United States Court of Appeals
For the First Circuit
No. 11-1562
AMERICAN STATES INSURANCE COMPANY,
Plaintiff, Appellee,
v.
JOANN LAFLAM,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. William E. Smith, U.S. District Judge]
Before
Lynch, Chief Judge,
Torruella and Selya, Circuit Judges.
Lauren E. Jones, with whom Robert S. Thurston and Jones
Associates were on brief, for appellant.
Anthony R. Leone, II and Leone Law, LLC on brief for
Rhode Island Association for Justice, amicus curiae.
Kevin J. Holley, with whom Kevin N. Rolando and Gunning
& LaFazia, Inc. were on brief, for appellee.
February 17, 2012
LYNCH, Chief Judge. On April 25, 2007, JoAnn LaFlam was
badly injured in an accident in Rhode Island while driving an
automobile insured under a policy issued to her employer by
American States Insurance Company (ASIC). That policy, subject to
certain exclusions and limitations, indemnifies its insureds from
injuries caused by negligent uninsured or underinsured motorists.
When it became clear that the tortfeasors were underinsured, LaFlam
requested and received authorization from ASIC to settle her claims
pursuant to Rhode Island's uninsured and underinsured motorist
(UM/UIM) insurance statute, R.I. Gen. Laws Ann. § 27-7-2.1.
Within three months of receiving authorization to settle,
LaFlam and the tortfeasors agreed to a settlement of $1 million.
However, when LaFlam made a claim that ASIC pay the settlement
amount under the UM/UIM policy, ASIC refused. Instead, ASIC filed
a federal lawsuit seeking a declaratory judgment that LaFlam's
claim was too late because it did not comply with the policy
requirement that a claim be made within three years after the date
of the accident. LaFlam, in turn, counterclaimed that ASIC had
breached the contract and that the denial of the claim was in bad
faith. The district court granted ASIC's cross-motion for judgment
on the pleadings and denied LaFlam's motion for judgment on the
pleadings. See Am. States Ins. Co. v. LaFlam, No. 10–357, 2011 WL
1532144, at *4 (D.R.I. Apr. 22, 2011). LaFlam appealed.
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Our examination of the Rhode Island statutory scheme, the
cases interpreting the scheme, and the insurance policy itself
persuades us that this appeal turns on unresolved questions of
Rhode Island law. We are also persuaded the better course for
resolving those questions is to certify the questions to the Rhode
Island Supreme Court.
Rhode Island has clearly expressed a strong public policy
against insurers using contractual language to limit an insured's
recovery under the UM/UIM statute. See, e.g., Rueschemeyer v.
Liberty Mut. Ins. Co., 673 A.2d 448, 450 (R.I. 1996); DiTata v.
Aetna Cas. & Sur. Co., 542 A.2d 245, 247 (R.I. 1988). However, the
Rhode Island Supreme Court has not had occasion to address whether
considerations of public policy bar insurers from (1) imposing a
contractual limitations period on UM/UIM claims which is shorter
than the ten-year statute of limitations provided by statute, or
(2) requiring that the limitations period begin to run on the date
of the accident. These two aspects of the ASIC clause at issue,
moreover, are interrelated. A short contractual limitations period
that begins to run on the date of the accident may operate to bar
an insured from recovery before the insured even knows she has a
UM/UIM claim.
Because we have found "no controlling precedent" in Rhode
Island law to guide us on these issues, we certify the question
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identified below to the Rhode Island Supreme Court. See R.I. Sup.
Ct. R., Art. I, R. 6(a).
I.
The material facts are not in dispute. Nearly one year
after the accident, on April 3, 2008, LaFlam, through counsel, sent
ASIC notice of a potential claim under ASIC's UM/UIM coverage.
ASIC acknowledged the notice on April 23. Between September 2008
and May 2009, ASIC made several requests for additional
information, including photographs of the damage to the vehicles
and updates regarding LaFlam's medical status, lost wages, and
medical bills.
The ASIC insurance contract specified that any insured
wishing to settle with a UM/UIM tortfeasor must first request
authorization to do so from ASIC. On January 25, 2010, LaFlam
requested such authorization to settle her underlying tort claims
with the two underinsured tortfeasors responsible for the accident.
LaFlam also sent ASIC copies of the policy limit declaration sheets
from the tortfeasors' insurers, a copy of the amounts already paid
by those insurers, and a copy of the police report. On February
18, 2010, ASIC authorized LaFlam to settle the claims.
Three months later, on May 19, 2010, LaFlam sent ASIC a
letter asserting a claim for payment of a settlement amount of $1
million, the ASIC policy limit. LaFlam alleges that ASIC's
authorized representative told her not to request arbitration
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because ASIC was still reviewing the file and would soon make
LaFlam an offer. No offer appears to have been made.
On August 25, 2010, ASIC brought this action seeking a
declaratory judgment that the three-year limitations provision
contained in its UM/UIM policy "precludes LaFlam's present claim
for underinsured motorist benefits under the policy." The
three-year contractual limitations period is set out in a provision
of the policy entitled, "Legal Action Against Us," which states:
Any legal action against us under this
Coverage Form must be brought within three
years after the date of the 'accident'.
However, this [paragraph] does not apply to an
'insured' if, within three years after the
date of the 'accident', we or the 'insured'
have made a written demand for arbitration in
accordance with the provisions of this
Coverage Form.
LaFlam counterclaimed for breach of contract and bad
faith, arguing that any application of the three-year contractual
limitations period was void as against Rhode Island public policy.
In response, ASIC moved to sever and stay discovery on LaFlam's
counterclaim for bad faith until her breach of contract
counterclaim was resolved. Both parties moved under Rule 12(c) for
a judgment on the pleadings.
The district court observed that "[a]ny provision that
restricts the coverage afforded by [the UM/UIM statute] is 'void as
a matter of public policy.'" Am. States, 2011 WL 1532144, at *3
(quoting Casco Indem. Co. v. R.I. Interlocal Risk Mgmt. Trust, 929
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F. Supp. 65, 70 (D.R.I. 1996), rev'd on other grounds, 113 F.3d 2
(1st Cir. 1997)). The court concluded, however, that the
three-year contractual limitations period "operates not to restrict
coverage, but to fix the time within which an insured may bring
legal action against the insurer." Id. The court noted that the
Rhode Island Supreme Court had upheld a one-year contractual
limitations period in the fire insurance context, see DiIorio v.
Abington Mut. Fire Ins. Co., 402 A.2d 745 (R.I. 1979), and a
two-year contractual limitations period in the property insurance
context, see Hay v. Pawtucket Mut. Ins. Co., 824 A.2d 458 (R.I.
2003). The Rhode Island Supreme Court had also upheld a
contractual limitations period governing notice of arbitration
decisions in the UM/UIM context. See Progressive N. Ins. Co. v.
Lyden, 986 A.2d 231 (R.I. 2010).
Finally, the district court reasoned that while the Rhode
Island General Assembly has governed the period of contractual
limitations provisions in other contexts -- such as actions for
breach of contracts for sale, actions for default under lease
contracts, and actions for breach of warranty of quality -- it
included no such restriction in the UM/UIM statute. Am. States,
2011 WL 1532144, at *3 & n.8.
The district court did not address LaFlam's argument that
the contractual limitations period is void as against public policy
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because it begins to run from the date of the accident, rather than
from the date that it becomes clear the insured has a UM/UIM claim.
The district court denied LaFlam's motion for judgment on
the pleadings, and granted ASIC's cross-motion. Id. at *4. LaFlam
appealed. LaFlam has filed an original motion with this Court
requesting that we certify legal questions to the Rhode Island
Supreme Court.
II.
We sketch the background to explain our decision to
certify. Rhode Island enacted its UM/UIM statute in 1962. See
R.I. Gen. Laws Ann. § 27-7-2.1, as enacted by 1962 R.I. Pub. Laws
ch. 161, § 1. Rhode Island's UM/UIM statute requires "that in each
liability-insurance policy an insurer must provide some minimum
protection against property damage and personal injury caused by an
uninsured or a hit-and-run motor vehicle for the protection of
persons insured thereunder." Ladouceur v. Hanover Ins. Co., 682
A.2d 467, 469 (R.I. 1996); see also R.I. Gen. Laws Ann. § 27-7-2.1.
"[T]he purpose of enacting the uninsured-motorist coverage statute
was to afford protection to the insured against economic loss
resulting from injuries sustained by reason of the negligent
operation of uninsured motor vehicles or hit-and-run motor
vehicles." McVicker v. Travelers Ins. Co., 785 A.2d 550, 553-54
(R.I. 2001) (quoting Pin Pin H. Su v. Kemper Ins. Cos./Am.
Motorists Ins. Co., 431 A.2d 416, 419 (R.I. 1981)) (internal
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quotation marks omitted). "This statute was premised on the
concept that responsible motorists who carry liability insurance
should not be uncompensated when they are without recourse against
an uninsured tortfeasor." Amica Mut. Ins. Co. v. Streicker, 583
A.2d 550, 553 (R.I. 1990). In 1985, the Rhode Island legislature
expanded the definition of "uninsured motorist" to include
underinsured motorists. Id.
Rhode Island's UM/UIM statute provides that "[a] person
entitled to recover [UM/UIM] damages . . . shall not be required to
make a claim against or bring an action against the uninsured or
underinsured tortfeasor as a prerequisite to recover damages from
the insurer providing coverage pursuant to this section." R.I.
Gen. Laws Ann. § 27-7-2.1(h). The UM/UIM statute also defaults to
Rhode Island's ten-year statute of limitations for civil actions,
see id. § 9-1-13(a), and it does not specify when that statute of
limitations begins to run. Furthermore, insureds who recover
UM/UIM funds receive prejudgment interest at an annual rate of
twelve percent. See id. § 9-21-10(a).
The Rhode Island courts have found and enforced a strong
public policy against contractually imposed restrictions on UM/UIM
coverage. See, e.g., Rueschemeyer, 673 A.2d at 450-51 (rejecting
a policy that excluded government-owned vehicles from the
definition of uninsured motor vehicles as "void as a matter of law"
and "void as a matter of public policy" because it "carve[d] out an
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exception . . . [that] impermissibly restrict[ed] coverage afforded
by the statute"); see also Casco, 929 F. Supp. at 71 ("The Rhode
Island Supreme Court . . . has regularly held that policy
exclusions that limit the extent of uninsured motorist protection
offered to the named insured violate the public policy underlying
the uninsured motorist statute.").
In DiTata v. Aetna Casualty & Surety Co., for example,
the Rhode Island Supreme Court explained that "[c]ontracts for
uninsured-motorist coverage . . . must be construed in light of the
public policy [of] . . . indemnification for an insured's loss
rather than defeat of his or her claim." 542 A.2d at 247. "In
order fully to effectuate these purposes, [the Rhode Island Supreme
Court] has disallowed contractual limitations that curtail an
insured's recovery in instances in which the insured has not
recovered the amount of his or her actual loss." Id. at 248.
The validity of ASIC's UM/UIM insurance provision, which
both imposes a three-year contractual limitations period on UM/UIM
claims and specifies that the limitations period begins to run on
the date of the accident, thus depends on whether it is void as
against Rhode Island public policy. We think it is unclear whether
the two components of the ASIC contractual limitations provision --
the three-year period and the defined accrual date, whether
considered independently or in combination -- violate this public
policy.
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On the one hand, the Rhode Island Supreme Court has
allowed contractual limitations periods to provide pre-suit notice
before UM/UIM recovery suits. In Progressive Northern Insurance
Co. v. Lyden, the Rhode Island Supreme Court considered a UM/UIM
policy that required a party dissatisfied with an arbitrator's
award to give written notice to the other party, within sixty days
of the arbitrator's decision, of an intention to proceed with a
lawsuit. 986 A.2d 231. The court enforced the provision against
the insured, preventing him from recovering UM/UIM funds from his
insurer. Id. at 235. The court based its holding on the
conclusion that "a limitations period in an insurance policy is a
term to which the parties are specifically bound." Id. (quoting
Nat'l Refrigeration, Inc. v. Travelers Indem. Co. of Am., 947 A.2d
906, 910 (R.I. 2008)) (internal quotation marks omitted). The
court explained that "[b]y entering into the insurance contract
with [the insurer], [the insured] agreed to the terms of the
policy, including the sixty-day notice period for reserving the
right to file suit." Id.
In so holding, the Rhode Island Supreme Court relied
heavily on cases involving contractual limitations periods in other
insurance contexts. For example, the court explained that it had
previously "strictly enforced a provision in a fire insurance
policy barring legal action beyond one year after a loss." Id.
(citing DiIorio, 402 A.2d at 747). Similarly, in the property
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insurance context, the court explained that it had "held that an
insured was bound by a limitations provision . . . barring legal
action after two years of the date of loss." Id. (citing Nat'l
Refrigeration, 947 A.2d at 910).
Further, the text of the statute itself does not address
contractual limitations. The default limitations provision states
that "all civil actions shall be commenced within ten (10) years
next after the cause of action shall accrue, and not after." R.I.
Gen. Laws Ann. § 9-1-13(a) (emphasis added). The statute does not
mandate that all contract actions must have a ten-year limitations
period. This permissive language stands in contrast to statutes in
which the Rhode Island General Assembly has expressly imposed a
minimum limitations period, below which parties may not contract.
See, e.g., id. § 6-51-5 ("An action for default under an automobile
lease or loan agreement, including breach of warranty or indemnity,
must be commenced within two (2) years after the cause of action
accrued. By the original lease or loan agreement the parties may
reduce the period of limitation to not less than one year."); id.
§ 6A-2-725(1) ("An action for breach of any contract for sale must
be commenced within four (4) years after the cause of action has
accrued. By the original agreement the parties may reduce the
period of limitation to not less than one year but may not extend
it."); id. § 39-12-28 ("[I]t shall be unlawful for any motor common
carrier to provide by rule, contract, regulation, or otherwise, a
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shorter period for the filing of claims than nine (9) months, and
for the institution of suits than two (2) years . . . ."). Here,
no such minimum is specified.
On the other hand, however, a shorter contractual
limitations period may have the unique effect, present in the
UM/UIM context but not in other insurance contexts, of barring
recovery before the insured knows or has reason to know that she
has a UM/UIM claim against her insurer. Sometimes, it does not
become clear that the insured has such a claim until after the
insured has attempted to obtain compensation from the tortfeasor.
The insured may well not know at the time of the accident whether
the tortfeasor is insured at all, and may well not know whether the
tortfeasor is underinsured in light of the damages until long after
the accident. Moreover, even once the insured becomes aware that
she has a UM/UIM claim against her insurer, she does not acquire
the right to sue the insurer until the insurer is in breach of the
contract, for example by declining to pay a covered claim. Thus,
as a practical matter, the two components of the contractual
limitations clause may effectively bar recovery, and that could be
thought to violate Rhode Island's policy of full UM/UIM coverage.
Rhode Island has no reported case law directly on point.
However, "[c]ourts in other jurisdictions have addressed this issue
and the overwhelming majority of these jurisdictions have concluded
that the limitations period begins to run on a UIM claim upon the
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insurer's breach of the insurance contract" rather than the date of
the accident. Grayson v. State Farm Mut. Auto. Ins., 971 P.2d 798,
799 (Nev. 1998), modified on denial of reh'g (Nev. 1999); see,
e.g., Shelter Mut. Ins. Co. v. Nash, 184 S.W.3d 425 (Ark. 2004);
Allstate Ins. Co. v. Spinelli, 443 A.2d 1286 (Del. 1982); Hamm v.
Allied Mut. Ins. Co., 612 N.W.2d 775 (Iowa 2000); Berkshire Mut.
Ins. Co. v. Burbank, 664 N.E.2d 1188 (Mass. 1996); Whitten v.
Concord Gen. Mut. Ins. Co., 647 A.2d 808 (Me. 1994); Metro. Prop.
& Liab. Ins. Co. v. Walker, 620 A.2d 1020 (N.H. 1993); Wille v.
Geico Cas. Co., 2 P.3d 888 (Okla. 2000); Safeco Ins. Co. v. Barcom,
773 P.2d 56 (Wash. 1989). The Rhode Island Supreme Court has often
turned to other states' decisional law in the UM/UIM context. See,
e.g., Amica Mut., 583 A.2d 550, 554 & n.5 (turning to other states
for guidance on whether a double recovery exclusion is void as
against the public policy of UM/UIM statutes).
In so holding, these courts have emphasized that the
limitations period in a UM/UIM policy should not "be triggered
until the UIM claim becomes ripe, eliminating the possibility that
the limitations period will have run before the claim could be
brought." Oanes v. Allstate Ins. Co., 617 N.W.2d 401, 407 (Minn.
2000). The Rhode Island Supreme Court has stated that "a claim is
not ripe for adjudication if it rests upon 'contingent future
events that may not occur as anticipated, or indeed may not occur
at all.'" State v. Gaylor, 971 A.2d 611, 614 (R.I. 2009) (quoting
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Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 580-81
(1985)).
By requiring the three-year contractual limitations
period to run from the date of the accident, the ASIC policy may
have the effect of requiring at least some insureds to file suit
before their claims are ripe; that is, before the insurer
determines whether it will cover the claim. The three-year
limitations period may even require some insureds to file suit
before it becomes clear that the tortfeasor is underinsured at all,
particularly if the insured remains mired in legal battle with the
tortfeasor and has not yet achieved a judgment.
ASIC responds that the Rhode Island Supreme Court has
already answered this question in Metropolitan Property and
Casualty Insurance Co. v. Barry, where it held that "[p]rejudgment
interest [on a UM/UIM claim] begins to run when the action accrues
for purposes of the statute of limitations," which begins on the
date of the accident. 892 A.2d 915, 924-25 & n.5 (R.I. 2006). In
our view, however, it is far from clear that Metropolitan Property,
concerned with the different issue of the accrual date for
prejudgment interest, resolves this case.
ASIC also argues that if the limitations provision begins
to run only once the insurer denies the claim, a claimant could
delay filing her claim for decades in order to accrue substantial
prejudgment interest. Moreover, ASIC argues, once the claim is
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filed and denied, the claimant would then have an additional period
of years to bring suit, accruing even greater interest. These
arguments, too, depend on the question of whether Rhode Island
would recognize distinct limitations provisions for the filing of
a UM/UIM claim and for the bringing of suit once the claim is
denied, as well as the question of when those limitations
provisions may begin to run.
This case, then, meets the requirements of the Rhode
Island certification rule, which provides for certification "if
there are involved in any proceeding before [the federal court]
questions of law of this state which may be determinative of the
cause then pending in the certifying court and as to which it
appears to the certifying court there is no controlling precedent
in the decisions of this Court." R.I. Sup. Ct. R., Art. I, R.
6(a).
Furthermore, federalism concerns motivate the
certification. This case involves major state policy issues that
"will certainly impact future cases." Real Estate Bar Ass'n for
Mass., Inc. v. Nat'l Real Estate Info. Servs., 608 F.3d 110, 119
(1st Cir. 2010) (certifying questions to the Massachusetts Supreme
Judicial Court concerning the unauthorized practice of law); accord
Fortin v. Titcomb, No. 10-2370, 2012 WL 230021, at *7 (1st Cir.
Jan. 26, 2012) (to be published in F.3d) (certifying question
regarding the complex relationship among several provisions of the
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Maine Tort Claims Act governing damage awards against government
employees); In re Engage, Inc., 544 F.3d 50, 57 (1st Cir. 2008)
(explaining that certification is appropriate when questions of
state law "clearly have implications which go beyond these
parties"). There are strong federalism interests that are
furthered by providing the state courts with the opportunity to
decide underlying unsettled questions of state law like the one
presented here. Cf. Growe v. Emison, 507 U.S. 25, 32 (1993)
(noting that "principles of federalism and comity dictate"
deferring to state courts "when the federal action raises difficult
questions of state law bearing on important matters of state
policy").
We therefore certify to the Rhode Island Supreme Court
the following question:
In light of the UM/UIM statute and Rhode
Island public policy, would Rhode Island
enforce the two provisions of the contractual
limitations clause in this case?
We would welcome the advice of the Rhode Island Supreme
Court on any other relevant aspect of Rhode Island law which it
believes would aid in the proper resolution of this issue.
The clerk of this court is directed to forward to the
Rhode Island Supreme Court, under the official seal of this court,
a copy of the certified question and our decision in this case,
along with a copy of the briefs and appendix filed by the parties
in the federal proceeding and the district court record, which set
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forth all facts relevant to the issues certified. We retain
jurisdiction pending the Rhode Island Supreme Court's
determination. The case shall be stayed until further order of the
court.
No costs are awarded.
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