In the recent opinion from the U.S. District Court for the District of Columbia, Azoroh et al. v. Automobile Ins. Co. of Hartford, Ct., --- F. Supp. 3d ---, Civil Action No. 14-1695, 2016 WL 4148184 (D.C. Cir. August 4, 2016), the district court addressed whether the discovery rule applies in the insurance context under District of Columbia law, ultimately finding that it did not. Rather, the policyholders were out of time for their suit against their property insurer, Hartford; and they were out of touch with the reality of their otherwise non-covered roof damage claim.
What Is the Discovery Rule?
Under District of Columbia law, like in other jurisdictions, the discovery rule acts to toll a statute of limitations when the relationship between an injury and the wrongful conduct that caused the injury is obscure or hidden. Essentially, a limitations period does not begin to run until the injured party knows, or should have known, of the alleged injury, the cause of the injury, and had some evidence of wrongdoing.
At issue in the Azoroh case was alleged windstorm damage to apartments owned and leased out by the policyholders under the “Section 8” program, supervised by the U.S. Department of Housing and Urban Development as well as the District of Columbia Housing Authority. Pursuant to requirements set by the federal government and the District of Columbia, the government inspected the property in June 2011, and the property received a passing grade. Subsequently, however, the policyholders reported a property damage claim to their property insurer, Hartford, as a result of a September 8, 2011, windstorm. Hartford denied the claim primarily based on its conclusion that the property had significant water and mold damage on all three levels of the leased apartments, which was the results of “wear and tear” and “splits in the roof membrane that occurred over a period of time.”
The policyholders did not retain an engineer until June 2014. The policyholders’ engineer completed an inspection of the damaged property, concluding that the roof damage “was most likely caused by a pointed instrument being pushed up against the sheathing from the interior.” The policyholders then filed suit against Hartford and alleged that Hartford breached the terms of the insurance policy and breached the implied obligation of good faith and fair dealing when it denied the property damage claim.
Since the policyholders failed to file their action within the policy’s two year contractual limitations provision set forth in the policy’s “Suit Against Us” clause, Hartford moved to dismiss the suit. In response, the policyholders argued that the discovery rule applied – i.e., the policy’s two-year contractual limitation period set forth in the Suit Against Us policy provision did not begin to run until June 24, 2014, as that was when the policyholders could “finally afford to pay for, then obtain, an in-depth investigative report from their own privately retained engineer.”
The underlying theme of the court’s analysis was indicative of the fact that the policyholders were not only out of time for their suit against Hartford, but they were also out of touch with the reality of their roof damage claim. The court reasoned that the policyholders’ argument for the discovery rule’s application to the policy’s suit limitations provision failed for two reasons. First, and though the District of Columbia has not yet expressly ruled upon the issue, other courts have held that the discovery rule does not apply to unambiguous contractual limitations provisions that clearly identify the time from which the limitations period begins to run. In support of this determination, the district court cited case law from Iowa, Indiana, and Pennsylvania.1 The policyholders also cited no legal authority in support of their argument for the application of the discovery rule in such an instance. Even if the discovery rule was determined to have a tolling effect on the limitations period, the court further acknowledged that the policyholders still failed to explain how the discovery rule could even apply here to these particular circumstances, as there was no evidence that the damage at issue here was obscure or hidden such that the discovery rule could be triggered.
Second, presuming that the discovery rule could apply in this case (again, irrespective of the fact that the damage was neither obscure nor hidden), the engineer’s report obtained by the policyholders still did not support the argument that Hartford wrongfully denied their claim. Hartford denied the claim, concluding that the damage was from “wear and tear.” The policyholders’ engineer concluded that the damage was most likely the result of a “pointed instrument being pushed up against the sheathing from the interior.” The relevant portion of the policy only would provide coverage here for the roof damage where it was caused by “direct force of wind or hail.” Simply, none of the findings by the policyholders’ engineer or the policyholders’ own allegations in the complaint against Hartford contend that the roof was caused by “direct force of wind or hail.” Accordingly, with or without the discovery rule’s application, the policyholders’ complaint could not survive a motion to dismiss.
Though jurisdictional exceptions exist, many jurisdictions strictly enforce an insurance policy’s suit limitations (or, Suit Against Us) provision, as long as the length of the limitations period complies with the particular state’s adopted standard fire policy (if any, and where applicable), and is further compliant with other similar state insurance regulation(s) and statutes. A policy’s contractual suit limitations provision is a viable coverage defense in many (though not all) jurisdictions to protect insurers from outdated and aged claims, even in cases such as this one where the policyholder attempted to argue in favor a tolled limitation through applying the discovery rule.