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Docket Number

Docket No. 76188.

Attorney(S)

William E. Montgomery, for plaintiffs. Cholette, Perkins Buchanan (by Robert J. Riley and Robert E. Attmore), for defendant.

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Smart Summary

Case Summary: Compton v. Michigan Millers Mutual Insurance Company, Docket No. 76188 (Mich. Ct. App. Apr. 8, 1986)

Factual and Procedural Background

On June 28, 1979, plaintiffs' cottage in Shelby, Michigan was completely destroyed by fire. The building was insured under a fire insurance policy issued by defendant. Plaintiffs, residents of Detroit, learned of the loss within 24 hours and promptly made a claim through the agent from whom they purchased the policy (the Stariha Agency).

Defendant's representative, Robert S. Pleiss, contacted plaintiffs about the loss, prepared a proof of loss statement in the amount of $8,450 and mailed it to plaintiffs for signature on August 16, 1979. Plaintiffs objected, insisting that they had increased coverage to $18,000 and demanded that amount. Defendant did not provide a proof of loss in the amount of $18,000 before the 60-day period expired. Plaintiffs retained counsel in 1980 and engaged in negotiations with defendant; on August 5, 1981 defendant provided a proof of loss statement for $9,500, which plaintiffs rejected.

Plaintiffs sued for breach of contract on February 1, 1983. Defendant moved for accelerated judgment under GCR 1963, 116.1(5) (now MCR 2.116(C)(7)), asserting that plaintiffs failed to commence suit within one year from the loss and failed to file a proof of loss within 60 days, in violation of MCL 500.2832; MSA 24.12832. The trial court granted the motion at a hearing on December 12, 1983, and entered an order dismissing the action. Plaintiffs appealed as of right. The Court of Appeals reversed and remanded, awarding costs to appellants.

Legal Issues Presented

Whether plaintiffs' suit was barred by the one-year limitation contained in the insurance policy and in MCL 500.2832 (i.e., whether suit was required to be commenced within twelve months of the inception of the loss).
Whether the running of the one-year limitation was tolled from the time plaintiffs gave notice to the insurer until the insurer formally denied liability (as articulated in Ford Motor Co v Lumberman's Mutual Casualty Co).
Whether plaintiffs' failure to file a sworn proof of loss within 60 days after the loss (as required by the policy/statute) barred their action.
Whether equitable estoppel could prevent the insurer from asserting the one-year or the 60-day proof-of-loss defenses, based on the insurer's negotiations, representations, or conduct.

Arguments of the Parties

Plaintiffs' Arguments

Defendant is equitably estopped from asserting the one-year limitation because defendant engaged in negotiations and failed to deny liability until after the one-year period had expired, thereby inducing plaintiffs to delay filing suit.
The one-year limitation should be tolled from the time plaintiffs gave notice to defendant until defendant formally denied liability.
Defendant should be estopped from asserting the 60-day proof-of-loss requirement because defendant prepared and provided pre-prepared proof-of-loss forms (including an $8,450 form) and told plaintiffs the insurer would investigate and prepare proof of loss; plaintiffs relied on defendant to prepare the proofs and therefore should not be penalized by procedural filing rules.

Defendant's Arguments

Plaintiffs failed to commence suit within the contractually and statutorily prescribed one-year period following the loss, and therefore the action is barred.
Plaintiffs failed to submit a sworn proof of loss within 60 days after the loss as required by statute, and therefore the action is barred.
Reading Ford Motor Co strictly, defendant contends that "notice" for tolling purposes requires submission of a sworn proof of loss; because plaintiffs never submitted such a sworn proof, the one-year period was never tolled.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Robinson v Associated Truck Lines, Inc., 135 Mich. App. 571, 576; 355 N.W.2d 282 (1984)	Explains what a plaintiff must allege to avoid a statute of limitations defense via equitable estoppel (e.g., concealment, misrepresentation as to time to bring suit, or inducement to refrain from bringing suit).	Used to state the standard plaintiffs must meet to establish equitable estoppel as to the one-year limitation.
Friedberg v Ins Co of North America, 257 Mich. 291; 241 N.W. 183 (1932)	Holds that negotiations deliberately intended to forestall commencement of an action may constitute inducement sufficient for equitable estoppel.	Supports the proposition that insurer negotiations can amount to inducement; the court considered whether such negotiations here tolled or estopped the one-year limitation up to a point in time.
Better Valu Homes, Inc v Preferred Mutual Ins Co, 60 Mich. App. 315; 230 N.W.2d 412 (1975)	Also supports that negotiations intended to forestall filing may constitute equitable estoppel.	Used, with Friedberg, to explain that negotiations can in some circumstances justify estoppel; the court applied this framework to the facts and limited the time such negotiations could excuse delay.
Ledbetter v Brown City Savings Bank, 141 Mich. App. 692; 368 N.W.2d 257 (1985)	Permits appellate consideration of an issue raised for the first time on appeal when it is a question of law and all necessary facts are presented.	Justified the Court of Appeals' decision to consider, for the first time on appeal, whether the one-year limitation was tolled from notice to formal denial.
Ford Motor Co v Lumberman's Mutual Casualty Co, 413 Mich. 22; 319 N.W.2d 320 (1982)	Announces that the period of limitation begins at the date of loss, but the running of the period is tolled from the time the insured gives notice until the insurer formally denies liability.	The court applied Ford's tolling rule and found that sufficient notice had been given here (including defendant's preparation of a proof of loss form and plaintiffs' unambiguous demand for $18,000), so the one-year limitation was tolled.
Hearn v Rickenbacker, 140 Mich. App. 525; 364 N.W.2d 371 (1985)	Addresses factual questions relevant to estoppel/technical compliance with filing requirements and the impropriety of granting accelerated judgment where material factual disputes exist.	The court relied on Hearn to conclude that the existence of factual disputes about whether plaintiffs could obtain forms or were induced to rely on defendant precluded granting accelerated judgment on the 60-day proof-of-loss issue.

Court's Reasoning and Analysis

The court conducted a sequential analysis addressing (I) the one-year limitation, (II) tolling of that period from notice until denial, and (III) the 60-day proof-of-loss requirement.

I. One-year limitation: The policy expressly required suit within twelve months from the inception of the loss. Plaintiffs undisputedly filed over 3 1/2 years after the loss. Plaintiffs contended equitable estoppel based on defendant's negotiations and failure to deny liability within one year. The court recited the legal standard for estoppel (citing Robinson and related cases) and acknowledged that negotiations, if deliberately intended to forestall suit, can constitute inducement (citing Friedberg and Better Valu Homes). The court found, however, that while negotiations might have forestalled suit through August 5, 1981 (the date of the insurer's $9,500 proof of loss), there is no record evidence of continued bad-faith negotiations after that date. The court therefore concluded that plaintiffs could not reasonably claim they were induced by the insurer to forgo suit for the entire period up to the filing date and that the trial court correctly concluded there was no estoppel preventing assertion of the one-year limitation—subject to the tolling question addressed next.

II. Tolling from notice until denial: Although plaintiffs raised a tolling argument for the first time on appeal, the court determined it could consider the issue as a question of law (citing Ledbetter) because the necessary facts were in the record. The court applied the principle from Ford Motor Co that the limitation period is tolled from notice until the insurer formally denies liability. Defendant argued Ford requires submission of a sworn proof of loss to effectuate notice. The Court of Appeals did not decide whether Ford requires a sworn proof; rather, it found that, on the facts of this case, the insurer itself prepared a proof of loss on August 16, 1979 (49 days after the loss) and plaintiffs gave prompt, definite, unambiguous and undisputed notice demanding policy limits of $18,000. The court determined that usual problems associated with unwritten notice (e.g., insurer uncertainty whether a claim will be filed or what is claimed) were not present, and thus the running of the one-year limitation was tolled. Because tolling applied, granting accelerated judgment on the basis of the one-year limitation was inappropriate.

III. Sixty-day proof-of-loss requirement: Plaintiffs conceded they never signed a sworn proof of loss. They argued equitable estoppel based on the insurer's conduct: defendant mailed pre-prepared proof-of-loss forms (one for $8,450), defendant's representative allegedly told plaintiffs he would investigate and prepare the proof of loss, and the insurer thus possessed and distributed claim forms only in pre-prepared amounts. The court reasoned that if plaintiffs were unable to obtain blank forms or if the insurer refused to prepare a proof of loss in the claimed amount of $18,000, then the insurer should be estopped from asserting the 60-day filing bar. Because this contention raised a question of fact—whether plaintiffs could obtain the necessary forms or were forced to rely on the insurer—the grant of accelerated judgment was improper. The court cited Hearn in support of the proposition that disputed factual issues preclude summary disposition.

Holding and Implications

HOLDING: The Court of Appeals reversed the trial court's grant of accelerated judgment and remanded the case for further proceedings. Costs were awarded to the appellants.

Implications:

The court held that, on the facts presented, the one-year limitation period was tolled from notice until denial under the Ford Motor Co rule because plaintiffs gave prompt, definite, and unambiguous notice and the insurer itself prepared a proof of loss shortly after the fire. As a consequence, accelerated judgment could not properly be granted on the one-year limitation ground.
The court also held that material factual disputes existed regarding whether plaintiffs were prevented from submitting a proof of loss (or reasonably relied on the insurer to prepare one), and those disputes precluded resolution by accelerated judgment on the statutory 60-day proof-of-loss requirement.
Direct effect on the parties: the trial court's dismissal by accelerated judgment was vacated, the matter was remanded for further proceedings on the merits consistent with the opinion, and appellants were awarded costs. The opinion did not purport to create a new rule of law beyond its application of existing precedent to the facts of this case.

Note: This summary is confined to the content and reasoning expressly set forth in the provided opinion. No additional facts or external interpretations have been added.

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COMPTON v MICHIGAN MILLERS MUTUAL INSURANCE COMPANY

PER CURIAM.

In this breach of contract case, the trial court granted defendant's motion for accelerated judgment, GCR 1963, 116.1(5), now MCR 2.116(C)(7), finding that plaintiff had failed to file suit within one year of the loss and had failed to file a proof of loss statement within 60 days of the loss, MCL 500.2832; MSA 24.12832. We reverse.

On June 28, 1979, a fire completely destroyed plaintiffs' cottage in Shelby, Michigan. The building was insured under a fire insurance policy plaintiffs had purchased from defendant. Plaintiffs, who lived in Detroit, learned of the fire within 24 hours from friends and immediately made a claim of loss through the agent from whom they had purchased the insurance policy, the Stariha Agency.

Robert S. Pleiss, defendant's representative, contacted plaintiffs regarding the loss. Pleiss was prepared to determine plaintiffs' loss based on a policy with a face value of $12,000 until plaintiffs corrected him, pointing out that they had increased the fire insurance coverage to $18,000.

Pleiss prepared a proof of loss statement in the amount of $8,450 and mailed it to plaintiffs for their signatures on August 16, 1979. Plaintiffs objected, requesting the full $18,000. Defendant did not provide plaintiffs with a proof of loss statement in the amount of $18,000, and the 60-day period expired.

Plaintiffs retained an attorney in 1980 and negotiations continued between the parties. The record does not indicate the extent of the negotiations, but plaintiffs argued that there were many telephone conversations and a few letters exchanged. On August 5, 1981, defendant provided plaintiffs with a proof of loss statement in the amount of $9,500, which plaintiffs rejected.

Plaintiffs instituted suit for breach of contract on February 1, 1983. Defendant filed a motion for accelerated judgment, contending that plaintiffs had failed to submit a proof of loss statement within 60 days of the loss and had failed to commence suit within one year of inception of the loss, as required by the contract and statute, MCL 500.2832; MSA 24.12832. Plaintiffs argued that defendant was equitably estopped from raising the limitation period as a defense because defendant had induced plaintiffs to delay filing a proof of loss statement and commencing suit by using negotiations as a dilatory tactic.

At a hearing held December 12, 1983, the trial court granted defendant's motion and later entered a corresponding order, from which plaintiffs appeal as of right.

We first consider whether plaintiffs' claim was barred by the one-year period of limitation found in the contract and statute, MCL 500.2832; MSA 24.12832.

The policy provides, as authorized by statute:

"No 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."

Without question, plaintiffs did not commence this suit until February 1, 1983, over 3 1/2 years after the loss.

Faced with this substantial hurdle in the path of recovery on the policy, plaintiffs argue initially that defendant is estopped from asserting the one-year requirement as a bar because of its negotiations with plaintiffs and failure to deny liability until after one year had expired.

To avoid a statute of limitations defense using an estoppel theory, a plaintiff must allege action by the defendant, such as concealment of a cause of action, misrepresentation as to the time in which an action may be brought, or inducement to refrain from bringing an action. Robinson v Associated Truck Lines, Inc, 135 Mich. App. 571, 576; 355 N.W.2d 282 (1984). Negotiations, if deliberately intended to forestall commencement of an action, will be considered an inducement sufficient for application of the equitable estoppel theory. Friedberg v Ins Co of North America, 257 Mich. 291; 241 N.W. 183 (1932); Better Valu Homes, Inc v Preferred Mutual Ins Co, 60 Mich. App. 315; 230 N.W.2d 412 (1975).

However, even if we assume that negotiations between the date of loss and August 5, 1981, (when the final $9,500 proof of loss was prepared by the insurance company) were intended by the insurer to forestall filing, there is nothing in the record to support a finding that such bad faith negotiations continued thereafter. From August, 1981, to February, 1983 — a period of 18 months — plaintiffs cannot reasonably claim that they were induced by their insurer to forego suit. Therefore, the trial court correctly concluded that defendant was not estopped from asserting that plaintiffs' action was barred by the expiration of the one-year limitation period.

For the first time on appeal, plaintiffs argue that the running of the one-year period of limitation was tolled from the time notice was given to defendant to the time defendant formally denied liability.

Although we could decline to consider this issue since the trial court never had an opportunity to pass upon it, we deem consideration appropriate since it is a question of law for which all the necessary facts have been presented. Ledbetter v Brown City Savings Bank, 141 Mich. App. 692, 702; 368 N.W.2d 257 (1985).

In Ford Motor Co v Lumberman's Mutual Casualty Co, 413 Mich. 22, 38; 319 N.W.2d 320 (1982), the Michigan Supreme Court held that:

"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."

The question then becomes whether plaintiffs gave defendant sufficient notice to toll the running of the period. Defendant asserts that Ford Motor Co should be read to hold that notice is not effected until a plaintiff submits a sworn proof of loss statement to its insurer. Defendant then argues that plaintiffs never submitted a sworn proof of loss statement and therefore the one-year period was never tolled.

We need not now decide whether "notice" as used in Ford Motor Co requires a sworn proof of loss statement. In this case the insurer itself prepared a proof of loss statement, on August 16, 1979 — 49 days after the loss — followed by prompt, definite, unambiguous and undisputed notice that plaintiffs demanded policy limits of $18,000.

Problems associated with unwritten notice, such as an insurer not knowing whether the insured will ever file a claim or not knowing what loss is claimed and whether it is covered, are not present in this case. Plaintiffs clearly indicated a desire to make a claim, and stressed the fact that they were covered for $18,000. Defendant suggests that it could not have denied plaintiffs' claim since a claim had not yet formally been made, but the facts indicate that defendant knew plaintiffs were making a claim and knew it to be in the amount of $18,000. We are satisfied that the running of the one-year limitation period was tolled, and therefore a grant of accelerated judgment on this basis would be inappropriate.

III

We next decide whether the trial court correctly found the action barred by the 60-day proof of loss requirement. Acknowledging that they never signed such a sworn statement, plaintiffs again argue that defendant is estopped from raising this defense to the action.

In Billy Compton's affidavit in opposition to defendant's motion for accelerated judgment he avers that defendant mailed plaintiffs a pre-prepared proof of loss statement in the amount of $8,450 on August 16, 1979, and that plaintiffs notified defendant that this amount was wholly inadequate. The record suggests that defendant possessed the necessary claim forms and distributed them to plaintiffs only in pre-prepared form. Also, defendant's representative allegedly told plaintiffs that he would investigate the claim and prepare the proof of loss statement. If plaintiffs were unable to obtain blank forms or if defendant refused to prepare one in the claimed amount of $18,000, then defendant should be estopped from claiming expiration of the 60-day period. Defendant's procedural rules for filing the statement of loss should not be used to the detriment of plaintiffs.

Plaintiffs contend in their memorandum in opposition to defendant's motion for accelerated judgment that they relied on defendant's assertions that defendant would prepare the proof of loss statement. Since this raises a question of fact as to whether plaintiffs were able to obtain the necessary forms or whether they were forced to rely upon defendant to provide them, the trial court's grant of defendant's motion for accelerated judgment was improper. Hearn v Rickenbacker, 140 Mich. App. 525, 528; 364 N.W.2d 371 (1985).

Reversed and remanded. Costs to appellants.

COMPTON v. MICH MILLERS INS