American States Insurance v. LaFlam
672 F.3d 38
1st Cir.2012Background
- LaFlam was injured in an accident in Rhode Island on April 25, 2007, while insured under ASIC UM/UIM coverage.
- LaFlam settled with underinsured tortfeasors for $1 million within three months of authorization.
- ASIC denied payment, then filed a declaratory judgment action arguing the claim was time-barred by a three-year contract limitation in the UM/UIM policy.
- LaFlam counterclaimed for breach of contract and bad faith; district court granted ASIC’s motion for judgment on the pleadings.
- Rhode Island public policy disfavors contract terms that restrict UM/UIM coverage; questions unresolved under Rhode Island law prompted certification.
- The First Circuit certified a Rhode Island Supreme Court question and stayed the case pending its answer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the two provisions of the contractual limitations clause violate Rhode Island public policy. | LaFlam argues policy limits undermine UM/UIM purpose. | LaFlam contends limits are valid contracting terms under Lyden and related Rhode Island law. | Certification sought to resolve RI public policy implications. |
| Whether the three-year limit and accrual from the accident are enforceable under RI law. | LaFlam claims accrual may not begin at accident date to avoid barring ripe claims. | ASIC argues accrual from accident date is valid; policy may preclude suit before ripe. | Court certified RI Supreme Court on enforceability of the two provisions in light of public policy. |
| What RI law governs the interaction of UM/UIM statute with contract limitations. | Public policy supports broader UM/UIM recovery; limitations must yield. | Policy terms should be enforced as contracts, within RI’s statutory framework. | RI Supreme Court guidance needed; certification approved. |
| Whether certification is appropriate to resolve unsettled state-law questions. | Certified questions will resolve controlling state-law issues. | Certification is appropriate due to unsettled RI law and broad policy implications. | Certification granted; case stayed pending RI Supreme Court answer. |
Key Cases Cited
- Rueschemeyer v. Liberty Mut. Ins. Co., 673 A.2d 450 (R.I. 1996) (public policy bars restrictive UM/UIM exclusions)
- Casco Indem. Co. v. R.I. Interlocal Risk Mgmt. Trust, 929 F. Supp. 65 (D.R.I. 1996) (void on public policy grounds for limiting UM/UIM coverage)
- DiTata v. Aetna Cas. & Sur. Co., 542 A.2d 245 (R.I. 1988) (contractual limitations in UM context construed against coverage goals)
- DiIorio v. Abington Mut. Fire Ins. Co., 402 A.2d 745 (R.I. 1979) (one-year fire policy limitations precedent informing policy limits)
- Hay v. Pawtucket Mut. Ins. Co., 824 A.2d 458 (R.I. 2003) (two-year contractual limitations in property context)
- Progressive Northern Ins. Co. v. Lyden, 986 A.2d 231 (R.I. 2010) (requirements for pre-suit notice consistent with contract terms in UM/UIM)
- Metropolitan Property and Casualty Insurance Co. v. Barry, 892 A.2d 915 (R.I. 2006) (prejudgment interest accrues when action accrues; different issue from limitations)
- Nat'l Refrigeration, Inc. v. Travelers Indem. Co. of Am., 947 A.2d 906 (R.I. 2008) (contractual limitations may be enforced in non-UM/UIM contexts)
- Amica Mut. Ins. Co. v. Streicker, 583 A.2d 550 (R.I. 1990) (public policy favoring full UM/UIM coverage)