Homeowner's Suit for Additional Living Expenses Commenced Two Days After Two-Year Anniversary of the Insured Home's Fire Loss Found Timely

PROPERTY – HOMEOWNERS – ADDITIONAL LIVING EXPENSE CLAIM – TWO-YEAR CONTRACTUAL SUIT LIMITATIONS PERIOD
Villa v. Sterling Ins. Co.
(App. Term, 2nd Dept., 9th & 10th Dists., decided 7/16/2010)

New York property insurers haven't been faring well lately in seeking to enforce their policies' two-year suit limitations period.  In Fabozzi v. Lexington Ins. Co., the Second Circuit US Court of Appeals ruled that the term "date of loss" as used in a homeowner policy's Suit Against Us condition did not mean the date of physical loss, but the date when the insured's claim for loss accrued.  Later that same month, in Dail v. Merchants Mut. Ins. Co., the Appellate Division, Fourth Department, held that the one-year tolling period of CPLR 210(a) for an insured's post-loss death extends the policy's two-year suit limitations period.

This is another case in which a suit commenced more than two years after the date of the covered physical loss to insured property was held to be timely, notwithstanding the policy's two-year suit limitations period.

On April 12, 2006, plaintiff's home was damaged by fire, and she submitted a claim for damage to her residence and personal property, as well as additional living expenses while she was unable to occupy her home, to the defendant, her homeowners insurer.  Defendant eventually settled plaintiff's dwelling claim and her home was repaired. She incurred additional living expenses (ALE), however, until April 2007, when she moved back into her home. Sterling paid some, but not all, of her ALE claim.

The policy contained a contractual period of limitations on the time within which the insured could sue Sterling, specifying that for Property Coverages,

No suit to recover for any property claim may be brought against us unless . . . the suit is commenced within 2 years after the loss.  (Bold added.)

After demanding payment and filing complaints with the New York State Insurance Department concerning Sterling's failure to pay the disputed ALE claim, plaintiff commenced this action on April 14, 2008, two years and two days after the date of the fire, to recover the principal amount of $8,750, representing unpaid additional living expenses.  Sterling moved for summary judgment dismissing the complaint on the ground that it was time barred. The District Court denied Sterling's motion, concluding that there existed a question of fact as to when plaintiff's cause of action accrued.  Sterling appealed.

In AFFIRMING the District  Court's denial of Sterling's motion for summary judgment, the Appellate Term held that by not defining "the loss", the policy's contractual suit limitations period was ambiguous:

In support of its motion for summary judgment dismissing the complaint, defendant relied entirely on the contractual period of limitations contained in the insurance policy. That provision required that actions be brought within two years "after the loss," but failed anywhere to define the term "loss," although it did define "occurrence." Also, for "additional living expenses," covered expenses were to be paid on a monthly basis upon submission of reasonable proof of the insured's expenses. The policy's coverage for these items was open-ended, specifying that it was "not limited by the policy period."

Exclusions from, or limitations of, coverage must be in clear and unmistakable language which is capable of no other reasonable interpretation or implication (see e.g. Pioneer Tower Owners Assn. v State Farm Fire & Cas. Co., 12 NY3d 302, 307 [2009]).  Ambiguities in insurance policies are required to be construed against the insurer, particularly when found in clauses that exclude or limit coverage (see Breed v Insurance Co. of N. Am., 46 NY2d 351, 353 [1978]). In the absence of a specific provision regarding accrual in a contract of insurance, the statute of limitations generally begins to run upon the insurer's breach of contract by its failure to pay (see Medical Facilities v Pryke, 62 NY2d 716 [1984]; see also Fabozzi v Lexington Ins. Co., 601 F3d 88 [2010]; cf. Costello v Allstate Ins. Co., 230 AD2d 763 [1996]; 815 Park Ave. Owners v Fireman's Ins. Co. of Washington, D.C., 225 AD2d 350 [1996]). Here, we conclude that the insurance policy was ambiguous as to the applicable limitations period respecting actions seeking additional living expenses. Thus, the statute of limitations on these items did not begin to run until after defendant's breach of contract, and had not run at the time this action was commenced. Accordingly, the Civil Court correctly denied defendant's motion for summary judgment, and we affirm the order.