Most first-party property insurance policies contain an express contractual provision, known as a suit limitation provision, that limits the time period within which an action seeking recovery under the policy may be commenced. Suit-limitation provisions typically provide that any action must be commenced within twelve months of the date of the loss.
Under New Jersey law, the running of a suit limitation provision is tolled from the time the insured gives notice of a loss to its insurer until the claim is denied by the insurance company. An issue that has arisen on a number of occasions in connection with Superstorm Sandy claims has to do with what constitutes a denial, thereby starting the limitation period to run again.
In February 2015, I discussed Inacio v. State Farm Fire and Casualty Company, 2015 WL 457049 (D.N.J. Feb. 3, 2015), a case that addressed the issue of what constitutes a denial sufficient to start the running of a suit limitation provision. In September, I addressed another decision decided by the same judge, Judge Kugler of the United States District Court for the District of New Jersey, Liguori v. Certain Underwriters at Lloyds, 2015 WL 4402851 (D.N.J. July 17, 2015), which involved the same issue.
Another federal judge recently reached a somewhat novel result in a tolling case. In Preston v. Metropolitan Group Property and Casualty Insurance Company, 2016 WL 1060360 (D.N.J. March 16, 2016), Judge Kevin McNulty of the United States District Court for the District of New Jersey held that a suit limitation provision starts to run again once the last settlement payment is made by the insurer, even though the insurer never expressly denies any further liability.
The insured in Metropolitan, Robin Preston, owned a home located in Asbury Park, New Jersey, that was damaged by Superstorm Sandy on October 29, 2012. At the time, Preston was insured by Metropolitan Group Property and Casualty Insurance Company. Preston filed a claim with Metropolitan on November 3, 2012, just a few days after Sandy damaged her home. Metropolitan inspected Preston’s home and prepared a damage estimate, which was dated November 19, 2012. Metropolitan conducted two additional inspections of the property, with the final one taking place in January 2013.
Between December 3, 2012 and February 4, 2013, Metropolitan issued a series of seven checks to Preston, totaling $14,721.06. No payments were made after February 4, 2013.
In August 2013, Preston’s counsel wrote to Metropolitan and requested a copy of the policy issued by Metropolitan and the reports prepared by Metropolitan’s adjuster. In April 2014—over eight months later—Metropolitan supplied the requested information. Preston then sued Metropolitan several weeks later in May 2014. At no time prior to commencement of the lawsuit did Preston demand any additional payments from Metropolitan.
Metropolitan moved for summary judgment, arguing that Preston’s claim for additional damage was barred by the one-year suit limitation provision. That provision provided:
Lawsuits Against Us. No suit or action may be brought against us by you unless there has been full compliance with all of the policy terms. Under Section I of this policy, any suit or action seeking coverage must be brought within twelve months of the loss.
Id. at *2. Preston argued that while more than one year had passed since the loss occurred, the suit limitation period was tolled from the time notice of the claim was provided and did not start running again. The court disagreed, and granted summary judgment in favor of Metropolitan.
The court began its analysis by summarizing what it believed to be New Jersey law concerning the tolling of suit limitation provisions:
For insurance claims, the limitations period begins to run on the date of casualty or accident. It is tolled, however, “from the time the insured gives notice until liability is formally declined.” That is, the time when the claim is being negotiated or processed by the insurer is not counted against the insured. Where the insurer has not . . . declined liability, but the parties disagree on the settlement amount, the limitations period is still suspended while the claim is pending—i.e., through the last settlement payment.
Id. at *3 (citations omitted). Thus, according to the court, “the tolling ceased, and the limitations period began running again, on February 4, 2013, the date that Metropolitan paid Preston the last settlement check.” Id. Because more than fifteen months had passed since the last payment, the court held that the claim was barred.
Preston also argued that the doctrine of equitable tolling should apply because, at the time, it was not clear to her that the February 4, 2013 check was the final check. As observed by the court:
Preston seems to argue that the final check should have announced itself in some way; otherwise, she says, a series of checks is simply an “invitation to submit additional evidence to recover for the loss as well as a promise to make future payments.”
Id. According to the court, in order for the doctrine of equitable tolling to apply, there must be some type of inequitable conduct on the part of the defendant on which the plaintiff relied to her detriment. Finding no reliance or inequitable conduct, the court refused to apply the doctrine of equitable tolling:
Nothing about the February 4, 2013 check indicated that more checks were on the way. If Preston thought additional money was due, or that a fourth inspection was required, she did not submit such a supplemental claim or request such a re-inspection. Six months after the checks stopped coming, Preston’s [attorney] sent Metropolitan a letter dated August 14, 2013, requesting a copy of the claims file. Nowhere in that letter does Preston request a re-inspection or demand a readjustment of her claim. Nor does she indicate confusion as to whether her claim was closed or whether additional checks would be forthcoming.
Id. at *5. The court further observed that “[a]s February 4, 2014 approached, it was unreasonable to refrain from filing in the unsupported belief that the February 4, 2013 check possibly was not ‘final’.” Id.
In reaching its decision, the court went a step further than other courts in holding “that the date of the last check is the proper time from which to measure the limitations period.” Id. Other courts have held that there must be an “unambiguous formal denial” of the claim to restart the running of the suit limitation provision. See, e.g., Liguori, 2015 WL 44028 at *3-5. In light of the Preston decision, an insured needs to be more proactive and commence an action within the twelve month period even in the absence of an “unambiguous formal denial.” Otherwise, it runs the risk of having its claim dismissed as being untimely.
© William D. Wilson and NJInsuranceBlog.com, 2016. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson or NJInsuranceBlog.com with appropriate and specific direction to the original content.