On November 11, 2013, Timothy Frazier allegedly slipped and fell in a fast food restaurant restroom owned and operated by Mita Enterprises, LLC (“Mita”).  Frazier v. Liberty Mut. Ins. Co., No. 2018-288-Appeal, 2020 WL 3117048, at *1 (R.I. June 12, 2020).  Three years later, in November 2016, Frazier filed suit against Mita to recover damages for his alleged injuries.  Id.  Mita, however, failed to respond to Mita’s complaint and Frazier filed a motion to default for Mita’s failure to respond to the complaint.  Id.  The Rhode Island Superior Court granted Frazier’s motion and default entered.  Id.  Subsequently, Mita filed a motion to vacate the entry of default and to dismiss the case for lack of sufficient service of process.  Id.  The first trial judge granted Mita’s motions and the case was dismissed on August 4, 2017.  Id.

Frazier later filed a new complaint against Mita in July 2017.  Id.  The process server, however, returned the summons non est inventus (“he is not found”), as Mita was not located.  Id.  Pursuant to Rule 21 of the Rhode Island Superior Court Rules of Civil Procedure, Frazier then moved to substitute Liberty Mutual, Mita’s insurance carrier, as a defendant.  Id.  Objecting to Frazier’s motion, Liberty Mutual argued, in part, that the statute of limitations barred Frazier’s claim.  Id.  Before addressing Liberty Mutual’s defense, however, Frazier renewed his motion to substitute and moved to amend his complaint.  Id.  The parties subsequently agreed that Frazier’s motion to substitute would be granted, but that Liberty Mutual reserved the right to assert any and all defenses, including the statute of limitations defense.  Id.  After Frazier amended his complaint on April 9, 2018, Liberty Mutual moved to dismiss it by arguing that the applicable statute of limitations barred Frazier’s claim.  Id. at *2.  In opposition to Liberty Mutual’s motion, Frazier relied on Rhode Island’s savings statute, arguing that Liberty Mutual was not a stranger to the first action against Mita, and thus, his claim was preserved for an additional year.  Id.  Rhode Island’s savings statute, R.I. Gen. Laws § 9-1-22, provides that:

If 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.”  G.L. 1956 § 9-1-22.

The second trial justice disagreed with Frazier and granted Liberty Mutual’s motion reasoning that Frazier’s claim was not preserved by the savings statute and was barred by the applicable three-year statute of limitations.  Frazier, 2020 WL 3117048, at *2.  Frazier timely appealed.  Id.

On appeal, the Rhode Island Supreme Court held that the second trial judge erred in granting Liberty Mutual’s motion to dismiss because Mita and Liberty Mutual shared “a sufficient commonality of interest,” and, thus, Liberty Mutual was not a “stranger to the original action.”   Id. at *4 (quoting Luft v. Factory Mut. Liability Ins. Co. of America, 155 A. 526, 527 (1931)).  The Court reasoned that “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 the original action.”  Id. at *3.  Moreover, initiating an action against an insurance company “places the injured person in precisely the same position with relation to the insurer” that the policyholder would have had if he or she had paid the judgment and then sought to be indemnified by the insurer.  Id. at *4 (quoting Hunt v. Century Indemnity Co., 192 A. 799, 803 (1937)).  Thus, in light of this “sufficient link” and “commonality of interest” between an insurance company and its insured, “an insurance company is not . . . a stranger to the original action against its insured” for purposes of the savings statute.  Id. at *3.  Importantly, the Court reasoned that this “sufficient link” existed between Liberty Mutual and Mita because Liberty Mutual employed lawyers to request the trial court to dismiss the first action against Mita for lack of adequate service of process.  Id. at *4.  Therefore, as a result, Liberty Mutual was not a stranger to the original action and Frazier’s claim against it should not be deprived the benefit of the savings statute.  Id.

In one of his last acts before retiring, Justice Indeglia authored a dissent.  Justice Indeglia asserted that the Court should not “depart from longstanding precedent” and should observe the principles of stare decisis, observing legal precedent.  Id. at *5 (Indeglia, J., dissenting).  Although the dissent agreed that the savings statute cannot be applied against a party who “was a stranger to the original action,” it disagreed with the Court’s interpretation of the word “stranger.”  Id.  Justice Indeglia pointed out that the Court’s jurisprudence and plain language suggests that the meaning of the term “stranger” is used to refer to someone who is not “a named party.”  Id. at *5-6; see also, Luft, 155 A. at 526-27.  Thus, he argues, Liberty Mutual was a stranger to the suit because “they were not a party” to the original action, and more importantly, were not named in either of Frazier’s initial complaints against Mita.  Frazier, 2020 WL 3117048, at *6.  As a practical matter, the dissent points out that broadening the applicability of the savings statute to include insurance companies that were not named in the original action provides “plaintiff[s] with an additional one year, plus 120 days, tacked onto the statute of limitations.”  Id. at *5 (citing G.L. 1956 § 9-1-14(c), 9-1-22).  This, the dissent worries, will carry tremendous negative financial consequences for consumers because insurance companies will now face an increase in potential liability which will, in turn, pass the cost onto the insured in the form of increased insurance premiums.  Id.

This decision carries with it obvious (and quite alarming) consequences.  As an initial matter, it is important to note that the Court’s ruling in Frazier may have limited application. This is because in Rhode Island, an injured party or their estate may not bring an action against the alleged tortfeasor’s insurer unless: (1) service of process was returned non est inventus; (2) the alleged tortfeasor has died and probate proceedings have not yet been initiated; or (3) the alleged tortfeasor has filed for bankruptcy. See R.I. Gen. Laws §§ 27-7-2 and 27-2-2.4.  Aside from these narrow applications, however, the savings statute should be precisely that: a “savings” statute.  That is, even if plaintiffs fail to name an insurance company in their original action and the statute of limitation has expired, the claim will be “saved” because of the now shared “commonality of interest” that exists between insurance companies and their insureds.  This means that an insurance company likely never will be a “stranger to the original action,” and the savings statute always may come to the rescue in the event the insured cannot be located or the plaintiff fails to name the insurance company in the original action.

As for insurance companies, the take away is not as comforting.  The Court’s ruling in Frazier means that insurance companies now will be exposed to potential liability for a longer period of time.  As the dissent points out, this may cause an increase in costs for insured persons in the form of increased premium rates to account for the increased risk to which insurance companies are now subjected.  Additionally, and strategically speaking, insurance companies now will be potentially at a significant disadvantage when defending against an action in which they were not named.  This is because the Court in Frazier views insurance companies and their insured as one in the same.  As a result, this could mean that insurance companies will no longer be able to raise certain affirmative defenses such as lack of notice or improper service of process, even if the insured fails to notify its insurer of the suit or the insurer is never served with process.  In sum, the lesson from this case for insurance companies is to keep an eye out for potential lawsuits against individuals they insure and prepare for prolonged exposure to potential liability.