Denied Times Two: Prejudicial Late Notice and Contractual Limitation Period Both, Separately, Doom First Party Claim
Finding the prejudice from the insured’s late notice was manifest, a federal district court in Connecticut dismissed, with prejudice, a first-party coverage action brought by an insured against her homeowners’ insurer, Allstate Insurance Company. Ruling that the insured’s reporting of the claim to the insurer 14 months after the loss was a material breach of the policy’s notice provision that prejudiced the insurer, the court also concluded that the insured’s action was separately barred by the policy’s 18-month suit limitation provision. See Discuillo v. Allstate Insurance Company, No. 3:17-CV-0234, 2019 WL 499255 (D. Conn. Feb. 8, 2019).
On February 10, 2015, the insured’s home sustained damage from a winter storm, including damage resulting from ice damming. The insured did not submit a claim to Allstate at the time, but instead undertook certain superficial repairs to address a roof leak. The repairs did not correct the underlying damage. The insured did not report the loss to Allstate until April 2016 – more than 14 months after the storm loss. Following inspections of the property by Allstate’s adjuster, who observed certain damage consistent with ice damming but was unable to determine whether the damage was caused by the winter storm or some other cause, Allstate issued payment to the insured in accordance with the adjuster’s repair estimate.
In January 2017, the insured filed suit against Allstate, seeking specific performance of the appraisal provision in the policy (count one) and seeking damages for breach of contract based on Allstate’s alleged failure to pay full value for the loss (count two). Allstate was served with the lawsuit on January 23, 2017 – i.e., more than 23 months after the February 10, 2015 loss. The policy contained an 18-month suit limitation period.
Following discovery, Allstate moved for summary judgment based on the insured’s breach of the policy’s loss notice provisions and also based on the policy’s suit limitation provision, and the district court granted the motion on both grounds.
The district court agreed that under no circumstance could the reporting of a claim more than 14 months after a loss be said to have been given “promptly”. After reiterating the requirement under Connecticut law that an insurer must establish material prejudice resulting from an insured’s late reporting of a claim, the district court concluded that the prejudice to Allstate in this matter was “manifest”, because the insured’s delay in reporting the claim deprived Allstate of the opportunity to promptly inspect the property, assess the then-existing damage, and repair the damage so as to avoid further loss. In reaching this conclusion, the district court emphasized that the insured’s damage expert testified that property damage caused by ice damming, if left untreated, worsens over time and leads to additional damages, and thus, the cost to repair such damage also increases over time.
The district court also found that all of the insured’s claims against Allstate were time barred pursuant to the policy’s 18-month suit limitation provision, since the lawsuit was first served on Allstate more than 23 months after the date of the loss. The court rejected the insured’s argument that her demand for appraisal under count one of the complaint was not subject to any statutes of limitation and therefore was not time barred. The court explained that contractual limitation periods are distinct from statutes of limitation, and that the phrase “any suit or action” utilized in the Allstate policy’s limitation provision was sufficiently broad in scope to include a demand for appraisal.