Homeowner insurance policy Homeowner insurance policy. (Photo:Matt Benoit/Shutterstock.com)

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The U.S. Court of Appeals for the Ninth Circuit has affirmed a decision by the U.S. District Court for the Central District of California holding that a homeowners’ insurance policy’s one-year suit-limitation provision prevented homeowners from recovering under their policy.

The Case

Around November or December 2012, Jacqueline Keller and Phillip Yaney noticed “warping” or “cupping” in portions of their newly installed hardwood floors after a backup of water and sewage in the downstairs bathroom flooded portions of their Beverly Hills home.

By June or July 2013, Ms. Keller and Mr. Yaney determined that the cupping was not subsiding and that it would not be resolved on its own. On September 15, 2014, they notified Federal Insurance Company, from which they had purchased a homeowners’ insurance policy, of the sewage backup and damage to their floors.

Federal denied coverage, and Ms. Keller and Mr. Yaney sued on December 10, 2015.

The district court granted summary judgment in favor of Federal, and Ms. Keller and Mr. Yaney appealed to the Ninth Circuit.

The Federal Policy

The Federal policy’s “Legal Action Against Us” (“LAAU”) clause provided:

[Y]ou . . . agree to bring any action against us within one year after a loss occurs. . . .

The Ninth Circuit’s Decision

The circuit court affirmed.

In its decision, the Ninth Circuit explained that the LAAU clause established a one year suit limitation period beginning “after a loss occurs.”

It then decided that Ms. Keller and Mr. Yaney failed to comply with the provision “because they filed their claim over one year after the loss occurred.”

The circuit court explained that their loss occurred in November or December 2012, when Ms. Keller and Mr. Yaney noticed the cupping of their floors.

The Ninth Circuit said that even if it assumed that the loss did not occur until July 2013, when Ms. Keller and Mr. Yaney decided that the cupping issue would not resolve itself over time, they still were late in submitting their claim to Federal in September 2014.

The circuit court conceded that the limitations period was tolled while Federal was evaluating their claim between September 2014 and December 2015, but it ruled that the December 10, 2015 complaint still was time-barred by the LAAU’s suit-limitation provision because Ms. Keller and Mr. Yaney waited over a year after the loss occurred before even filing their claim with Federal.

The Ninth Circuit rejected the argument by Ms. Keller and Mr. Yaney that their complaint should be deemed timely because Federal failed to show that it had been prejudiced by their delay in filing their claim. The circuit court reasoned that Federal did not deny coverage based on lack of notification but based on the one year suit limitation provision in the LAAU clause – and as a result Federal did not have to show that it had suffered any prejudice.

The case is Keller v. Federal Ins. Co., No. 17-55323 (9th Cir. April 1, 2019). Attorneys involved include: For JACQUELINE KELLER, PHILLIP YANEY, Plaintiffs – Appellants: Jacob N. Segura, Attorney, JACOB N. SEGURA LAW OFFICES, Los Angeles, CA. For FEDERAL INSURANCE COMPANY, a corporation, CHUBB INA HOLDINGS, INC., as successor-in-interest to The Chubb Corporation erroneously sued as Chubb Corporation, AKA Chubb Group of Insurance Companies, Defendants – Appellees: Mary McPherson, Esquire, TRESSLER LLP, Irvine, CA; Bradley N. Garcia, Jonathan Hacker, O’Melveny & Myers LLP, Washington, DC.

Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. Mr. Meyerowitz is the Director of the Insurance Coverage Law Center and editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. He may be contacted at smeyerowitz@meyerowitzcommunications.com.