Extension Is Not Waiver of 2-Year Suit Limitations Period in Homeowners Policy

HOMEOWNERS – FIRE LOSS – 2-YEAR CONTRACTUAL SUIT LIMITATIONS PERIOD – WAIVER – ESTOPPEL – BAD FAITH
Van Acker v. Unitrin Preferred Ins. Co.
(Sup. Ct., Wayne Co., decided 6/30/2008)

Most if not all property insurance policies contain some sort of contractual suit limitations period. In New York, policies must allow up to two years from the loss date for the insured to bring suit for losses caused by fire and lightning. The New York courts have repeatedly upheld contractual suit limitations periods, as parties are free to contract and may always provide for a suit limitations period shorter than the otherwise applicable statute of limitations.

It sometimes happens that the adjustment and settlement of a large loss takes upwards of two years. In such cases, insureds or their representatives will often request an "extension" of the policy's two-year suit limitations period, since suing before there has been any breach of the insurer's obligation to pay would be premature and potentially subject to dismissal.

The Van Ackers' home sustained a major fire loss on December 10, 2003. On October 25, 2004, Unitrin made an offer of $243,258.98. The Van Ackers then retained their own adjuster, who estimated damages to be $299,492.28. On December 15, 2004 (one year and 5 days after the loss date), the parties signed an agreement to submit their damage appraisals to an umpire. The dwelling RCV was resolved in April 2005, but the Van Ackers' contents RCV and ALE remained in dispute. The Van Ackers moved back into their residence in November 2005, with their contents loss claim still unresolved.

On December 7, 2005 (three days before the two-year loss anniversary date), the Van Ackers emailed Unitrin's general adjuster, to confirm their earlier oral request for an extension of the policy's two-year suit limitations period. That condition provided:

Suit Against Us. No action can be brought unless the policy provisions have been complied with and the action is started within two years of the date of loss.

In a reply email on December 13, 2005 (three days after the two-year suit deadline), Unitrin's general adjuster agreed to a "one-time extension to March 1, 2006." The e-mail further stated in part that "we do not intend to waive or prejudice any rights under the policy[.]" Nevertheless, there were subsequent emails between the parties during the month of March, including one from Unitrin's general adjuster to the Van Ackers, dated March 10, 2006 (after the date of the expiration of the extension), which indicated that he had had a "health issue" arise, and that he been unable to finish looking over some paperwork. On April 11, 2006, Unitrin's general adjuster sent another email to the Van Ackers in which he re-affirmed the March 1, 2006 extension. The Van Ackers commenced this action on August 21, 2007. (Note: The decision gives a 2007 commencement date but later states that the insureds commenced this action four months after the April 2006 email. Either that email was sent in April 2007 or the action was commenced in August 2006.)

Unitrin moved to dismiss the action as barred by the policy's suit limitations period. In opposition, the Van Ackers argued that the March 10, 2006 email Unitrin's general adjuster sent to them, in which he admitted he had not been available to review certain documents, created a fact question as to whether Unitrin waived the policy's suit limitations requirement.

Wayne County Supreme Court Justice Dennis Kehoe disagreed, finding that the insureds had not established the existence of any material triable issue of fact as to the doctrines of waiver or estoppel:

Based on the evidence presented by the Plaintiffs, this Court must find that the circumstances do not rise to the level of a waiver of the statute of limitations by the insurer. While there is evidence of ongoing negotiations between the parties, such negotiations, without more, do not meet the burden imposed by the Court of Appeals on the insured of demonstrating the existence of any "material triable issue of fact."

Although it was not necessary to reach the issue of plaintiffs' bad faith cause of action, Justice Kehoe also ruled that "[w]ere the Court to consider the issue, it would conclude that an action for punitive damages for failing to negotiate in good faith does not lie against Unitrin, in that the Plaintiffs have failed to allege the elements necessary to support a cognizable cause of action in tort which is 'independent of the contract'".

Couple of observations: It's not a "statute of limitations" we're talking about, it's a contractual limitations period. Although the decision does not say so, one can surmise that Unitrin fully paid and settled the dwelling and ALE claims prior to the two-year loss anniversary. Chances are that Unitrin also paid what it thought it owed on the Van Ackers' contents claim, so this suit may have been over what they insureds believed they were still owed on their contents loss. Negotiations extending beyond the suit deadline, in and of themselves, do not constitute a waiver or create an estoppel, although clarity in intention and reservations of rights are always best in those situations.