New Jersey Federal Court Holds Ambiguous Denial Letter Tolls Suit Limitations Provision in Sandy Suit

The United States District Court for the District of New Jersey recently denied summary judgment to an insurer seeking to enforce the one year suit limitations provision of the insurance policy because the insurer’s denial letter failed to clearly disclaim coverage for the insured’s wind damage claim.

In Liguori v. Certain Underwriters at Lloyd’s, London Subscribing to Policy #AJD8955, the insured filed suit 19 months after receiving the denial letter. While the insurer argued that the suit was time barred since it was filed more than one year after the denial, the insured maintained that the denial letter was insufficient to end the tolling of the suit limitations provision. After analyzing the letter and applicable law, the court agreed with the insured and held that the letter did not rise to the level of an unambiguous formal denial that could serve to trigger the running of the statute of limitations.

In Liguori, the insured filed a claim on November 1, 2012 for storm damages as a result of Superstorm Sandy. The insurer retained the services of an adjuster and an engineer, both of whom inspected the property and found that the majority of damage was caused by flood, but that “wind may have caused cosmetic damage that was insignificant relative to the demolition of the house by the flooding.”

On February 25, 2013, the insurer sent a letter to the policyholders that stated the following:

We are pleased to inform you damages resulting from wind are covered under your Property Insurance Policy. Our inspection revealed damages to your property. We enclose our estimate of repair which totals $___. After the recoverable depreciation in the amount of $___ and your wind deductible of $___ has been applied, this renders a net claim of $___. Under separate cover a check of $___ will be forwarded to the policy address.

With respect to the flood damage, the letter stated as follows:
The claim you submitted for flooding, which caused water damage to the risk premises is expressly excluded in this policy. We regret to inform you this policy, in this instance, will not respond to indemnify you for your damages. The letter ended by advising the insured that the insurer “reserves the right to amend, alter or supplement this letter should information become known in the future that would affect the content of this letter.” The insured later filed suit against the insurer on August 21, 2014.

Relying on established New Jersey case law, the Court found that this case involves “special circumstances” suggesting that the insurer’s denial letter was ambiguous. First, the court noted that the insured filed a claim for “storm damages” and not a specific claim for non-covered flood damage. The Court also found that while the letter did expressly deny coverage for flood damage, it did indicate that the policy covered wind damage and that the insurer’s inspection found wind damage to the property. Even though the dollar amounts were left blank, based on a reasonable reading of the language of the letter, the Court concluded that the insureds were to receive some money for the wind damage to the property. Based on this language, the Court could not find that the letter contained unequivocal denial language with respect to the wind damage claim.

Second, the Court found that the language reserving the insurer’s rights to amend or supplement the letter if new information became available lent support to the conclusion that the letter was ambiguous. If the denial was final, the Court reasoned, then how could new information become relevant in the future. Taking these “special circumstances” into account, the Court held that the letter was not an unambiguous denial of the insured’s wind claim sufficient to trigger the running of the suit limitations provision of the policy.