Estate of Frank Degraauw v. Travelers Insurance Company

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

06-547

ESTATE OF FRANK DEGRAAUW

VERSUS

TRAVELERS INSURANCE COMPANY

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APPEAL FROM THE
ABBEVILLE CITY COURT
PARISH OF VERMILION, NO. 13927
HONORABLE EDWARD B. BROUSSARD, CITY COURT JUDGE

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ULYSSES GENE THIBODEAUX
CHIEF JUDGE

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Court composed of Ulysses Gene Thibodeaux, Chief Judge, Jimmie C. Peters, and J.
David Painter, Judges.

AFFIRMED.

Roger Chadwick Edwards, Jr.
Edwards & Edwards
P. O. Box 217
Abbeville, LA 70511-0217
Telephone: (337) 893-2884
COUNSEL FOR:
Appellant - David M. DeGraauw

Frank Simo Slavich, III
Perret, Doise
P. O. Drawer 3408
Lafayette, LA 70502-3408
Telephone (337) 262-9000
COUNSEL FOR:
Appellee - Travelers Insurance Company

THIBODEAUX, Chief Judge.

Plaintiff-appellant, David M. DeGraauw (DeGraauw), the court-

appointed succession representative for the estate of deceased homeowner, Frank

DeGraauw, sued the decedent’s homeowner’s insurer, The Standard Fire Insurance

Company (Standard Fire),1 for breach of contract. The suit claimed that Standard Fire

failed to pay the replacement costs for roof damage as covered by the policy. The

trial court granted Standard Fire’s peremptory exception of prescription. DeGraauw

appeals. For the following reasons, we affirm.

I.

ISSUE

Did the trial court erroneously apply La.R.S. 22:691(F) to sustain the

defendant’s exception of prescription and dismiss the plaintiff’s lawsuit on his claim

for insurance proceeds?

II.

FACTUAL BACKGROUND

On October 3, 2002, the Abbeville, Louisiana home of decedent, Frank

DeGraauw, was damaged by Hurricane Lili. Mr. DeGraauw possessed a

homeowner’s insurance policy issued by “The Standard Fire Insurance Company,

One of the Travelers Property Casualty Companies,” which covered losses to his

residence. On October 16, 2002, Mr. DeGraauw filed a claim with Standard Fire. On

November 8, 2002, an adjuster for the insurer prepared a repair estimate for the

damages in the amount of $9,778.96. The estimate was itemized and included

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Standard Fire Insurance Company is a subsidiary of Travelers Insurance Company and is
the company that issued the homeowner’s policy at issue. Standard Fire is the only defendant that
has appeared and answered the suit.

estimates of the costs for the repair of the roof, as well as for the repair of other

damage to the dwelling.

On or about November 9, 2002, the insurer tendered to Mr. DeGraauw

a payment in the amount of $6,176.63, which was the balance due after deductions

of the applicable $1,000.00 deductible and the recoverable depreciation in the amount

of $2,602.33. In a letter issued to Mr. DeGraauw from the insurer, he was advised

that his loss would be settled in full, in accordance with the policy’s terms, once he

provided notification to the insurer of the completion of the repairs or replacement

of the damaged property. Standard Fire asserts that it received no further contact

regarding the loss until June 2004.

Mr. DeGraauw passed away on May 16, 2004, and his son, David M.

DeGraauw, was appointed as the succession representative. In June 2004, DeGraauw

notified Standard Fire that his father had performed temporary repairs to the roof after

receiving the first portion of the insurance settlement; however, those repairs were

insufficient, and a new roof had to be installed at an additional total cost of

$16,700.06. He requested reimbursement for these costs. On June 26, 2004,

Standard Fire denied this request. On June 30, 2004, it offered to tender the

previously withheld depreciation of $2,602.33. DeGraauw rejected this offer. On

March 23, 2005, Standard Fire tendered a check to DeGraauw in the amount of the

withheld depreciation, which DeGraauw has not negotiated.

On April 11, 2005, DeGraauw filed suit, alleging that Standard Fire

breached the insurance contract. In the suit, he asserted that the initial payment

relative to roof damage from the insurance company that was received by his father

was intended to cover only temporary roof repairs as evidenced by the insurer’s

estimate. He argued that because these repairs were insufficient the insurance

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company remained obligated to settle the loss under the “replacement cost coverage”

terms of the policy.

Standard Fire answered and filed various exceptions, including an

exception of prescription. Standard Fire asserted that the policy allowed one year

from the date of loss to file lawsuits against the insurer and that DeGraauw’s suit was

prescribed because it was filed on April 11, 2005, two years and six months after the

October 3, 2002 date of loss.

The trial court granted the exception. In its ruling, the trial court found

that the suit was prescribed because it was filed more than one year after the one-year

prescriptive period had run. The court rejected DeGraauw’s contention that the

insurance company’s original roof damage estimate addressed only temporary roof

repairs. The court also reasoned that there was no evidence that the insurer had acted

to waive the prescriptive period by any subsequent acknowledgment of the claim, nor

was there evidence that the insurer acted to interrupt the running of the prescriptive

period. The trial court added also that the claim for replacement of the roof

constituted a new claim under the policy.

III.

LAW AND ARGUMENT

Prescription

Louisiana Revised Statutes 22:691 sets forth the standard provisions that

are to be included in all standard fire insurance policies issued in Louisiana.

Louisiana Revised Statutes 22:691(F) requires that the following limitation regarding

the filing of lawsuits be included in standard fire policies:

Suit—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

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complied with, and unless commenced within twelve
months next after the inception of the loss.

The policy issued to Mr. DeGraauw restates this limitation, as such:

SECTION 1 – CONDITIONS

....

8. Suit Against Us. No action can be brought unless
the policy provisions have been complied with and
the action is started one year after the date of loss.

DeGraauw has asserted that the trial court erroneously interpreted this

suit limitation clause as that which establishes a prescriptive period and contends that

this court should decline to adhere to prior jurisprudence interpreting it as such.

DeGraauw asserts that because of the absence of any language in La.R.S. 22:691(F)

designating this provision as a prescription clause and because this section of the

statute is a provision of broader legislation intended to create a standard form

insurance contract, the suit limitations provision is not that which rises to the level

of a prescriptive period.

Rather, DeGraauw argues that this one-year limitations clause is simply

a contractual provision that is to be read in pari materia with the other provisions of

the policy to determine if it is enforceable under the circumstances presented. When

interpreted in this manner, he states that an inherent conflict and/or ambiguity

between the lawsuit limitations provision and the policy’s “Loss Settlement”

provision is apparent such that it should render the application of the suit limitations

clause unenforceable.

The Loss Settlement provision of the policy states:

SECTION 1 – CONDITIONS

3. Loss Settlement. Covered property losses are
settled as follows:

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....

(4) We will pay no more than the actual cash
value of the damage until actual repair or
replacement is complete. Once actual repair
or replacement is complete, we will settle the
loss according to the provisions of b.(1) and
b.(2) above.

DeGraauw claims that this provision means that a loss will be settled in full once the

actual repairs or replacement of the damaged property is completed, yet it provides

no express time limitation for the completion of those repairs. He contends that this

conflicts with the lawsuit limitations clause because the right to sue for recovery on

a claim becomes time-barred by law within one year of the date of the applicable loss,

regardless of whether repairs have been completed. DeGraauw argues that, under the

rules of contractual interpretation, a conflict of this nature should be resolved in favor

of the insured and the suit limitations clause should be deemed inoperative.

Otherwise, he argues that the language of the policy provides an unfair escape clause

for insurers, giving them the opportunity to avoid paying claims in full, even if

neither party has, prior to that time, breached the insurance contract. This argument

is meritless.

First, we reject DeGraauw’s assertion that the trial court erroneously

interpreted and applied the insurance policy’s one-year limitations period as a

prescriptive clause. By definition, liberative prescription is “a mode of barring of

actions as a result of inaction for a period of time.” La.Civ.Code art. 3447. Louisiana

Revised Statutes 22:691(F) is a prescriptive period established by legislation pursuant

to La.Civ.Code art. 3457. In Gremillion v. Travelers Indemnity Co., 240 So.2d 727,

256 La. 974 (1970), the supreme court wrote that the twelve-month limitations period

for filing actions that was established and mandated by La.R.S. 22:691(F) is a valid

prescriptive period.

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Second, we reject the notion that the prescriptive period should be

ignored because it is in conflict with the loss settlement provision of the policy. The

one-year time limitation in the suits provision is one in which the insured must assert

his or her claim judicially, but it does not require the insured to settle the claim within

this time period. La.R.S. 22:691(F); Blum v. Cherokee Ins. Co., 336 So.2d 894

(La.App. 4 Cir. 1976). Consequently, even if the claim is still pending, unless the

insurer in some manner leads the insured to reasonably believe that the time limitation

has been waived, the insured must file any lawsuit within the specified one-year time

limitation. See Blum, 336 So.2d 894; Stephens v. Audubon Ins. Co., 27-658 (La.App.

2 Cir. 12/6/95), 665 So.2d 683, writ denied, 96-66 (La. 2/28/96), 668 So.2d 363.

Moreover, we are mindful that the contents of the policy constitute the law between

the parties, which will be enforced as written if the terms are clear and express the

intent of the parties. Stephens, 665 So.2d 683.

Now turning to the application of the one-year prescriptive period to the

specific facts of this case, we note that prescription begins to run from the date of the

loss. Gremillion, 240 So.2d 727. According to the record, the date of the loss at

issue—damage to the roof—occurred on October 3, 2002. The lawsuit was filed on

April 11, 2005, more than two years after the date of the loss. Therefore, we find, as

did the trial court, that the suit is prescribed on its face. The burden thus shifted to

DeGraauw to show that the action was not prescribed. See Cichirillo v. Avondale

Indus., Inc., 04-2894, 04-2918 (La. 11/29/05), 917 So.2d 424.

Prescription may be defeated if it can be shown that the period was

interrupted or that the right to plead prescription was renounced. See Lima v.

Schmidt, 595 So.2d 624 (La.1992). DeGraauw attempted to satisfy this burden by

arguing that the insurer interrupted the prescriptive period by twice acknowledging

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that the policy covered the repair or replacement of the roof. According to

DeGraauw, the acts of acknowledgment were the insurer’s tender of the first portion

of the insurance settlement on or about November 9, 2002, and the insurer’s act of

tendering the withheld depreciation amount on March 23, 2005. We disagree.

Prescription may be legally interrupted when one acknowledges the

rights of the person against whom he had commenced to prescribe. La.Civ.Code art.

3464. The supreme court has stated that, “[s]ubstantively, acknowledgment is the

recognition of the creditor’s right or obligation that halts the progress of prescription

before it has run its course . . . .” Lima, 595 So.2d at 631. The legal effect of

acknowledgment is the erasing of the time that has accrued, with prescription

recommencing anew from the date of interruption. See id. Acknowledgment that is

sufficient to interrupt prescription does not have to be in any particular form. See

Bennett v. State Farm Ins. Co., 03-1195 (La.App. 3 Cir. 3/24/04), 869 So.2d 321.

“The acknowledgment need not be of a certain amount of damages, only of the

defendant’s responsibility and plaintiff’s right against that defendant.” Bennett, 869

So.2d at 329 (citing Lima, 595 So.2d 624).

In regard to an insurer’s acknowledgment of a claimant’s rights

sufficient to interrupt the running of prescription, we have stated before that a tacit

waiver or interruption of prescription may be found to have occurred if the insurer

“(1) continues negotiations, thereby inducing the insured to believe the claim will be

settled or not contested, (2) makes an unconditional offer of payment, or (3) performs

acts of reparation or indemnity.” Id. at 330 (citations omitted). However, we further

stated:

[U]nless the insurer in some manner leads the insured to
reasonably believe the time limitation has been waived
while the claim is under consideration or in some other
way acts so as to induce the insured to withhold suit, the

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suit must be filed within the prescribed period even if the
claim is pending. Blum v. Cherokee Ins. Co., 336 So.2d
894, 898, (La.App. 4 Cir. 1976).

After reviewing the record, we find no evidence of any direct or tacit

actions on the part of the insurer to interrupt the running of the one-year prescriptive

period. Specifically, we find no evidence in the record that Standard Fire took any

action to induce either the deceased Mr. DeGraauw or his succession representative

to delay the filing of any lawsuit. In fact, there is no indication in the record that

there were ever any discussions, orally or in writing, between the insurer and the

decedent, or the decedent’s succession representative, or any legal counsel for the

insured or his estate until after the period had run. Once prescription runs, it cannot

be interrupted. Lima, 595 So.2d 624. We also find it significant that, for a span of

almost two years following the initial payment by the insurance company, there was

no contact between the parties about the claim.

In addition, we do not find that the insurer’s negotiations with DeGraauw

commencing in June 2004 or the insurer’s subsequent tender of the withheld

depreciation amount of $2,602.33 on March 23, 2005, were acts of renunciation of

the insurer’s right to plead prescription. La.R.S. 22:651.2 Renunciation by definition

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Louisiana Revised Statutes 22:651 states:

§ 651. Claim administration not waiver

None of the following acts by or on behalf of an insurer shall be
deemed to constitute a waiver of any provision of a policy or of any defense
of the insurer thereunder:

(1) Acknowledgment of the receipt of notice of loss or claim under
the policy.

(2) Furnishing forms for reporting a loss or claim, for giving
information relative thereto, or for making proof of loss, or receiving or
acknowledging receipt of any such forms or proofs completed or
incompleted.

(3) Investigating any loss or claim under any policy or engaging in
negotiations looking toward a possible settlement of any such loss or claim.

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“obliterates the effect of prescription that has run” and is subject to more strict

requirements than acknowledgment. Lima, 595 So.2d at 631. It has to be “clear,

direct, and absolute and manifested by words or actions of the party in whose favor

prescription has run.” Id. When renunciation occurs, a new and binding, unilateral

obligation to pay or perform has been created by the debtor after prescription has

accrued. See id. This has not occurred in this case.

Accordingly, we find no legal or manifest error in the trial court’s

judgment sustaining the exception of prescription.

IV.

CONCLUSION

The judgment sustaining the exception of prescription is affirmed. Costs

of this appeal are assessed to the plaintiff-appellant, David M. DeGraauw.

AFFIRMED.

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