Courts Issue Warning Call on Insurance Claim Limitations Period

Failure to File within Statute of Limitations Results in Dismissal

In Apatow v. American Bankers Insurance Company of Florida, the U.S. District Court for the Central District of California dismissed the insured's claim because he failed to file it in the proper court within the one-year statute of limitations. The insured owned a Standard Flood Insurance Policy (SFIP), the terms of which are set by statute. The terms of the SFIP—and the corresponding statute—explicitly stated that an insured must sue in federal court within one year of denial of his claim. The insured filed his claim against the insurer within a year of denial of his claim but filed it in state court. The case was removed to federal court after the one-year statute of limitations period had run.

The insured argued that the limitations period had not run because, after the insured received the initial denial letter, he sent more information to the insurer regarding part of his claim. The insurer reviewed the new information and sent the insured a check for some of the damages. The insured argued that, by sending this check, the insurer revoked the initial denial and restarted the statute of limitations.

The district court rejected this argument on public policy grounds. That an insurer "may inadvertently extend the limitations period by answering claimants' inquiries or by considering new information would contravene a strong public policy to encourage an insurance company to reconsider its original denial when confronted with potentially new facts," the court reasoned. Section leaders agree with this logic. "This ruling allows an insurance carrier to consider new evidence without being characterized as reopening a claim or encountering a business cost of having claims run on forever," says Marc J. Shrake, Los Angeles, CA, cochair of the Property Subcommittee of the Section of Litigation's Insurance Coverage Litigation Committee.

Without such a public policy, "any time a plaintiff might want to extend the time period for an action, all he would have to do is continue to send letters to the insurance company every time a claim was denied, saying he has new facts, or keep sending letters debating some point of the denial or another," says Thomas A. Dye, Miami, FL, cochair of the Property Subcommittee of the Section of Litigation's Insurance Coverage Litigation Committee. "It would be hard for the courts and the parties to determine when the statute of limitations accrued," he adds.

The court also rejected the insured's argument that filing the case in state court tolled the statute of limitations. The statute regarding the insured's insurance policy expressly demanded the suit be filed in federal court, and thus federal courts retain exclusive jurisdiction regarding such claims. While the tolling rule generally allows relation back to the date of a state court filing, this rule did not apply because state courts are not courts of competent jurisdiction in this case.

Similar Case in Nevada Results in Dismissal

On the same day that the Central District of California issued its ruling in Apatow, the U.S. Court of Appeals for the Ninth Circuit issued a similar ruling. In Queensridge Towers v. Allianz Global Risks US Insurance Company, the Ninth Circuit upheld the U.S. District Court for the District of Nevada's dismissal of the insured's claims because the insured did not file its lawsuit within the applicable statute of limitations. Pursuant to the insured's insurance policy, the insured was required to file any action within 12 months of discovery of the loss or damage that gave rise to the claim. Nevada law equitably tolls these insurance limitation clauses from the date the insured gives notice of the loss until the date the insurer denies liability. Correspondence between the insured and insurer showed that the insured had discovered the damage more than a year before filing its lawsuit against the insurer, even considering equitable tolling.

Attorneys Must Pay Close Attention to Limitation Periods

Section leaders caution that plaintiffs should pay attention to provisions—whether in the policy itself or set forth by statute—that limit the time the plaintiff has to file a lawsuit. "These cases are a warning call to plaintiffs' counsel more so than defense counsel," says Dye. "It behooves plaintiffs' counsel to research the statute, read the policy, and calendar the dates accordingly to be sure there are time periods that are not missed," he adds.

Shrake agrees. "Make sure you understand whether in the policy there is some sort of suit limitations provision," he says. "Make sure you also understand the law, if any, in the particular jurisdiction that might speak to suit limitations and validity. Look at the statutes and case law to see whether any limitations period is equitably tolled while a claim is being considered," he adds.

But not only plaintiffs should take heed of the rulings in Queensridge and Apatow. "On the carrier side, always do your job to look for coverage, and be clear about the decision you make," cautions Shrake. "If you do not intend to reopen a claim, be clear that you don't intend to do so."

Catherine M. Chiccine is an associate editor for Litigation News.

Hashtags: #insurancelaw, #statuteoflimitations, #SFIP,#insurancepolicy, #standardfloodinsurancepolicy

Related Resources

• Apatow v. Am. Bankers Ins. Co. of Florida, et al., No. 16-198 MWF (MRW), U.S. Dist. Court for the Central Dist. of Cal. (Dec. 21, 2016).
• Queensridge Towers LLC v. Allianz Global Risks US Ins. Co., No. 15-15128, 9th Cir. (Dec. 21, 2016).
• The National Flood Insurance Act of 1968, as amended, 42 U.S.C. §4001 et seq. (1997).
• Standard Flood Insurance Policy Forms (FEMA, June 2014).
• Lindsay M. Sestile, "Texas Supreme Court Prodigy Decision to Affect Insurance Claims?" Litigation News (May 27, 2009).
• Dennis Abbott & Benjamin Rajotte, "The Lawsuit Deadline for Flood Insurance Claims," State & Local Law News, Vol. 37, No. 3 (Spring 2014).

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