A federal court recently reaffirmed the legality of a policy requirement that an insured that contests a denial of coverage must bring suit against its property insurer within two years of the loss.

The claim in Northpointe Commerce Park, LLC v. Cincinnati Ins. Co., arose out of two separate windstorms that caused damages to the plaintiff’s commercial building.  Following the first windstorm on May 1, 2011, the insurer hired a contractor to assess the damage.  That contractor concluded that the outdoor panel siding needed to be replaced because the windstorm damaged panels that were already loose before the storm. The insurer, Cincinnati Insurance Company, issued a property policy that provided coverage for losses caused by windstorms. However, the insurer denied coverage on May 25, 2012 on the grounds that the damage to the building’s panel siding was not caused by a windstorm but rather was due to design defects and improper installation of the panels.

A second windstorm occurred on March 3, 2012.  Although Northpointe reported the loss to its insurer, it did not file a formal loss notice.  Northpointe did retain a public adjuster and that adjuster met with Cincinnati insurance representatives to inspect the damages.  Thereafter Cincinnati took no action and did not acknowledge that a claim was made.

The insured commenced a lawsuit seeking coverage in February 2014 – more than two years after the damage from the May 2011 windstorm. Cincinnati Insurance Company moved to dismiss the lawsuit because the policy required that the insured commence coverage litigation within two years after the date on which the “direct physical loss” occurred. The insured argued that the claim arose on the date of the denial of the claim in May 2012, not the date of the windstorm, and its February 2014 lawsuit was commenced within two years of the denial date. The federal magistrate judge ruled in Cincinnati’s favor following well established case law that the policy requirement is clear and unambiguous and must be applied. Therefore, the court declined to review the validity of Cincinnati’s denial of coverage with respect to the first windstorm.

On the other hand, the court ruled that the insurance company was not entitled to dismiss the insured’s claim that its building suffered damage during a second windstorm because there were issues of fact regarding whether the insurer waived a timely notice requirement and whether the damage occurred during the first — uncovered, windstorm or the second storm.

 Thanks to Mendel Simon for his contribution.

For more information, contact Denise Fontana Ricci at .