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JUDY BAKER v. PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY (12/14/87)

filed: December 14, 1987.

JUDY BAKER, APPELLEE,
v.
PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY, APPELLANT



Appeal from Judgment of the Court of Common Pleas, Civil Division, of Cambria County, No. 1984-1876.

COUNSEL

Stephen L. Dugas, Johnstown, for appellant.

James F. O'Malley, Johnstown, for appellee.

Wieand, Kelly and Popovich, JJ. Kelly, J., files a dissenting opinion.

Author: Wieand

[ 370 Pa. Super. Page 462]

In this action by Judy Baker to recover for a theft loss pursuant to the terms of a homeowner's policy issued by Pennsylvania National Mutual Casualty Insurance Company, the jury returned a verdict in favor of Baker in the amount of $11,913.97. A motion for post-trial relief, requesting the entry of a judgment n.o.v. or the granting of a new trial, was denied by the trial court, and judgment was entered on the verdict. On appeal, the insurance company contends that it is entitled to judgment n.o.v. because Baker's action was not commenced within one year of the loss as required by the terms of the policy. It also contends that the verdict was contrary to the weight of the evidence, which, according to appellant, depicted a false claim. Finally, it is argued, the trial court erred when it allowed evidence of the insurer's assets, reserves and claims handling procedures.

[ 370 Pa. Super. Page 463]

The claim arose initially because of the alleged theft of personal property from the home of Judy Baker, in Johnstown, Cambria County, between May 21, 1982 and May 24, 1982. Baker filed a claim with Pennsylvania National Mutual under and pursuant to a homeowner's policy which had been issued to her by the company. When six months passed without payment, Baker obtained counsel, who inquired of the insurer regarding the claim. He was advised that the investigation was continuing and that it would be necessary for Baker to submit to an oral examination under oath regarding the alleged loss. This examination took place on July 6, 1983. On February 15, 1984, the insurance company denied the claim. Baker commenced legal action on July 3, 1984. She subsequently filed an amended complaint which added separate counts seeking to recover compensatory damages for emotional distress and punitive damages because of the insurer's alleged bad faith in handling her claim. A preliminary objection in the nature of a demurrer was filed and denied, an answer was filed, and a jury, on October 29, 1985, returned a verdict which allowed only the claim for the stolen personal property.

The insurance policy which Baker purchased from Pennsylvania National contained the following provision:

8. Suit against us. No action shall be brought unless there has been compliance with the policy provisions and the action is started within one (1) year after the occurrence causing loss or damage.

"The law is clear that such a clause . . . is valid and will be sustained." General State Authority v. Planet Insurance Co., 464 Pa. 162, 165, 346 A.2d 265, 267 (1975) (citing numerous cases) (footnote omitted). "Likewise, axiomatic is the principle that a contractual limitation on the right to recovery under the terms of the policy may be waived by the acts of the insurer." Commonwealth v. Transamerica Insurance Co., 462 Pa. 268, 273, 341 A.2d 74, 76 (1975). See: General State Authority v. Planet Insurance Co., supra 464 Pa. at 165 n. 6, 346 A.2d at 267 n. 6; McMeekin v. Prudential Insurance Co., 348 Pa. 568, 572-573, 36 A.2d

[ 370 Pa. Super. Page 464430]

, 432 (1944); Arlotte v. National Liberty Insurance Co., 312 Pa. 442, 445, 167 A. 295, 296 (1933). Thus,

If in the course of the negotiations the company [gives the insured] reasonable grounds for believing that the time limit [will] be extended or that such provision [will] not be strictly enforced, it [can] not subsequently insist on its strict enforcement without giving [the insured] a reasonable time thereafter to bring [an] action. Sudnick v. Home Friendly Insurance Company, 149 Pa. Super. 145, 153, 27 A.2d 468 [(1942)]. "'If it (the company) act[s] and promise[s], after the action [is] legally barred, as if it [does] not intend to insist on the limitation, and put the party to trouble, expense, and anxiety in regard to his claim, they need not complain of a jury finding that they did waive it. Under such circumstances, juries will be very likely to do so; and sometimes, probably, on pretty slight evidence.' There is a long line of cases which hold that the waiver need not be express. It may be inferred from the acts of the insurers evidencing a recognition of liability, or even from their denial of obligation exclusively for other reasons." Bonnert v. Pennsylvania Insurance Company, 129 Pa. 558, page 563, 18 A. 552, 15 Am.St.Rep. 739 [(1889)]. "Prima facie, the insured is entitled to have his loss made good immediately upon its happening, and when that loss appears to be an honest one, we are not disposed to scan very strictly the evidence which tends to rebut a technical forfeiture of the right to payment." Pennsylvania Fire Insurance Company v. Dougherty, 102 Pa. 568, 572.

McMeekin v. Prudential Insurance Co., supra 348 Pa. at 572-573, 36 A.2d at 432 (emphasis added). See: 19 P.L.E. Insurance ยง 421.

The issue of the timeliness of Baker's action is controlled by the decision of the Supreme Court in Commonwealth v. Transamerica Insurance Co., supra. There, the insured had issued a bond to the Commonwealth undertaking to indemnify the Commonwealth against any loss, up to a maximum of $10,000.00, caused by the failure of designated

[ 370 Pa. Super. Page 465]

Commonwealth employees to perform faithfully their duties and properly account for all monies and property received by them as a result of their positions. The bond contained a provision that any action under the bond had to be brought prior to the expiration of three years from the cancellation of the bond. The bond was cancelled on August 25, 1967. Prior thereto, an employee of the Commonwealth came under suspicion of embezzlement. The Commonwealth notified Transamerica of a potential claim on November 4, 1968, and Transamerica thereafter requested the results of the Commonwealth's on-going investigation. The Commonwealth promptly complied with the request. On August 28, 1969, after the employee had entered a plea of guilty to embezzlement, the Commonwealth submitted to Transamerica a proof of loss containing a claim for $48,094.11. Thereafter, the parties continued to cooperate with each other in providing information regarding the loss. After August 6, 1970, but prior to August 25, when the three year period was to expire, Transamerica decided to deny the Commonwealth's claim. However, its decision was not communicated to the Commonwealth until after the three year period had expired. The Commonwealth promptly filed suit thereafter. The trial court determined that the contractual time limit for commencing an action barred the Commonwealth's action and, therefore, entered summary judgment for the insurer. On appeal, the Supreme Court reversed, holding that because Transamerica's actions had given the Commonwealth reasonable grounds for believing that the time limit would not be strictly enforced, a waiver thereof had resulted. The Court explained:

The portrayal of a bona fide investigation by [Transamerica] during the course of which it failed to suggest any grounds upon which it might deny liability, and the withholding of the decision to reject the claim, particularly where there was ample grounds to believe that if the parties were in fact acting in good faith liability would be eventually acknowledged, supply a basis for finding that the ...


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