A recent New Jersey Federal District Court decision provides a good example of how an insurance policy’s Suit Limitation period may be “stopped” and “re-started” by equitable tolling during the adjustment of a property insurance claim.
As we explained in an earlier post, New Jersey permits parties to an insurance contract to shorten (or presumably lengthen) the state’s six year statute of limitations for a party to commence an action for breach of contract. This is commonly done through a clause in the insurance policy that provides any action must be brought within X years of either (i) the date of loss, or (ii) the carrier’s denial of the claim (the “Suit Limitation” provision). The Suit Limitation provision is typically styled as a “condition” in the policy – in other words it is an action the policyholder must take before they are entitled to recover benefits under the policy. An insured’s failure to comply with the Suit Limitation condition (or any condition) may preclude them recovering damages in a lawsuit for a loss that might otherwise be covered.
New Jersey parts company with the majority of other states by “tolling” the limitations period from “from the time an insured gives notice until liability is formally declined.” Peloso v. Hartford Fire Ins. Co., 56 N.J. 514, 521, 267 A.2d 498 (1970). As such, one effect of tolling is that the time between the insured’s notice of the claim, on one hand, and the insurer’s denial of coverage, on the other, is not taken in account in determining whether the insured has complied with the Suit Limitation condition. Importantly, some New Jersey courts have stated that there must be an “unequivocal” denial in order to end the tolling period and restart the Suit Limitation clock.
In Boisvert v. State Farm Fire & Cas. Co., 2016 U.S. Dist. LEXIS 87031(DNJ July 6, 2016), the insureds suffered damage to their home as a result of Superstorm Sandy. The insureds immediately gave notice of visible damage and, after learning that their home had sustained structural damage, provided notice of the structural damage on December 27, 2012.
On April 29, 2013, State Farm informed that insureds that the structural damage was caused by settlement and was not covered under the Policy. The insureds communicated their disagreement to State Farm who sent another adjuster to evaluate structural damage. On July 26, 2013, State Farm again informed the insureds that the structural damage was not covered, but invited the insureds to submit any additional information for consideration.
The insureds requested mediation with State Farm on September 3, 2013. The parties mediated on October 3, 2013. During the mediation State Farm invited the insureds to submit additional documentation in support of their request for re-consideration. The mediation was unsuccessful.
Less than a year later, on September 16, 2014, the insureds filed a complaint alleging, inter alia, breach of contract. State Farm moved to dismiss the complaint based on the Policy’s one-year Suit Limitation condition because the alleged property damage occurred on October 29, 2012 and Plaintiffs did not file suit until September 16, 2014 – more than one year after the “date of loss or damage” as set forth in the policy.
The Plaintiffs argued that the Suit Limitation condition should be tolled. The two primary reasons (and the only ones this post will discuss) articulated were: (1) the July 26, 2013, letter was not an “unequivocal denial” that ended the tolling period, and (2) Plaintiffs relied on State Farm’s actions in seeking mediation before filing suit.
The Court analyzed the July 26th letter and concluded that it was a clear and unequivocal denial, despite the invitation to the insured that they could submit additional information for consideration. As a result, the 365-day limitations period – which had been tolled since the insureds’ October 29, 2012 notice – began to run again on July 26, 2013. Therefore, the insureds had 365 days from July 26, 2013 to file suit, unless the Suit Limitation period was tolled again.
The Court determined that even if State Farm’s alleged statements to the Plaintiff that “they must participate in mediation, and that they did not have any other option” caused Plaintiffs to delay filing suit, Plaintiffs still did not timely file:
“Defendant denied Plaintiffs claims on July 26, 2013, thus the statute of limitations began to run. On September 3, 2013, Plaintiffs requested mediation as a result of Defendant’s alleged actions. Accordingly, between July 26, 2013 and September 3, 2013, the statute of limitations ran for 39 days and was tolled on September 3, 2013 when Plaintiffs requested mediation. The statute of limitations then began to run again on October 3, 2013, once mediation was complete. Thus, Plaintiffs had 326 days (365 days minus 39 days) from October 3, 2013 to file suit–by August 25, 2014. Plaintiffs did not file suit until September 16, 2014. Accordingly, Plaintiffs’ Complaint was untimely.”
The decision in Boisvert v. State Farm is the result of a relatively straightforward application of New Jersey’s tolling doctrine, and provides useful insight as to how tolling is affected by interactions between the insurer and insured.
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