Woodland Hills personal injury attorney Barry P. Goldberg files cases against Homeowner’s Insurance Policies for clients in various types of claims and cases. However, there is still a great deal of confusion about what the time limit is and whether various “tolling” of that time applies. Barry P. Goldberg is an insurance policy expert and is familiar with many of the nuances that plague many younger and inexperienced plaintiffs’ lawyers.
The proposition regarding the time limits is relatively simple although somewhat deceptive in that can be substantially shorter than the time required to bring a bodily injury personal injury action. Moreover, application of the rule is where counsel and claimants get tripped up. The rule, stated simply, is as follows:
A lawsuit against the insurer on a homeowner’s insurance policy must be brought within 12 months after inception of the loss. This one-year limitation period is tolled “from the time an insured gives notice of the damage to his insurer . . . until coverage is denied.” (Prudential-LMI Commercial Ins. v. Superior Court (1990) 51 Cal.3d 674, 693 (Prudential-LMI).)
During a typical claims process, especially with an unrepresented insured, an insurer gives mixed messages. On the one hand, they may tend to reassure an insured that they will handles everything. The implicit message is that an insured will not need counsel to make a straight-forward claim and that an attorney will inevitably cost too much. On the other hand, the insurer requests certain claim documentation in a customary format in order to “perfect” the claim. Insureds become confused and may even “freeze” during the process.
It is not unusual for an insurer to “close” a case because the insureds failed to submit the necessary documentation. Later, the insurer “reopens” the case when the insureds provide further information. Sometimes, this back and forth of opening and closing can occur 3 or 4 times on a complex claim. Often, when an insurer closes the claim, the insurer tells the insureds that the time for filing suit was running, and specifies the time periods already included in the one-year limit (the time before the insureds notified the insurer of the loss, and the time between the first closing and later re-opening of the claim). Insureds may ignore this advice, believing that the time to file suit would be continuously tolled, without regard to periods during which the insurer had closed the claim. Once the insured files a case in Superior Court, a summary judgment often follows.
In Prudential-LMI, the Supreme Court established the equitable tolling principle, and explained the policy considerations supporting equitable tolling. The principle, as mentioned above, is “to allow the one-year suit provision . . . to run from the date of ‘inception of the loss,’ . . . but to toll it from the time an insured gives notice of the damage to his insurer . . . until coverage is denied.” (Prudential-LMI, supra, 51 Cal.3d at 693.) The court agreed with the observation that “‘[i]n this manner, the literal language of the limitation provision is given effect; the insured is not penalized for the time consumed by the company while it pursues its contractual and statutory rights to have a proof of loss, call the insured in for examination, and consider what amount to pay; and the central idea of the limitation provision is preserved since an insured will have only 12 months to institute suit.’ ” (Id.)
Prudential-LMI explained that equitable tolling “eliminat[es] the unfair results that often occur in progressive property damage cases. First, it allows the claims process to function effectively, instead of requiring the insured to file suit before the claim has been investigated and determined by the insurer. Next, it protects the reasonable expectations of the insured by requiring the insurer to investigate the claim without later invoking a technical rule that often results in an unfair forfeiture of policy benefits. . . . [G]ood faith and fair dealing require an insurer to investigate claims diligently before denying liability. [Citation omitted.] Third, a doctrine of equitable tolling will further our policy of encouraging settlement between insurers and insureds, and will discourage unnecessary bad faith suits that are often the only recourse for indemnity if the insurer denies coverage after the limitation period has expired. [Citation omitted.] [¶] Equitable tolling is also consistent with the policies underlying the claim and limitation periods—e.g., the insurer is entitled to receive prompt notice of a claim and the insured is penalized for waiting too long after discovery to make a claim.” (Prudential-LMI, supra, 51 Cal.3d at 692.)
These types of cases do not involve a traditional “formal denial of coverage,” as in Prudential-LMI. (Id. at 700.) But the courts have held that the same principles, supported by the same policy considerations, necessarily apply when an insurer closes a claim with written notice to the policyholder that the statute of limitations is running. The courts hold that to conclude otherwise would allow the policyholders to keep a claim open indefinitely, without providing the insurer with any basis for further investigation. The courts conclude situations like this are not the purpose of equitable tolling.
The lessons to be learned are that insureds and their counsel need to assume that the shortest limitations period applies to most claims. Further, since tolling is an equitable doctrine, it cannot be counted on as if it were automatic and calculated by the claimant/insured. If there is any doubt whatsoever, a claimant/insured should consult with an experienced insurance claims and coverage counsel.