                                 ___________

                                 No. 95-3298
                                 ___________

Federal Deposit Insurance             *
Corporation, successor to             *
claims of First Federal Bank,         *
F.S.B.,                               *
                                      *
           Appellee,                  *
                                      *
     v.                               *   Appeal from the United States
                                      *   District Court for the District
Hartford Accident and Indemnity       *   of South Dakota.
Company,                              *
                                      *
           Appellant.                 *


                                 ___________

                    Submitted:    June 13, 1996

                        Filed:   October 16, 1996
                                 ___________

Before HANSEN, ROSS and JOHN R. GIBSON, Circuit Judges.

                                 ___________

ROSS, Circuit Judge.


     This case is before us for the second time following our earlier
remand to the district court based on our conclusion that a blanket bond's
two-year contractual limitations period is valid under South Dakota law.
See RTC v. Hartford Acc. & Indem. Co., 25 F.3d 657, 659 (8th Cir. 1994).
We briefly reiterate the facts for the purposes of our analysis in the
present appeal.


     Hartford Accident and Indemnity Company (Hartford) issued a standard
savings and loan blanket bond (bond) for the now-defunct First Federal Bank
(First Federal).   The bond provided broad coverage for losses arising out
of dishonest, criminal or malicious
acts, including employee infidelity.        The bond further provided that any
action on the bond must be brought no later than twenty-four months after
discovery of the loss.


         In 1987, First Federal established a mortgage banking company which
conducted business under the name Midland Mortgage Company.      First Federal
owned 86% of the stock, while John Gaustad, Midland's president, owned the
remaining 14%.1    In late 1988, it was discovered that Gaustad had engaged
in   fraudulent activities involving fictitious loans funded by First
Federal.     First Federal notified Hartford of the claim under the bond and
Hartford refused to pay.     The proof of loss was submitted to Hartford on
December 20, 1988.       On March 7, 1990, fifteen months following the
submission of the proof of loss, Hartford denied coverage.           The suit was
filed on November 15, 1990, eight months after denial of coverage and
almost twenty-five months after discovery of the loss.
         The district court initially entered summary judgment in favor of
     2
FDIC , concluding that the two-year contractual limitations period in the
bond was void under South Dakota law.       See S.D.C.L. § 53-9-6.    A panel of
this court reversed, holding instead that, because it was contained in a
surety contract, the two-year contractual limitations provision was valid
under South Dakota law.      See S.D.C.L. §§ 53-9-6, 58-9-29.    The case was
remanded to the district court with instructions to consider the issues
relating to the date of discovery, estoppel, and any other issues remaining
in the case.


         On remand, the FDIC argued that the statute of limitations did




         1
      On June 1, 1988, Gaustad purchased all of First Federal's
stock in Midland Mortgage Company and became its sole owner.
         2
      On March 8, 1991, First Federal failed and the Resolution
Trust Corporation (RTC) succeeded to First Federal's interest in
this lawsuit. Subsequently, the FDIC was statutorily substituted
for the RTC as appellee.

                                      -2-
not begin to run until March 7, 1990, when coverage was formally denied,
or, alternatively, that the twenty-four month limitation period should not
commence until after the expiration of sixty days following the submission
of a proof of loss, or February 20, 1989.    Under either scenario, FDIC's
suit filed on November 15, 1990, would be timely.


     The district court presumed the contractual period of limitations
began to run on October 27, 1988, when First Federal's president, Paul
Mavity, stated he discovered Gaustad had committed fraudulent acts.   Mavity
testified that on October 27, 1988, he "discovered that there were frauds,
fraudulent acts being committed."   Nevertheless, the court ruled that the
limitations period was tolled during the fifteen months that Hartford
investigated the loss, and in the alternative that Hartford waived the two-
year deadline.   Accordingly, the district court once again entered summary
judgment in favor of the FDIC.


     Hartford's bond uses the surety industry's standard twenty-four month
contractual limitation, which requires that suit be brought within two
years of the discovery of the loss.       The bond further provides that
Hartford is immune from suit for sixty days following the submission by the
policyholder of proof of loss:


     (d) Legal proceedings for the recovery of any loss hereunder
     shall not be brought prior to the expiration of 60 days after
     the original proof of loss is filed with the Underwriter or
     after the expiration of 24 months from the discovery of such
     loss. . ..


     The bond also describes when discovery of loss occurs:


     Discovery occurs when the Insured becomes aware of facts which
     would cause a reasonable person to assume that a loss covered
     by the bond has been or will be incurred, even though the exact
     amount or details of loss may not then be known.




                                    -3-
     Mavity's uncontroverted statement, that on October 27, 1988, he
became aware of Gaustad's fraudulent acts, constitutes discovery of loss
under the clear terms of the insurance policy as a matter of law.


     Hartford's bond specifically required First Federal to commence
action no later than "the expiration of 24 months from the discovery of
such loss."    The language is plain and unambiguous.       Nevertheless, the
district court adopted a new legal theory of "tolling," where the cause of
action accrues on the date of discovery, in accordance with the plain
language of the contract, but runs only until proof of loss is submitted.
At that point, according to this theory, the limitations period is tolled
during the time the insurer investigates the claim and the period begins
to run again after the insurer denies the claim.


     The district court reasoned that literally enforcing the twenty-four
month limitations period as written, would "produce unjust results and is
contrary to the policyholder's rights under the bond."          The court noted
that "[d]espite the twenty-four month limitations period, the plaintiff in
fact had only eight months in which to bring an action.         Add to this the
two months of immunity provided by the bond and it is clear that the
policyholder's time for bringing suit was severely reduced."          The court
concluded that adoption of the tolling theory "is clearly the most fair to
both parties."


     We   disagree   with   the   court's   conclusion.   The   district   court
disregarded existing South Dakota law and instead followed a minority of
courts that have used the concept of tolling to enlarge a contractual time
limitations.     See, e.g., Peloso v. Hartford Fire Ins. Co., 267 A.2d 498,
501 (N.J. 1970); Prudential-LMI Comm. Ins. Co. v. Superior Court, 798 P.2d
1230, 1232 (Cal. 1990); Ford Motor Co. v. Lumbermens Mut. Cas. Co., 319
N.W.2d 320, 323-25 (Mich.




                                      -4-
1982).   The minority rule is premised on a perceived incongruity in
insurance contracts that have time limitations.     The perception of the
incongruity stems from the fact that the insurance policy requires suit to
be commenced within one or two years, but does not account for the delays
either required by the policy or inherent in the claims process.     These
courts purport to reconcile this by "allow[ing] the period of limitation
to run from the date of the casualty but to toll it from the time an
insured gives notice until liability is formally declined."    Peloso, 267
A.2d at 501.   Hartford claims the minority rule wrongly makes the two-year
limitation a grant of two, unfettered years to the insured in which to
decide whether to sue.    Hartford argues the limitations period is not a
grant of time, but instead is a deadline for filing suit.


     The majority of courts have refused to toll a limitation provision
during the initial non-suit period or during the insurer's investigation.
See, e.g., Ashland Fin. Co. v. Hartford Acc. & Ind. Co., 474 S.W.2d 364,
366 (Kent. Ct. App. 1971); Closser v. Penn. Mut. Fire Ins. Co., 457 A.2d
1081, 1085-86 (Del. 1983) (refusing to toll a limitations provision where
insured was not prevented from complying with the provision); Suntrust
Mtg., Inc. v. Georgia Farm Bureau Mut. Ins. Co., 416 S.E.2d 322, 323-24
(Ga. Ct. App. 1992) (refusing to toll the limitations period during the 60-
day nonsuit period); Kelley v. Travelers Ins. Co., 458 N.E.2d 406, 407
(Ohio Ct. App. 1983) (rejecting tolling argument); Brunner v. United Fire
& Cas. Co., 338 N.W.2d 151, 152 (Iowa 1983) (rejecting Peloso).


     On March 7, 1990, when Hartford completed its investigation and
denied coverage, First Federal still had more than seven months in which
to commence suit.    Instead of filing its action, however, First Federal
waited more than five months before objecting to Hartford's denial of
coverage on August 13, 1990.     On September 16, 1990, Hartford answered
First Federal and reiterated its denial of coverage.      Even then, First
Federal still had six weeks in which to




                                    -5-
file suit.   See Minnesota Mut. Fire & Cas. Co. v. North Lakes Constr.,
Inc., 400 N.W.2d 367, 370 (Minn. Ct. App. 1987) (holding that insured's
failure to commence suit within two-year limitations period precluded
recovery where insured had three months to commence suit after insurer
denied coverage); Martin v. Liberty Mut. Fire Ins. Co., 293 N.W.2d 168, 172
(Wis. 1980) (applying time limitation where insured had one month left on
limitations period after insurer denied coverage).   See also Koclanakis v.
Merrimack Mut. Fire Ins. Co., 899 F.2d 673, 676-77 (7th Cir. 1990) (insured
"does not explain why he could not have prepared a lawsuit in a six-week
period, especially when he already knew all of the pertinent facts").


     We conclude the district court erred in applying a tolling theory to
this contract.   The bond unambiguously provided that any suit must be filed
within twenty-four months of the date of discovery of the loss.   No showing
has been made that the contract was inherently unfair to the insured or
that compliance with the time requirements in fact delayed the filing of
suit beyond the limitations period.    The FDIC has never claimed that First
Federal could not have filed suit or was prevented from filing suit within
the two-year period.   See Closser, 457 A.2d at 1085 (refusing to toll time
limitation where insured was not prevented from complying with deadline).
If conduct or inaction on the part of the insurer is responsible for the
insured's failure to comply with time limitations, injustice is avoided and
adequate relief assured, without doing violence to the plain language of
the insurance contract, by resort to traditional principles of waiver and
estoppel.


     Because South Dakota law already protects an insured who has been
mislead or otherwise induced into missing a filing deadline, we decline to
rewrite the policy's limitations provision to read other than its clear and
unambiguous terms provide, namely that suit may not be brought "after the
expiration of 24 months from the




                                      -6-
discovery of such loss."   See Johnson v. Johnson, 291 N.W.2d 776, 778 (S.D.
1980) (holding that contracts are to be interpreted as written, and the
interpretation of the terms of a contract may not result in a modification
of the contract).     A court must not impose its own concept of fairness
under the guise of construing a contract.           Where the parties make by
agreement a fixed, unqualified limitation that no suit or action on the
policy shall be sustainable unless commenced within twenty-four months
after discovery of the loss, the parties are bound to their contract as
written.


      We also reject the district court's conclusion that Hartford waived
its right to rely on the bond's contractual limitations provision.            The
district court's holding was based on its finding that Hartford "sat on the
claim for sixteen [sic] months before issuing its denial," and that
Hartford did not indicate during its investigation that the limitations
period was running and when the period would expire, although the court
acknowledged that Hartford was "not required [to do so] under the bond."
The court concluded that, because of the totality of Hartford's conduct,
it would be unjust and inequitable for Hartford to rely on the limitations
defense.


      Although it appears the district court may have confused or combined
the doctrines of equitable estoppel and waiver, the FDIC is not entitled
to   relief   under   either   theory.3     First   and   foremost,   the   facts
unequivocally establish that Hartford's denial of coverage occurred seven
months prior to the expiration of the




      3
      A substantial difference exists between the doctrines of
waiver and equitable estoppel. Western Cas. & Sur. Co. v.
American Nat'l Fire Ins. Co., 318 N.W.2d 126, 128 (S.D. 1982).
Waiver is the intentional relinquishment of a known right,
Subsurfco, Inc. v. B-Y Water Dist., 337 N.W.2d 448, 456 (S.D.
1983), while estoppel requires an inducement upon which the other
party reasonably relies to its detriment. Cromwell v. Hosbrook,
134 N.W.2d 777, 780-81 (S.D. 1965).

                                      -7-
limitations period and the final correspondence from Hartford, again
denying the claim, came at least six weeks prior to the expiration of the
limitations period.     As previously stated, no evidence has been submitted
that the insured was prevented from complying with the filing deadline.
There is no evidence that Hartford "lull[ed] the insured into inaction by
promises of, or negotiations for, payment under a claim, or [by failing]
to   deny   liability   until   after   a   contractual   limitations    period   has
expired."    See Federal Sav. & Loan Ins. Corp. v. Aetna Cas. & Sur. Co., 701
F. Supp. 1357, 1361 (E.D. Tenn. 1988).            Hartford's statements in its
notices of denial that it would consider additional information if First
Federal believed that any facts were misstated or omitted from Hartford's
analysis were not attempts to mislead First Federal to believe payment was
likely, or that it intended to enlarge the limitations period in the
contract.    Instead these comments were simply good faith expressions of a
willingness to consider corrected information if necessary.             See Roberson
v. Metropolitan Life Ins. Co., 682 F. Supp 907, 910 (E.D. Mich. 1988)
(holding that insurer's good faith statement that plaintiff's claim would
be fairly apprised if additional evidence was submitted did not estop
insurer from asserting limitations defense).


      The district court disregarded S.D.C.L. § 58-12-2, which provides
that "[i]nvestigating any loss or claim under any policy" shall not
"constitute a waiver of any provision of a policy or of any defense of the
insurer."    While the statute clearly does not insulate an insurer from a
claim of waiver regardless of the manner of its investigation, it does
codify the sound policy that as a general rule an insurer's investigation
of a claim will not constitute a waiver of an insurer's rights under the
policy.


      In summary we conclude the district court erred in disregarding the
clear terms of the contract between the parties and further erred in
concluding that Hartford waived its




                                        -8-
limitations defense.   The FDIC's suit is barred by the twenty-four month
limitations provision of the bond.   The judgment of the district court is
reversed and the district court is instructed to enter judgment in favor
of Hartford.


     A true copy.


           Attest:


                 CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.




                                     -9-
