The opinion of the court was delivered by: TROUTMAN
A familiar pattern of events, beginning with destruction of property by fire, followed by a demand for payment by the insured and denial thereof by the insurer, and culminating with institution of legal action to compel payment, fully describes the instant litigation. Defendants, claiming that plaintiffs failed to institute suit within the time period prescribed by the insurance contracts
and Pennsylvania law,
move to dismiss the complaint for failure to state a claim upon which relief can be granted. The relevant inquiry focuses upon whether an insurer who denies an insured's claim, irrespective of good or bad faith, with sufficient time remaining for the insured to comply with a one-year limitation for instituting suit has waived, expressly or impliedly, enforcement of this provision.
Pennsylvania courts acknowledge the validity and "binding nature" of such clauses. General State Authority v. Planet Insurance Co., 464 Pa. 162, 168, 346 A.2d 265 (1975).
The insured's failure to adhere to policy conditions constitutes an "absolute bar" to suit unless the insurer waives its right to rely thereon or its conduct estops it from doing so. Lardas v. Underwriters Insurance Co., 426 Pa. 47, 52-53, 231 A.2d 740 (1967). Where the insurer affirmatively misleads the insured about the possibility of settlement, dissuades him from filing suit or induces him to believe that it will not enforce the limitations period, courts construe this conduct as violative of the insurer's duty of "utmost good faith and fair dealing". Leone v. Aetna Casualty & Surety Co., 599 F.2d 566, 569 (3d Cir. 1979). To prevent the insurer from profiting from its own misbehavior, courts do not interpret the clause strictly. General State Authority v. Planet Insurance Co., supra, Lardas v. Underwriters Insurance Co., supra. Importantly, the insured must be given an opportunity to establish a fact question on this issue. Leone v. Aetna Casualty & Surety Co., supra.
Clearly, State Farm expressed its intention not to pay within sufficient time for plaintiff to file suit. Even if State Farm denied the claim in bad faith, plaintiffs still had sufficient time within which to comply with the terms of the policy. Cf. Marshall v. Aetna Casualty & Surety Co., No. 80-1234, slip op. at 2 (E.D.Pa. June 30, 1980) ("(plaintiff), as the party claiming waiver "must show that he was misled and prejudiced thereby' "), quoting Brown v. City of Pittsburgh, 409 Pa. 357, 186 A.2d 399 (1962). Admittedly, Allstate's indication to the same effect was not as clear. Allstate did reject plaintiffs' proof of loss within sufficient time for plaintiffs to file suit, and State Farm's formal denial of payment put plaintiffs on notice that representations which State Farm had made previously concerning settlement and payment no longer existed. Plaintiffs should not have sat idly watching the one-year time period elapse. Moreover, negotiations between the parties did not toll the limitations period. Marshall v. Aetna Casualty & Surety Co., supra.
Accordingly, defendants' motions to dismiss the complaint will be granted.