Gilbert v. Nationwide Mutual Insurance Co., 2007-SC-78-DGNationwide had been granted summary judgment at the trial court. On appeal Gilbert argued that in reading her Nationwide policy there was no way she could have known that the statute of limitations on her claim expired after two years. (She was represented by at least two different attorneys). She acknowledges that Nationwide can shorten the statute of limitations, but she claims that it failed to clearly do so in the contract. Nationwide argues that whether the statute of limitations is two years, or 15 years, the point is that under the policy, Gilbert was to do nothing to prejudice Nationwide’s right to sue or otherwise recover from anyone else who may be liable for property damage to Gilbert’s vehicle.
Auto Insurance. Property Damage. Claim against the insured's own carrier. If suit has not been filed against an offending tort-feasor within two years of an accident, is an insured barred from making a claim against their own insurer for payment under collision coverage?
The Court of Appeals concluded; "There is no dispute that Gilbert’s actions clearly prejudiced and prevented Nationwide from recovering from a subrogation claim against Prime and Baldanza and this was clearly a violation of the contract between Gilbert and Nationwide." It upheld the summary judgment, 2-1.
In dissent Judge Miller declared; "It is true that she [Gilbert] may lose her rights under the contract by operation of law, i.e., waiver or estoppel. She may also, of course, lose her rights by release of the tortfeasor, which she did not do. She cannot, however, lose her rights under the contract by allowing the statute of limitations to run against her subrogee, which has no rights until payment is made. It would be a strange state of affairs if an insured under a collision contract of insurance were bound to settle with his insurer in time to permit the insurer to prosecute a subrogation claim against the tortfeasor within the time prescribed for limitations of a tort action."
It is interesting to note that there was no dispute that Prime, Inc. had made an offer to resolve the property damage claim well within the statute of limitation. However, there was a dispute as to whether this offer (made in 2000) was ever accepted or whether it was in fact, rejected. Gilbert initially claimed she accepted the offer in November 2003 at a mediation, but after summary judgment was entered, she claimed for the first time, it was accepted when it was made. Prime claimed the offer was rejected by Gilbert when made.
Another interesting note is Judge Miller's unsupported conclusion that Gilbert cannot lose her rights under the contract by allowing the statute of limitations to run." Gilbert has no rights beyond those set forth in the contract. She is allowed coverage, but only if she does not prejudice Nationwide's right to subrogation, which she clearly did.
So what was Gilbert to do? Simple, either accept the offer, sue the tortfeasor within two years, or demand coverage under her own policy, forcing Nationwide to subrogate. What did she do? nothing. She waited until the statute ran to seek payment from the tortfeasor and when she found out she couldn't, she sought to collect on her collision coverage. Her action, or in this case inaction, clearly prejudiced Nationwide, who is prevented from recovering any payments it makes. While Miller is correct that Nationwide's right to subrogation does not exist until payment is made, the contractual rights and obligations OF BOTH PARTIES under the contract exist the moment it is executed. The rights and obligations are governed by the contract. They do not exist separate from its language. Gilbert has a right to coverage, but the obligation not to prejudice Nationwide's ability to subrogate. Nationwide has the obligation to provide coverage, but the right not to be prejudiced by Gilbert. Gilbert did prejudice Nationwide, so she doesn't have the right to coverage nor does Nationwide have the obligation to provide it. Gilbert is not simply afforded coverage, as Judge Miller claims, because she "paid her premiums."
Unfortunately, given the grant of discretionary review and the makeup of the current court, I imagine that a reversal is coming. Don't be too surprised if the Court adopts in some manner, Judge Miller's conclusions. I was surprised this case didn't garner a published opinion or at least more publicity. The Nationwide policy contains similar language to most policies, regarding subrogation and lack of prejudice. If Gilbert is allowed to recover under these circumstances, that language is most probably rendered useless, as is any attempt by the insurer to limit coverage in similar cases, where the insured blows the statute.