(Insurance Clip Art)
In Ransom v. Erie Ins. Co., ___ N.E.3d ___, No. 21 HA 0011, 2022 WL 4675876 (Ohio Ct. App., 7th Dist., Harrison County, Sept. 30, 2022), a property insurance carrier convinced a trial judge to dismiss the policyholders' complaint with prejudice based on the policy's one-year limitations period for bringing suit against the carrier. The policyholders-homeowners made a claim for damage to their roof; the carrier agreed that the claim was covered but contested the amount of damage. The policyholders then sued, but it was over one year later.
In the trial court and in the appellate court, the carrier and the policyholders-homeowners contended:
Appellee then moved to dismiss, arguing the complaint was filed beyond the one-year time limit to do so, as set forth in the contract of insurance. As alleged, Appellants filed suit more than one year after the date the damage occurred. However, Appellants urged the court to find Appellee had waived this provision based on its conduct showing it relinquished the one-year limitation because the parties were still negotiating the value of the claim when it expired.
Ransom, 2022 WL 4675876, at *5, ¶ 30. The appellate court reversed the trial court, holding that the complaint raised a reasonable inference that, based on the carrier's negotiating conduct, the carrier may have waived its own contractual limitations period:
Upon accepting all factual allegations in Appellants’ complaint as true and making all reasonable inferences in favor of Appellants, this court concludes Appellee agreed there was coverage under the policy and the parties’ negotiations about the value of Appellants’ claim were ongoing one year after the date of damage to their roof. Because of the continued and unresolved nature of the claim here, it can reasonably be inferred these negotiations or contacts showed Appellee waived the right to invoke the contractual one-year limitation.
Ransom, 2022 WL 4675876, at *6, ¶ 32.
Moreover, the contractual limitations period did not apply to the plaintiffs' bad faith claims in this case, either, because under Ohio law "an insurer's breach of the duty to act in good faith is a tort and consequently governed by the statute of limitations for torts." Ransom, 2022 WL 4675876, at *7, ¶ 43. The carrier argued that in this case, the plaintiffs' bad faith claims should nonetheless be dismissed, based on the underlying nature of the claims themselves:
We acknowledge Ohio courts, including this one, have recognized two different types of bad faith claims—the first is when a claimant must prove the insurer had no lawful basis to deny coverage, and the second is when the claimant does not have to establish the underlying coverage since the claim arises from the company having a lack of a reasonable justification to act in the manner it did. [Citation omitted.] However, this distinction does not affect our decision here. Based on the broad nature of Appellants’ bad faith allegations plus the fact we are reviewing a decision which granted a motion to dismiss, this distinction makes no difference. As stated, Appellants’ bad faith claim alleged Appellee breached its duty to act in good faith by refusing to pay the entire cost to repair the roof; initially denying coverage altogether; purposely delaying the handling of their claim without reasonable justification; and canceling their policy after they made a legitimate claim for coverage….
Consequently, the trial court erred by dismissing Appellants’ second claim for relief by applying the one-year contractual limitation to Appellants’ bad faith claim.
Ransom, 2022 WL 4675876, at *7, ¶¶ 44-45.
The contractual limitations period in an insurance policy depends for its enforcement on the conduct of the carrier which wrote it. This is a pretty universal rule in the law of jurisdictions in the United States. Further, insurance bad faith claims are generally governed by statutes of limitations, not contract periods of limitation. See generally 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 11:2 & 11:15 (West 3d Edition and 2022 Supplements).
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