A couple of weeks ago, we got a nice result ($13 million verdict) following a three-month trial in BASF Catalysts, LLC v. Allstate Insurance Company, one of the last great complex environmental coverage beasts. We had the pleasure of co-counseling the matter with Dave Oberdick and his team from the Pittsburgh, PA firm of Meyer, Unkovic & Scott, LLP – a wonderful group of professionals.
One of the issues in the case involved the statute of limitations relating to insurance claims. The carrier - OneBeacon - argued that it had sent a denial letter in 1993 and that we hadn’t brought suit until 2005. The statute of limitations in New Jersey for contract matters is six years.
OneBeacon’s problem was that its denial letter included “CYA” language. Specifically, while the letter denied coverage for the claim, it also stated: “This correspondence is based upon presently known information. [OneBeacon] will review any additional information which [the policyholder] believes should be considered in evaluating these matters. Neither this letter nor any investigation of these matters undertaken by or on behalf of [OneBeacon] is intended to waive any rights or obligations of [OneBeacon] under the … policies issued to [the policyholder].”
OneBeacon’s claims handler testified at trial that, following this letter, he had never closed the claim file, and had in fact received supplemental information from BASF Catalysts (then known as Engelhard).
We argued that the “waffle” language inserted by the carrier, and the fact that the claim file had never been closed, meant that there was no unequivocal denial of coverage, and that the limitations period was therefore never triggered. The Court agreed, writing in part:
“Toto v. Princeton Township, 404 N.J. Super. 604, 617, 962 A.2d 1150, 1157 (App. Div. 2009); Azze v. Hanover Insurance Co., 336 N.J. Super. 630, 641-43 (App. Div. 2001) require that a denial of coverage is required to be clear and unequivocal and cannot be ambiguous or open to multiple interpretations. Nothing was presented at trial to change my earlier conclusion that [the so-called denial letter] is not unequivocal.”
The Court also found that the carrier had actively participated in the coverage case for five years before raising the issue, and therefore was estopped from doing so, holding:
“[OneBeacon] was an active participant in the lengthy fact discovery process as well as in the trial, and did not attempt to make its motion until all discovery was concluded and then again at the close of [the policyholder’s] evidence. The timing of the motion was procedurally deficient because it was addressed to a ‘defense’ as to which [the policyholder] did not have the burden of proof. In [Zaccardi v. Becker, 88 N.J. 245, 256-58, 440 A.2d 1329 (1982)], the Supreme Court determined that defendants were equitably estopped from asserting the limitations-period defense where they delayed for seventeen (17) months in informing the trial court and the plaintiffs that they were going to rely upon the defense.”
- If you’re a carrier and you intend to deny a claim, you’d better be clear and final in your language.
- If you’re a policyholder and you intend to prosecute a claim, don’t sit on your rights. We won this one, but others may be lost because of inertia.
- Statute of limitations defenses are not like fine wine. They don’t get better with age. Neither do insurance claims.
The views expressed in this post are purely mine, and are not necessarily the views of BASF Catalysts, LLC.