In Liguori et. al. v. Certain Underwriters at Lloyds London Subscribing to Policy #AJD8955, the Court held that an insurer’s ambiguous letter sent to its insured was not an unequivocal denial of coverage that would trigger the statute of limitations for the insureds’ claims. The insureds had originally filed a claim after their New Jersey home suffered damage from Hurricane Sandy. On February 25, 2013, the insurer’s adjuster sent a letter to the insureds on behalf of the insurer, in which it stated that damages resulting from wind were covered under the policy, but water damage resulting from flooding was not covered.
The insureds did not respond to the letter but filed a Complaint nearly 19 months later, asserting claims for breach of contract and breach of the implied covenant of good faith and fair dealing due to the insurer’s alleged failure to cover property damages caused by wind. The insurer filed a motion for summary judgment, and argued that the action was barred by the applicable statute of limitations.
The Court acknowledged that New Jersey has a six-year statute of limitations for contractual actions that ordinarily applies to insurance actions. However, the Court also noted that the statute of limitations may be shortened by the terms of an insurance contract, and here both parties agreed that the one-year statute of limitations found in the insurance policy at issue is binding. The issue before the Court was whether the “equitable tolling doctrine” applied to allow the insureds to bring suit more than one year after the accrual date of the property loss. Particularly, the insureds argued that the February 25 letter sent by the insurer’s adjuster was insufficient to end the tolling of the statute of limitations.
The Court cited case law from the New Jersey Supreme Court for the proposition that “contractual limitation provisions should not run uninterrupted from the date of loss, as it would allow the statute of limitations to run while the insurance company investigated the loss.” Thus, the one-year statute of limitations is tolled “from the time the insured gives notice of loss until the time that the insurance company ‘formally denies coverage.’” Here, the Court had to determine whether the February 25 letter was an unambiguous formal denial that would allow the statute of limitations to resume running.
The Court agreed with the insureds’ argument that the February 25 letter was ambiguous and not a formal denial. In support, the Court noted that the insureds filed a claim for “storm damages,” not a specific claim for flood damages, and the letter stated that the insureds’ wind damages were covered under the policy. Moreover, dollar amounts of the estimates of the total damages the insureds would receive were left blank in the letter, which the Court found was, from the insurer’s perspective, ambiguous at best and an agreement to pay the insureds’ wind damage claim at worst.
Further, the Court reasoned that language in the letter stating that the insurer reserved the right to amend or supplement the letter could be read ambiguously, “since one might reasonably wonder why new information could become relevant in the future if the denial was final at the time.” Because the letter was not found to be a clear denial of coverage, the Court could not conclude that the insureds’ claims were barred by the statute of limitations, and denied the insurer’s motion for summary judgment.