Here are a few universal truths. If politicians can raise taxes, they will.  If lawyers can bill, they will. And if judges can find a way to help clear their docket, they will.  That last truth can create a serious problem for the unwary dealing with insurance claims.

Many business property policies and homeowners’ policies contain a specific limitations period, meaning a deadline by which the policyholder must commence suit against the carrier. Typically, the policyholder is required to sue within one or two years of the date of loss. This can shorten the applicable statute of limitations considerably. In New Jersey, for example, the general statute of limitations for breach of contract is six years, and Courts generally construe that to mean six years from the date of wrongful denial of the claim. 

 [By the way, you also need to be very careful with proof of loss requirements in policies. Many policies contain time periods within which a proof of loss is required. Many Courts interpret the requirements strictly, which can lead to unfair results for the policyholder.]

Recently, in Boisvert v. State Farm (D.N.J.),  an unfortunate policyholder learned these lessons the hard way.  The Boisverts owned property that was damaged by Superstorm Sandy on October 29, 2012.  They filed a claim with their homeowners’ carrier, State Farm. On July 26, 2013, State Farm denied the claim, claiming that all the damage was pre-existing, and was caused by poor workmanship. State Farm’s letter also cited policy language requiring that any suit be commenced against State Farm within one year of the date of loss (meaning, by October 29, 2013).

The Boiverts waited to sue State Farm until September 16, 2014. According to the Boiverts,  because of ambiguous language  in State Farm’s coverage position letter,  they were unsure whether State Farm was continuing to investigate the claim. The State Farm letter had suggested that the Boisverts could submit additional information to State Farm, which State Farm would consider. The letter had also advised the Boiverts that they could file an appeal with the New Jersey Department of Banking and Insurance (otherwise known as the legal equivalent of closing your head in a car door repeatedly).

The Boisverts were right about the legal standard to be applied. Under New Jersey law, the contractual limitations periods in insurance policies are in fact tolled during the period that the insurance company investigates the claim, until the time that liability is formally declined. A main case standing for that proposition is Peloso v. Hartford, 56 N.J. 514, 521 (1970). But here, the Court rejected the idea that the limitations period had been tolled, writing:  “Although the [denial] letter in this case stated that Defendant would accept ‘additional information,’ it clearly stated that there was a ‘denial’ of the claim, that the damage for which Plaintiffs sought payment was not ‘covered by the [the] policy,’ and that any ‘action must be started within one year after the date of the loss or damage.’ Faced with nearly identical language, courts have found an unequivocal denial.”  And so did this Court.

The Boiverts also argued that the contractual limitations period needed to be equitably tolled because they had gone to nonbinding mediation with State Farm, which caused a 30 day delay. But the Court rejected this argument as well, writing: “Plaintiffs have submitted no authority indicating that a non-binding mediation program – that was initiated by Plaintiffs – tolls the statute of limitations. Mediation is not a prerequisite for bringing a suit. Plaintiff’s exercise of their right to present their claim before a mediator does not constitute conduct by Defendant that was ‘calculated to mislead [Plaintiff] into believing that it was unnecessary to seek civil redress’ within the limitations period.”

In any event, the argument over whether mediation tolls the limitations period was moot, because even if the statute of limitations were tolled 30 days during mediation, the Boiverts’ claims were still untimely.

Here are some takeaways.  First, when dealing with an insurance claim, always check the policy for the limitations period and make sure you file suit within that period if need be, because otherwise you may lose your rights.  You might have some awesome arguments about why the limitations period should be tolled because you were negotiating with the insurance company, or because the insurance company requested more information. Many judges won’t care, because they’re overworked and are looking for any way to lighten their load. And, of course, don’t expect any help from the insurance company if you try to argue that negotiations were ongoing.   Second, if you’re in discussions with the carrier and the suit deadline is approaching, try to obtain a tolling agreement extending the time to sue. Many claims representatives will be only too happy to agree to such an extension, to avoid litigation if possible.

In other words, as the referee says to the boxers before the fight begins:  Protect yourself at all times. 

You can read the full State Farm v. Boisvert decision here.