[Copyrighted Material Omitted]
Sharon Soorholtz Greer and Thomas L. Hillers of Cartwright, Druker & Ryden, Marshalltown, for appellant.
James F. Kalkhoff of Dutton, Braun, Staack & Hellman, P.L.C., Waterloo, for appellee.
We must decide whether a policy provision limiting the time to file an action to recover underinsured motorist's benefits is binding on a passenger who was injured while riding in the named insured's vehicle. The passenger brought this action approximately one month after the deadline set forth in the policy, which required suit to be commenced " within two years after the date of the accident."
We conclude the passenger, as an insured and a third-party beneficiary of the policy, does not have greater rights than the policyholder. Thus, the passenger cannot avoid the contractual time limitation unless the policyholder under similar circumstances would have been able to avoid it. Because the record, when viewed in the light most favorable to the passenger, does not demonstrate either that the policy's time limit was unreasonable or that the insurer should be equitably estopped from enforcing it, we hold the insurer's motion for summary judgment should have been granted. Accordingly, we vacate the decision of the court of appeals, reverse the order of the district court, and remand for entry of summary judgment in favor of the insurer.
I. Facts and Procedural Background.
On May 23, 2009, Esad Osmic, his wife, and his children were riding as passengers in a Ford Explorer owned and operated by Esad's brother Selim. Some members of Selim's immediate family were also riding in the vehicle. As the Explorer was traveling northbound on Washington Street/Highway 218 in Waterloo, a Nissan Sentra that was owned and driven by Rochelle Heasley entered the highway. According to witnesses, Heasley's Nissan cut across two lanes without clearance to do so. This forced Selim to take immediate evasive action. He swerved to avoid being hit, but as a result, he lost control of the Explorer. It ended up rolling over in the grass embankment next to the highway. Selim was ejected from the vehicle.
The police responded to the accident. Heasley was cited for improper merging. At the time, Heasley was insured by Progressive Insurance, with coverage limits of $50,000 per claim and $100,000 per occurrence. Selim had coverage with Nationwide Agribusiness Insurance Company (Nationwide), including underinsured motorist (UIM) coverage.
In October 2009, Esad began treatment for right shoulder pain which he attributed to the May 2009 accident. Arthroscopy was recommended in November 2009, and Esad eventually underwent this procedure in November 2010.
Meanwhile, in June 2010, approximately thirteen months after the accident, Esad's counsel submitted a representation letter to Nationwide. Nationwide's claims representatives thereafter contacted the office of Esad's counsel and left phone messages approximately once a month for the next eight months asking for Esad's medical records. In addition, a letter was sent on December 3, 2010, to Esad's counsel requesting those records.
On September 13, 2010, a Progressive claims representative advised Nationwide's claim representative that Progressive had settled with Selim and his family for $65,000, leaving only $35,000 in remaining coverage for the accident.
On March 7, 2011, Esad's attorney submitted a demand on Heasley's Progressive policy on behalf of Esad and his two children. He asserted that Esad had suffered a right shoulder injury, a left inguinal hernia, and a low back injury as a result of the accident. He also maintained that the children had suffered both physical and psychological injuries from the accident. The demand letter sought $178,500 for Esad and $13,000 each for the two children. The letter added, " The statute is rapidly approaching in this matter. I hope to hear from you soon to see if these matters can be resolved." At that time, approximately ten weeks remained before the May 23, 2011 expiration of the two-year statute of limitations to bring suit against Heasley. See Iowa Code § 614.1(2) (2011) (requiring actions based on personal injury to be brought within two years).
Upon receipt of this letter, Progressive informed Esad's attorney that only $35,000 remained on its policy to cover claims arising from the May 23, 2009 accident. Progressive offered to pay $25,000 to Esad and $5000 for each of his children to settle the claims.
In response to the offer from Progressive, Esad's counsel finally initiated contact with Nationwide by phone on March 25, 2011. During the conversation, Nationwide requested a copy of the demand letter to Progressive and copies of Esad's and his children's medical records.
On March 28, 2011, Esad's counsel provided Nationwide's claims representative with a copy of his demand letter to Progressive, along with copies of his clients' medical records and medical bills. The letter also summarized the status of Progressive's remaining insurance coverage and its outstanding settlement offer of $25,000 for Esad and $5000 each for the two children. The letter further stated:
Please provide me with a copy of your declaration page so I know and can confirm for my client what the underinsured limits are. Also, please advise in writing if I may proceed with settling with Progressive for the amount identified above.
I realize I have not provided you with the three year prior medical records. I should have those in the very near future and will forward them to you immediately. If you need anything further, please advise. I look forward to hearing from you to conclude the claim with the tortfeasor as our statute is running.
On April 1, 2011, Esad's attorney sent Nationwide a letter enclosing medical records for Esad for the three years prior to the accident. The letter reiterated:
Please advise as to your policy limits as soon as possible and also provide me with a copy of the declaration page. Also, please let me know if I may proceed to settle the case with Progressive for the tortfeasor's limits as previously explained. I look forward to hearing from you in the very near future.
On April 12, 2011, Nationwide's claims representative wrote back to Esad's attorney. She granted consent to settle the claims with Progressive for $25,000, $5000, and $5000, respectively. She added, " Regarding your request for a copy of the Declaration page, I do not have consent from our Insured to provide this information." Finally, she stated:
I am currently reviewing the information provided regarding Esad's injury. I have had the opportunity to review the claim information pertaining to the claims of [the children] and it appears
the settlement offers presented by Progressive of $5,000 for each of these claims will adequately indemnify them....
I am aware of the fast approaching statute expiration date and will be in contact with you regarding the underinsured claim of Esad once I have had the opportunity to review the information you have provided.
On May 4 and May 11, Esad's attorney sent additional medical records and an additional medical bill to Nationwide.
On May 27, 2011, Nationwide's claims representative wrote Esad's attorney, advising that the UIM coverage under Selim's policy " has now expired per the contract language which states Underinsured Motorists coverage will be barred unless suit filing is commenced within two years after the date of the accident." The letter enclosed a copy of the policy's UIM endorsement. The policy language limiting the time to bring suit read, " [A]ny suit against us under this [UIM] Coverage will be barred unless commenced within two years after the date of the accident."
Esad brought this action against Nationwide and Westfield National Insurance Company (his own insurance carrier) on June 23, 2011, alleging he had suffered damages in excess of the Progressive policy limits and seeking recovery on both Nationwide's and Westfield's UIM coverage. Nationwide then moved for summary judgment, claiming Esad's petition was untimely because he had failed to file it within the policy's two-year deadline. Esad resisted the motion. Nationwide supported its motion with an affidavit from its claims representative, but Esad did not submit an affidavit or other statement from his attorney. Esad did, however, furnish an affidavit from Selim. Therein, Selim stated he would have granted consent to share the declarations page for the Nationwide policy with Esad if asked.
The district court denied Nationwide's motion, citing several considerations. First, the court emphasized that Esad was not a party to Nationwide's insurance policy. As the court put it, " The court knows of no reason that Esad should be bound by contractual provisions in which he did not participate." The court further found that even though Nationwide had not waived its statute of limitations defense, it " intentionally did not provide plaintiff with a copy of the policy which would have revealed the contractual limitations within the two-year time period." The court noted Nationwide's agreement that it would have provided a copy of the relevant policy language if requested. Lastly, the district court observed that Nationwide could have completed its claims investigation and responded to Esad's UIM claim before the contractual limitations period expired. For this combination of reasons, the court denied Nationwide's summary judgment motion.
We granted Nationwide's application for an interlocutory appeal and transferred the case to the court of appeals. In a well-written and lively opinion, the court of appeals upheld the district court's ruling. Initially, it determined " the contractual two-year period of limitation in Selim's Nationwide insurance policy was valid and enforceable as to Selim." However, the court also found Nationwide had a duty under the facts of the case to advise Esad's attorney of the contractual deadline for bringing UIM claims under the policy. As the court explained:
Esad was not a party to the Nationwide policy and had no knowledge of the contractual time limitation for filing suit. Nationwide had knowledge of Esad's claim within the contractual time limitation, but chose to withhold the information until after the limitations period expired.
One member of the panel dissented from this ruling, reasoning that third-party beneficiaries are bound by contractual provisions, that Esad's attorney never asked for the policy itself, and that the requested declarations page " would not have provided any information regarding the contractual limitations period."
We granted Nationwide's application for ...