Case Law Notes

SUMMER 2020 CASE LAW NOTES

Frazier v. Liberty Mut. Ins. Co., No. 2018-288-Appeal, 2020 WL 3117048 (R.I. June 12, 2020)

In November 2013, Timothy Frazier (“Frazier”) alleges he slipped and fell in the bathroom of a Pizza Hut owned and operated by Mita Enterprises, LLC (“Mita”). Three years later, just before the applicable statue of limitations expired, Frazier filed suit against Mita for his alleged injuries. Mita, however, did not respond to the complaint, and Frazier moved for default due to their failure to respond. The Superior Court granted the motion and default entered against Mita. Attorneys for Mita later filed a motion to vacate the default and to dismiss the case due to improper service of the complaint on them. Mita’s motions were granted, and the case was dismissed. Importantly, Mita was represented by attorneys engaged by its insurer, Liberty Mutual.

Frazier filed a new complaint in July 2017. Mita, however, could not be served as it had gone out of business. The summons was returned non est inventus (Latin for “he is not found”). counsel to press for the dismissal of Frazier’s initial, timely-filed

Under rules of court procedure, Frazier moved to substitute immediate and significant. Even if a plaintiff cannot—or does

Mita’s insurer, Liberty Mutual, as defendant. Liberty Mutual argued that the statute of limitations barred the second case, which was clearly brought more than three years after Frazier’s alleged fall. In opposition, Frazier argued that due to Rhode Island’s “savings statute,” his claim could be timely re-filed for an additional year after dismissal.

But Frazier’s initial claim was against Mita, not Liberty Mutual!

Liberty Mutual relied on a longstanding rule dating to 1931 that the savings statute does not apply against a defendant which “was a stranger to the original action.” Luft v. Factory Mut. Liability Ins. Co. of America, 51 R.I. 452, 155 A. 526 (1931) (emphasis added). That might be so, Frazier argued, but in this circumstance at least, Liberty Mutual was not a stranger to the initial, timely-filed action—Liberty Mutual had, after all, retained the counsel that succeeded in getting the initial complaint dismissed. Rhode Island’s savings statute provides that:

[i]f an action is timely commenced and is terminated in any other manner than by a voluntary discontinuance, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits, [the plaintiff] may commence a new action upon the same claim within one year after the termination.

R.I.G.L. 1956 § 9-1-22. The Superior Court granted Liberty Mutual’s motion, reasoning that Frazier’s claim against the insurer was not preserved by the savings statute, as the insurer was not a party to the first action and was therefore a stranger.

On appeal, the Rhode Island Supreme Court held that the trial Mita and Liberty Mutual shared “a sufficient commonality of interest,” that Liberty Mutual was not a “stranger to the original action.” The Supreme Court reasoned that despite the longstanding rule, “modern society and evolving jurisprudence present a different view” of whether an insurer who appears on behalf of its insured is considered a “stranger” to that action. The Supreme Court further reasoned that an action against the insurer “places the injured person in precisely the same position with relation to the insurer” that the policyholder would be in if he had simply paid a judgment and thereafter sought indemnification from the insurer. And critically, the Supreme Court held that a “sufficient link” existed between insurer and the insured in Frazer’s case because the insurer had retained claim against Mita. Even under the longstanding rule, if an insurer is not a “stranger” to the original action, then Frazier’s claim would be preserved by Rhode Island’s savings statute.

The Frazier decision may have somewhat limited application, because unlike some other states, Rhode Island does not generally provide for a direct action against an alleged tortfeasor’s insurer—except in certain limited circumstances (one of which is service of the complaint returned non est inventus). That said, where it does apply, its consequences are judge erred in granting Liberty Mutual a dismissal because

not—name an insurer as defendant in a legal filing, and even if the statute of limitations has run on the claim, a claim against that insurer may now be preserved by the savings statute due to the “commonality of interest” between insurer and insured.

Effectively, Frazier will mean that insurers have exposure to potential liability for a longer time—the applicable statute of limitations plus a year from the savings statute. Insurers are also put at direct risk when defending claims against their insureds (suits in which the insurer itself is not named), because Frazier acts to combine insurer and insured, effectively, into one party. Does this mean, looking forward, that insurers will no longer be able to argue certain defenses such as lack of notice or ineffective service—even when the insured does not give notice or the insurer is never served? Can an insurer ever be a stranger to an action against its insured? What notice to the insurer is required to render them a non-stranger? Will the savings statute now effectively always preserve claims against insurers when the insured cannot be located? For now, these questions are unanswered, or only partially answered.

The bottom line is that Frazier creates the likelihood of additional risk for insurers and creates an opening through which further expansions on insurer liability may follow.