Floored: Are insureds bound by one-year limitation period?
On March 4, 2016, Steven and Pamela Zannini’s house experienced significant flooding as the result of burst pipes. The house was insured by Phenix Mutual Fire Insurance Company, and the Zanninis filed a claim for water damage. An adjuster instructed the Zanninis to remove the floor of the house so he could investigate the area underneath. After they did so, the house began to collapse, and the Zanninis repaired its framing to prevent it from collapsing completely. As a result of removal of the floor, the Zanninis “suffered a complete loss [of the house] and direct physical loss of [their] personal property and use of the [house] for a substantial amount of time.” On May 3, 2016, Phenix sent the plaintiffs a letter denying coverage of the damage caused by the collapse.
The policy included the following “Suit Against Us” provision: “No action can be brought unless the policy provisions have been complied with and the action is started within one year after the date of loss.”
After Phenix’s denial notice, the parties attempted to negotiate a resolution to the claim. On February 9, 2017, Phenix’s counsel sent the Zanninis’ counsel a communication requesting “all documentation” related to the collapse. Phenix’s counsel sent the Zanninis’ counsel another communication on March 19, 2017, stating that Phenix “would like to resolve the claim if possible.” On September 8, 2017, the Zanninis’ counsel sent Phenix’s counsel a letter with photographs of the damaged floor. On January 15, 2018, Phenix’s counsel sent the Zanninis’ counsel a communication stating that Phenix’s position had not changed.
On February 23, 2018, nearly two years after the pipes burst, the Zanninis filed a breach of contract and declaratory judgment action against Phenix. The insurer moved for summary judgment on the basis that the Zanninis’ suit was barred by the policy’s one-year time limitation provision. The Zanninis opposed summary judgment, arguing that the provision was unenforceable because it violated the public policy underlying the statute of limitations, that Phenix’s conduct delayed the running of the time limit, and that genuine issues of material fact existed as to whether Phenix either waived or was estopped from asserting the time limit as a defense.
The court granted the summary judgment motion, concluding that allowing parties to contract for a shorter period to initiate an action than the statutorily prescribed limitation period does not violate the public policy underlying the statute of limitations. It also concluded that the provision was not unreasonable, and it was not unenforceable because the Zanninis did not show that it was impossible for them to comply with the provision. Finally, the court concluded that the communications between the parties’ counsel did not create an issue of material fact as to whether Phenix delayed the running of the one-year period, was estopped from asserting it as a defense, or waived it. The Zanninis filed a motion for reconsideration, which the trial court denied. The Zanninis appealed.
On appeal, the court addressed each of the Zanninis’ arguments in turn, explaining the statutory provisions that apply to each argument.
The court pointed out that if Phenix waived the one-year limitations period set forth in the policy, any cause of action pursued by the Zanninis would still be required to comply with the statute of limitations. Allowing parties to agree to a time period that is shorter than the statute of limitations, therefore, does not allow parties to “circumvent” the public policy underlying the statute. Accordingly, the court concluded that the one-year limitation provision did not violate the public policy of protecting courts and defendants from stale claims.
The court then considered the Zanninis’ argument that the one-year time limitation period was unreasonable because it was conceivable that an insured could not comply with the policy provisions within one year. In holding that the one-year time limitation was reasonable, the court observed that Phenix denied the Zanninis’ claim on May 3, 2016, yet the Zanninis did not file suit until February 23, 2018.
The Zanninis next argued that genuine issues of material fact existed as to whether Phenix’s communications delayed the running of the limitation period, whether Phenix was estopped from asserting the limitation provision as a defense, or whether Phenix waived it.
The court concluded that the communications did not create an issue of material fact as to whether Phenix intended to induce the Zanninis to believe that it would resolve the claim through negotiations. The February 9communication merely requested documentation regarding the collapse, while the March 19 communication noted that Phenix sought to resolve the claim “if possible.” Neither communication contained a representation, explicit or implicit, about resolving the dispute solely through negotiation. At best, the court said, these communications demonstrated that Phenix remained willing to consider the Zanninis’ claim.
Finally, the Zanninis argued that these same communications created a dispute of material fact as to whether Phenix waived the time limitation provision as a defense. To establish waiver, the Zanninis must point to explicit language indicating Phenix’s intent to forgo a known right, or conduct from which it may be inferred that the defendant abandoned this right. The court concluded that the communications did not create an issue of material fact as to whether they demonstrated the insurer’s intent to abandon its right to assert the time limitation as a defense. Merely requesting more information or expressing a desire to resolve a claim is insufficient to establish a waiver of a time limitation provision.
The court affirmed the trial court’s grant of summary judgment to Phenix on the Zanninis’ breach of contract and declaratory judgment claims.
Zannini v. Phenix Mutual Fire Insurance Company—Supreme Court of New Hampshire—No. 2018-0702—December 17, 2019.