Many homeowners policies contain a “Suit Against Us” provision in the policy which states that the insured must file suit against the insurer within one year from the date of loss. Anyone who has suffered a significant property loss knows that one year is hardly enough time to come to resolution with an insurance company over the damage, scope of repairs, costs of replacement, and payment of replacement cost benefits. Policyholders are often in the midst of claim submission, adjustment, or partial payments when the one year “Suit Against Us” time limit expires.
Fortunately, courts in many states including Colorado, have determined enforcement of the one year time limit is illogical in some circumstances and have refused to enforce the time limit in certain contractual and tort claims filed against insurers.
Colorado’s Adams County District Court Judge C. Scott Crabtree issued the following opinion with specific analysis of other common policy conditions which indicate the one year time limit is illogical. The Court noted agreement with the Colorado Court of Appeals1 that a one year time limit does not bar tort claims based on bad faith. However, Judge Crabtree allowed the policyholder to also proceed with contractual claims against the insurer—even though the contract claims were filed more than a year after the date of loss.
The policy at issue in Emenyonu provided that:
"Loss will be payable 60 days after we receive your proof of loss and a. reach agreement with you.
b. there is an entry of a final judgment. Or
c. there is a filing of an appraisal award with us." Emenyonu at 324.
The Court of Appeals reasoned:
These provisions make it clear that the processing of a claim could take more than one year. Indeed, here, the plaintiff filed his claim shortly after January 25, 1991, but State Farm did not deny the claim until October 18, 1991. Yet, according to State Farm’s interpretation of the suit-limitation provision, a plaintiff would be precluded from filing any lawsuit if more than one year had elapsed from the date of loss, even though the claim might still be pending. In our view, this result would be both illogical and untenable.
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In this case, [insured] reported his hail damage claims on May 27, 2010 and June 14, 2010. All activity between American Family and [insured] ended as of May 7, 2011. Under American Family’s interpretation of the Policy, [insured] had just 20 days to determine whether to bring a legal action on his first claim, find an attorney, and file a lawsuit. Because a common sense reading of the Policy’s terms cannot apply to [insured’s] action here, the “Suit Against Us” provision does not bar [insured] from bringing its contractual claim.2
Check your policy provisions regarding “Loss Payment.” If the loss payment conditions conflict with the one year “Suit Against Us” limit, you may have an argument that application of the one year limit is illogical and may not bar claims against your insurer for breach of the insurance contract—as well as tort claims for bad faith.
1 Emenyonu v. State Farm Fire & Cas. Co., 885 P.2d 320, 323 (Colo. App. 1994).
2 (See Judge Crabtree’s order, December 14, 2011, Colorado Adams County District Court case 11cv1265, quoting the Emenyonu case) (emphasis added).