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Make rights immediately or lose



It is common for an insurance company to act fairly and in good faith with its insured. However, an insurer is not required to waive its rights under the insurance policy, as an insured person asked it to reconsider a partial denial of the claim. In Write Start Early Christian Education Center, LLC v. National Fire & Marine Insurance, Case No. 20-3456, United States Court of Appeals for the Sixth Circuit (November 12, 2020) Write Start Early Christian Education Center sued National Fire and Marine Insurance to get coverage after a burglary caused damage to the center. National Fire moved to dismiss the lawsuit which was because the lawsuit was filed more than two years after the loss and was therefore banned.

FACTS

National Fire provides Write Start with commercial property insurance. The insurance covers damage from various causes of loss on several terms and exceptions. A condition is a contractual limitation period. If Write Start questions a coverage decision, it must sue National Fire within two years of the damage occurring.

In May 2016, Write Start suffered property damage from a burglary. It submitted a claim to the National Fire. On July 21, National Fire largely denied everything but a small portion of the claim.

In March 2018, two months before the expiry of the contractual limitation period, Write Start asked National Fire to resume the claim. The insurance company agreed to investigate any new evidence of claims. But it "continues [d] to stand by" its partial denial of coverage and stressed that it maintained a "complete reservation of rights", "without waiving all [its] rights and defenses under the policy," "including contractual limitation period. "Write Start offered a new repair estimate.

In June 2018, National Fire replied that it had reviewed the repair estimate and inspected the property again but found no reason to change its original decision. It also requested documentation required by the policy to support Write. Start's request for reconsideration. In the letter, it was again noted that National Fire reserved all contractual rights and could waive them only "expressly and specifically" in writing.

; s three-month-old request for supporting documentation had been left unanswered h that the policy required that the documentation be made within 60 days. Almost three years after the burglary, Write Start National Fire sued for breach of contract at the state court. National Fire filed a motion to dismiss the case for failure to state a claim and invoked the time limit of the contract. Between March and October, after the National Fire had issued a notice, the district court dismissed the complaint as prohibited and denied permission to change it for meaningless reasons.

ANALYSIS

Ohio, the state where the loss occurred, enforces reasonable contractual boundaries. A two-year limitation period is considered reasonable.

The complaint admits that it stems from an incident on 11 May 2016 and that Write Start filed its lawsuit on 12 April 2019. National Fire's proposal to dismiss incorporated legitimate insurance policy and its two-year limitation period. The policy was referred to in the complaint and was really the starting point for Write Start's lawsuit. The complaint did not appeal to any theories or facts that indicated that the deadline did not apply. The district court therefore dismissed the court in the correct manner of time limits.

A district court may deny permission to change a complaint where the change would be meaningless and an amended complaint that would not survive a motion to dismiss is considered meaningless.

The main difference between the original complaint and the amended complaint is Write Start's new allegation that National Fire waived the limitation period through its correspondence with Write Start. But the new accusations were no better than the old ones.

Under Ohio law, an insurance company may waive a contractual limitation clause by acknowledging liability or maintaining a reasonable hope of adjustment, so that the insured delays bringing an action. To determine if an insurance company has done so, the court looks at its "documents" and "explanations." Negotiations or discussions about the company's responsibility alone are not enough. The same applies to investigating a claim or resuming an investigation. Even a partial acknowledgment of liability does not waive the limitation period for the disputed part of the claim, at least if the insurer clearly states the scope of liability and refers to the contract limitation clause.

The letters between Write Start and National Brand, incorporated in the amended complaint by reference, make Skriv Start's refusal claims unlikely. All they show is that, when Write Start asked National Fire to resume the investigation to consider new evidence, National Fire agreed to retain its rights, including the right to assert the timeline. The sixth circuit was confirmed.

The reason for time limits in insurance is to protect the insurer and the courts from handling outdated claims where the witnesses' memories are weakened if they are not destroyed and evidence disappears. Write Start had two years to sue National Fire. They took three and they were properly shut down by the district court because the delay could not be met and allegations of waiver were defeated by permissible evidence that National Fire refused to waive anything and even went so far as to advise Start and its adviser on the limitation period. and that it refused to waive any of its rights.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to employment as an insurance consultant specializing in insurance coverage, insurance claims management, fraud and insurance fraud almost equally for insurers and policyholders. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.

For the past 52 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claims staff to become professionals in insurance claims.

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