Private Limitations of Action Provision Enforced
Ninth Circuit Affirms Summary Judgment Because Suit Was Filed Too Late
Every first party property insurance policy contain a special provision that limits the time available for an insured to sue the insurer in the event a claim is rejected. The private limitations provision is usually less than the state’s statute of limitations and protects the insurer from stale claims.
In Maxwell B. Williams And Claire N. Williams v. Travelers Home And Marine Insurance Company And Travelers Indemnity Company, No. 17-17368, United States Court Of Appeals For The Ninth Circuit (October 17, 2018) the Ninth Circuit was asked to ignore a private limitation of action provision.
FACTS
Maxwell and Claire Williams brought a diversity insurance coverage action seeking coverage under their homeowners’ policy after suffering a water loss at their residence in Las Vegas, Nevada. The Williamses appeal the district court’s grant of summary judgment in favor of Travelers Home and Marine Insurance Company (“Travelers”).
In Nevada, a claim for bad faith must be filed within four years of the triggering event. A claim based on violation of statute must be filed within three years of the triggering event. Under Nevada law, an insured’s limitations period does not begin to run until the insurer “formally denies” liability or additional benefits. No magic words are necessary to constitute a denial of further benefits; rather the limitations period is triggered by notification that the carrier has failed to fulfill its promise to pay a claim.
Here, the limitations period was triggered by Travelers’ October 5, 2011 letter, which stated that Travelers was closing the claim file because the Williamses had failed to cooperate with Travelers’ previous two requests for inspection of the property and additional information in support of the claim. The letter notified the Williamses that Travelers was “closing [its] file,” and referred the Williamses to their insurance policy’s “Suit Against Us” provision, which set forth a two-year limitation period for breach of the policy. The letter put the Williamses on notice that Travelers would not make further payments on the claim.
The only evidence the Williamses offered of any post-closure activity is Travelers’ July 7, 2012 letter, which advised the Williamses that Travelers did not have a record of the check it issued to them on May 26, 2011 being cashed. The letter did not indicate that any further consideration had been or would be given to the Williamses’ claim or that Travelers contemplated further payment.
The Williamses filed suit on June 17, 2016—well over four years after the limitations period was triggered by the October 5, 2011 letter.
DECISION
The Williamses’ claims for bad faith and violations of statute were barred by the applicable statutes of limitation.
Nevada has a six-year limitation period for general breach of contract actions. However, the Policy contains a two-year suit limitation provision. Suit limitation provisions are enforceable in Nevada so long as the period provided in the contract is a reasonable balance between the insurer’s interest in prompt commencement of action and the insured’s need for adequate time to bring suit.
As noted above, the Williamses filed suit on June 17, 2016—over four and a half years after the limitations period was triggered by the October 5, 2011 letter. The Williamses’ breach of contract claim was barred by the two-year suit limitation provision.
ZALMA OPINION
The Ninth Circuit found the decision, as it should, a simple decision based on arithmetic. The suit was filed more than four years after the denial. The language of the policy was clear and easy to understand. The failure to file suit within four years of the denial was slothful and gave the court no basis to give the insureds’ the opportunity to sue their insurer.
