Michael J. Rankin reports a recent case finding that an insured’s property damage coverage claim was not barred by a one year statute of limitation period in the policy due to the carrier’s coverage letter being unclear as to what damage would or would not be covered. The insureds were owners of Jersey shore property who submitted a claim for damage incurred to property by Superstorm Sandy. In response the carrier sent a letter advising that it was “pleased to inform them” that wind damage from the storm would be covered under the policy. However, the carrier’s letter was silent as to the specific dollar amounts that would be received and explained that damage due to flooding was not covered. Nearly nineteen (19) months later, the Policyholders filed a lawsuit for, amongst other things, breach of contract due to the carrier’s failure to pay the claim. The carrier argued that the lawsuit was filed out of time. The Court found the timing of the insured’s lawsuit proper because the carrier’s letter was not a clear and unequivocal denial sufficient to start the running of the limitations period.
New Jersey has a six (6) year statute of limitation period for contract actions. However, the statute of limitations may be shortened by a contract’s terms including an insurance policy, which is typically shortened to one (1) year. When making a timely claim, the 1 year limitation provision is typically tolled until receipt of the coverage letter from the carrier. Under the circumstances of this case, the statute of limitation tolling period did not begin to run due to the vagueness of the carrier’s letter. It is important for insureds who disagree with a carrier’s coverage position to contact an attorney immediately for purposes of evaluating the claim and providing enough time to file a lawsuit. Please contact Michael J. Rankin if you have any questions or need any assistance in connection with coverage included under liability or other insurance policies.