Two decisions issued on December 21, 2016, drive home the critical significance that policy-based “suit limitations” provisions can have on an insurance claim. In both instances, federal courts rejected policyholders’ attempts to obtain coverage for plainly covered losses simply because they failed to follow their policies and filed their lawsuits after the proscribed cutoff. These decisions serve as sharp reminders that policyholders must not only read their insurance policies, but they must understand how they work and, most importantly, calendar critical dates and time periods.
In Queensridge Towers LLC v. Allianz Global Risks US Insurance Company, the Ninth Circuit Court of Appeals affirmed a Nevada district court’s ruling that Allianz is not required to cover a $5 million loss stemming from damage to the windows of a luxury condominium tower in Las Vegas. The court found the developer’s suit for coverage to be untimely under the developer’s builders’ risk insurance policy. The policy contained a suit limitation provision requiring that suit be filed within 12 months of discovery of the damage. The developer learned of the damage (scratches on more than 5000 windows installed in the high rise condominium tower) in October 2007, and provided notice to Allianz in April 2008. Under Nevada law, the suit limitations period was “tolled” from the date of notice until the date Allianz denied coverage, which occurred in January 2012. The developer then filed suit against Allianz one day before the anniversary of the denial in January 2013. As the court found, however, because the developer waited six months before giving notice of the damage, six months of the suit limitations period accrued, leaving the developer only six additional months to file suit after the denial. Because the developer waited almost another full year before filing suit, the suit was time barred.
In the second decision, Apatow v. American Bankers Ins. Co. of Florida, a federal district judge in California found that movie director Judd Apatow failed to timely file suit for flood damage to his beachfront home in Malibu, California. Apatow’s home was damaged by storm surge on October 12, 2014. Apatow was insured under a Standard Flood Insurance Policy (SFIP), the terms of which are set by Congress under the National Flood Insurance Program. The policy contained a one-year suit limitation provision that required suit to be brought within one-year of the date of denial and that the suit be brought in federal court. Apatow submitted a claim for damage which the insurer investigated and then denied on December 30, 2014. Apatow filed suit in California state court on December 11, 2015 – within one year of the date of the denial. The insurer was served with the suit on December 28, 2015, and removed the suit to federal court on January 11, 2016. But, the district court found the suit untimely because Apatow failed to bring the suit in federal court within one-year of the date of denial. The fact that Apatow timely filed the suit in state court did not meet the requirements of the policy’s suit limitation provision, which explicitly required that the suit (1) be filed within one-year of the denial; and (2) that it be filed in federal court. Further, because the SFIP was issued as part of FEMA’s federal flood insurance plan, the court found the one-year limitations period for filing suit under 42 U.S.C. § 4072 to be more than just a statute of limitations; it is a condition precedent to the United States’ waiver of sovereign immunity. The court concluded, therefore, that a suit filed beyond the one year limitations period is not simply time-barred; the court has no subject matter jurisdiction to consider it.
The Queensridge and Apatow decisions serve as harsh examples of how a failure to follow suit limitations provisions and other contractual or statutory conditions to coverage can result in a loss of coverage for otherwise plainly covered losses. It is critically important, therefore, that policyholders read and understand the requirements for coverage under their insurance. Where there are questions or uncertainties, policyholders should consult with knowledgeable coverage counsel who can help navigate the complexities and ambiguities that often exist in today’s comprehensive and evolving insurance products.