A federal court in Kentucky granted summary judgment to an insurer on a breach of contract claim on the basis that the policy’s two-year limitation period to file suit for claims under the policy was enforceable under Kentucky law. Richard Lackey v. Property and Casualty Insurance Co. of Hartford, 2017 WL 4685235 (W.D. Ky. Oct. 18, 2017).

The insured’s residence was covered by a homeowner’s policy that required that any action against the insurer must be brought “within two years after the date of loss.” The insureds discovered water damage to their residence and submitted a claim to the insurer. The insurer accepted the claim and attempted to repair the property. Four years after the loss, and claiming that the property was uninhabitable, the insureds sued the insurer asserting claims including breach of contract and negligent performance of its duties under the policy. The insurer moved for summary judgment on the breach of contract claim arguing the filing was untimely under the policy’s time limitation provision. The insureds argued that the cause of action did not accrue on the date of loss because the insurer accepted the claim and did not breach the contract until it indicated that it would not agree to a restoration bid submitted by the insureds, and that the lawsuit was, therefore, timely.

The court held that the time limitation provision was valid and enforceable under Kentucky law and that the claim accrued at the time of the loss, not later. The court concluded that the insurer’s letter was an “informal settlement negotiation,” rather than a formal denial letter, and, therefore, the breach of contract claim accrued from the date of loss rendering the lawsuit untimely.