California Court Denies Summary Judgment Based Upon Continued Tolling of One-Year Statute of Limitations

In Globe Imps. Ltd., Inc. v. Allied Prop. & Cas. Ins. Co., 2015 U.S. Dist. LEXIS 20190 (N.D. Cal. Feb. 19, 2015) the U.S. District Court for the Northern District of California examined equitable tolling of the one year statute of limitations under sections 2070 and 2071 of the California Insurance Code. Sections 2070 and 2071 require that fire insurance policies issued in California include the following language:

Suit

No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss.

Plaintiffs owned three buildings in Eureka, California that were damaged by a fire in December 2006. At the time of the fire, Nationwide Insurance (“Nationwide”) insured Plaintiffs under commercial property insurance policy. Plaintiffs filed a claim under the policy, beginning a multi-year negotiation regarding the valuation of the loss. In June of 2009, Nationwide mailed two letters, each with a check enclosed, explaining its calculations and paying the balances due on the undisputed portion of the repair costs for two of the buildings, referred to by the parties as buildings one and three. In November of 2009, Nationwide sent a letter regarding buildings one and three stating that Nationwide “will be closing this aspect of the claim.” Plaintiffs responded with a letter in December of 2009 requesting that Nationwide keep the files on buildings one and three open because Plaintiffs have “issues regarding payment.”

Over subsequent years the parties continued corresponding and negotiating regarding the damage to building two. The parties did not discuss buildings one and three until January 2013, when Plaintiffs sent information regarding those buildings as part of a “comprehensive package” addressing remaining issues on the entire insurance claim. In September of 2013 Nationwide responded that it had closed its files on buildings one and three in 2009, the policy’s appraisal process was unavailable to resolve Plaintiffs’ remaining disputes on the claim and Plaintiffs’ recourse was to seek a “judicial determination.”

In October 2013, Plaintiffs filed suit against Nationwide, asserting that it breached their contract in their handling of the claims with regard to all three buildings. Nationwide moved for partial summary judgment, arguing that the Court must dismiss Plaintiffs’ claims regarding buildings one and three because the one-year statute of limitations contained in the policy, as required by sections 2070 and 2071 of the California Insurance Code, had passed. Nationwide argued that equitable tolling ceased, and the statute of limitations resumed, on November 13, 2009, when Nationwide sent Plaintiffs a letter stating that Nationwide had closed its files on buildings one and three. Nationwide argued that, at that point, it had made its final payment and the letter unequivocally notified Plaintiffs that their claim for further payments was denied.

In denying Nationwide’s motion for partial summary judgment, the court noted that the California Insurance Code sections 2070 and 2071 require all fire insurance contracts to contain a one-year statute of limitations on legal actions arising under those contracts. The court cited In Prudential-LMI Com. Ins. v. Superior Ct., in which the California Supreme Court held that those provisions establish (1) that the one-year statute of limitations begins running at the inception of the loss, and (2) that the limitation period is “equitably tolled from the time the insured files a timely notice, pursuant to policy notice provision, to the time the insurer formally denies the claim in writing.” 51 Cal. 3d 674, 679, 274 Cal. Rptr. 387, 798 P.2d 1230 (1990). Additionally, the court noted that the California Supreme Court described the moment equitable tolling ceased as the moment when the insureds’ “claim was denied unequivocally.” Id. at 692.

The court noted that Plaintiffs and Nationwide undertook a prolonged negotiation to determine coverage and the amount of loss. The court was not persuaded by Nationwide’s attempt to take Plaintiffs’ single claim, brought under their single policy for losses suffered due to a single fire and divide the claim into individual assets for purposes of calculating the statute of limitations to file suit. Instead, the court determined that, while the undisputed facts may show that Plaintiffs did not actively pursue further compensation for buildings one and three from November 2009 to September 2013, Nationwide could not prevail on its motion for partial summary judgment absent authority that Plaintiffs’ inaction with respect to buildings one and three had legal import when Plaintiffs continued to actively address other portions of their claim. Therefore, the Court denied Nationwide’s motion for partial summary judgment.

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In Globe Imps. Ltd., Inc. v. Allied Prop. & Cas. Ins. Co., 2015 U.S. Dist. LEXIS 20190 (N.D. Cal. Feb. 19, 2015) the U.S. District Court for the Northern District of California examined equitable tolling of the one year statute of limitations under sections 2070 and 2071 of the California Insurance Code. Sections 2070 and 2071 require that fire insurance policies issued in California include the following language:

Suit

No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss.

Plaintiffs owned three buildings in Eureka, California that were damaged by a fire in December 2006. At the time of the fire, Nationwide Insurance (“Nationwide”) insured Plaintiffs under commercial property insurance policy. Plaintiffs filed a claim under the policy, beginning a multi-year negotiation regarding the valuation of the loss. In June of 2009, Nationwide mailed two letters, each with a check enclosed, explaining its calculations and paying the balances due on the undisputed portion of the repair costs for two of the buildings, referred to by the parties as buildings one and three. In November of 2009, Nationwide sent a letter regarding buildings one and three stating that Nationwide “will be closing this aspect of the claim.” Plaintiffs responded with a letter in December of 2009 requesting that Nationwide keep the files on buildings one and three open because Plaintiffs have “issues regarding payment.”

Over subsequent years the parties continued corresponding and negotiating regarding the damage to building two. The parties did not discuss buildings one and three until January 2013, when Plaintiffs sent information regarding those buildings as part of a “comprehensive package” addressing remaining issues on the entire insurance claim. In September of 2013 Nationwide responded that it had closed its files on buildings one and three in 2009, the policy’s appraisal process was unavailable to resolve Plaintiffs’ remaining disputes on the claim and Plaintiffs’ recourse was to seek a “judicial determination.”

In October 2013, Plaintiffs filed suit against Nationwide, asserting that it breached their contract in their handling of the claims with regard to all three buildings. Nationwide moved for partial summary judgment, arguing that the Court must dismiss Plaintiffs’ claims regarding buildings one and three because the one-year statute of limitations contained in the policy, as required by sections 2070 and 2071 of the California Insurance Code, had passed. Nationwide argued that equitable tolling ceased, and the statute of limitations resumed, on November 13, 2009, when Nationwide sent Plaintiffs a letter stating that Nationwide had closed its files on buildings one and three. Nationwide argued that, at that point, it had made its final payment and the letter unequivocally notified Plaintiffs that their claim for further payments was denied.

In denying Nationwide’s motion for partial summary judgment, the court noted that the California Insurance Code sections 2070 and 2071 require all fire insurance contracts to contain a one-year statute of limitations on legal actions arising under those contracts. The court cited In Prudential-LMI Com. Ins. v. Superior Ct., in which the California Supreme Court held that those provisions establish (1) that the one-year statute of limitations begins running at the inception of the loss, and (2) that the limitation period is “equitably tolled from the time the insured files a timely notice, pursuant to policy notice provision, to the time the insurer formally denies the claim in writing.” 51 Cal. 3d 674, 679, 274 Cal. Rptr. 387, 798 P.2d 1230 (1990). Additionally, the court noted that the California Supreme Court described the moment equitable tolling ceased as the moment when the insureds’ “claim was denied unequivocally.” Id. at 692.

The court noted that Plaintiffs and Nationwide undertook a prolonged negotiation to determine coverage and the amount of loss. The court was not persuaded by Nationwide’s attempt to take Plaintiffs’ single claim, brought under their single policy for losses suffered due to a single fire and divide the claim into individual assets for purposes of calculating the statute of limitations to file suit. Instead, the court determined that, while the undisputed facts may show that Plaintiffs did not actively pursue further compensation for buildings one and three from November 2009 to September 2013, Nationwide could not prevail on its motion for partial summary judgment absent authority that Plaintiffs’ inaction with respect to buildings one and three had legal import when Plaintiffs continued to actively address other portions of their claim. Therefore, the Court denied Nationwide’s motion for partial summary judgment.