance of judicial consistency. [21] Justice Ryan further noted that Dahrooge had addressed and rejected the claim made by the plaintiff, and that it ought to have been followed as binding authority: It is noteworthy that the Court today does not overrule Dahrooge, it merely denigrates it as employing narrow reasoning for its failure to reconcile the obvious incongruity between the proof of loss and payment provisions, and the limitation provision of the statute. The Dahrooge Court's failure to undertake such reconciliation was evidently its inability, like mine, to perceive that the proof of loss and payment provisions, and the limitation provision of the statute, are incongruous, conflicting or inconsistent. The proof of loss and settlement provisions of the statutory policy provide that a proof of loss must be filed by the insured within 60 days of the loss and suit may not be brought until 60 days after the proof of loss is filed. The limitation provision declares that suit upon a loss must be brought within 12 months of the loss. I am unable to see how those provisions are incongruous, inconsistent or conflicting. The first of them announces that the insurer is liable 60 days after the proof of loss is filed by the insured-a period obviously intended to afford opportunity for notification of the loss by the insured and assessment of it by the insurer. The limitation provision provides that the insured has 12 months from the date of the loss to start suit. Where is the inconsistency?    The majority opinion suggests to me rather forcefully that the Court's concern is not that the Legislature has really contradicted itself in establishing a proof of loss plus 60 days no-suit period for perfecting the claim and a 12-month limitation of action provision, but that, in the Court's view, a fairer, more desirable and more reasonable approach would be a tolling of the running of the period of limitation while the parties are negotiating a settlement of the claim. Needless to say, had the Legislature wanted to do it that way, it could easily have done so .... [22] Like Justice Ryan, we believe that the Tom Thomas and Ford majorities found inconsistencies where none existed and, under this thin veil, inserted their own policy views into the otherwise contrary statutory language at issue.