Policyholders Beware! Courts continue to enforce short limitations periods to dismiss property insurance lawsuits.

By | June 13, 2019

In an April 4, 2019 post, Christina warned that property/business interruption insurance policies often contain internal limitations periods that require policyholders to bring any lawsuits within 12 or 24 months. She also gave advice on how to address those short limitations periods. See [Permalink].

In the two months since Christina’s post, both the United States Court of Appeals for the Ninth Circuit and the United States District Court of the District of New Jersey have held that these short contractual limitations periods are enforceable under California and New York law, respectively. See Keller v. Federal Ins. Co.,  765 Fed.Appx. 271 (9th Cir. 2019); Conrail v. Aspen Specialty Ins. Co., No. 17-12281, 2019 U.S. Dist. LEXIS 96591 (D.N.J. June 10, 2019).  And in both of these cases, the policyholder’s lawsuit against the insurer was dismissed because the policyholder did not file a lawsuit within the limitations period.

Keller is notable as a cautionary tale. But Conrail is a good example of a specific issue that Christina raised. A limitations period of a year or two may seem like a long time in the abstract, but in the real world, addressing significant property damage often takes longer. The limitations period may run before a policyholder is able to determine if a lawsuit is necessary.

In Conrail, a train derailed, damaging a drawbridge. The insured, Conrail, sought property insurance coverage from Hudson Specialty Insurance Company. The Hudson policy contained a one-year limitations period, but Conrail did not file a lawsuit until five years after the drawbridge was damaged. Hudson asked the court to dismiss the lawsuit. Conrail opposed the request, arguing that one-year limitations period was not enforceable because it would have been impossible to complete the multi-million dollar drawbridge reconstruction within a year.  (A separate D. N. J. opinion issued in the lawsuit on the same day recounts Conrail’s travails in reconstruction. See Conrail v. Aspen Specialty Ins. Co., No. 17-12281, 2019 WL 2425118 (D.N.J. June 10, 2019)). The court, however, rejected Conrail’s argument. Nothing prohibited Conrail from suing Hudson before the reconstruction was complete, and Conrail did not ask Hudson for an extension of the limitations period.

Again, we caution policyholders to pay attention to these internal limitations periods and take measures to avoid losing rights. Take a look at Christina’s April 4, 2019 post: [Permalink].

Scott Hecht

Contact Scott Hecht for more information.