If your business insurance company denies or underpays your claim, you have a right to challenge the insurer’s decision in court in New York. However, it is important to be mindful of the deadline for bringing a lawsuit, since an untimely filing can permanently bar an otherwise valid claim from moving forward.
Statute of Limitations
Insurance policies are a type of contract. When your insurance company wrongly denies or limits your claim, this is considered a breach of contract. In New York State, a cause of action for breach of contract is subject to a six-year statute of limitations, which requires that the action be brought within six years of the date when the insurer denied coverage or otherwise breached its obligations under the policy.
However, insurance policies frequently contain contractual provisions that shorten the time available for filing a lawsuit. When these provisions are reasonable and clearly stated in the policy, New York courts routinely enforce them. Therefore, depending on your policy, you may have significantly less time than six years to bring an action in court.
Policy Provisions
Many insurance policies, particularly property insurance policies, contain a “Legal Action Against Us” or similar clause limiting the time within which policyholders may commence litigation. For instance, a policy may require that any lawsuits be brought within 1 or 2 years.
Further, depending on the policy language, the event that starts the clock may vary. The provision, for instance, may state that the deadline runs from the date of the loss; the date that coverage was denied; the date that the loss was discovered or should have been discovered; or another specifically defined triggering event. It is therefore important to read your policy carefully to determine the filing deadline that applies in your situation.
The Triggering Event
Much litigation in this area has centered around the event that triggers the deadline. The United States Court of Appeals for the Second Circuit examined this issue in Fabozzi v. Lexington Insurance Co.1, which involved a homeowner’s policy that required any court actions to be commenced within two years after the “date of loss.” The court concluded that generic language, such as “date of loss,” is ambiguous and does not necessarily mean the date on which physical damage occurred. The court, which pointed to the well-established doctrine that unclear policy language should be resolved in favor of the insured, stated that, absent more specific language, the limitation period should be interpreted to run from the point at which the cause of action for breach accrued. Under New York law, unless the contract provides otherwise, a cause of action for breach of contract accrues when the breach occurs.
New York’s Appellate Division reached a similar conclusion in Lobello v. New York Central Mutual Fire Insurance Co.2 In Lobello, a homeowner’s policy required a cause of action to be filed within two years after the “date of loss,” without defining the term “loss.” The insurer argued the clock started when the policyholders suffered a burglary, while the policyholders contended it ran from the date the insurer denied the coverage. The court sided with the insureds, holding that the limitation period began when coverage was denied.
However, when a policy uses more specific language, the court may reach a very different conclusion and bar an otherwise valid claim if it commences after the deadline.
The Takeaway
If your insurance company wrongly denies or limits your claim, the deadline to file a lawsuit may be far shorter than you expect. It’s important to review your policy immediately after a claim is denied or challenged to understand the applicable limitation period and to consult experienced legal counsel well before the deadline.
If your business insurance company has denied or is challenging your claim, contact Schwartz, Conroy and Hack, PC for assistance. We have the expertise and tenacity to make insurance companies keep the promises they make to you and your business.
- Fabozzi v. Lexington Ins. Co., 601 F.3d 88, 93 (2d Cir. 2010)
- Lobello v. N.Y. Cent. Mut. Fire Ins. Co., 152 A.D.3d 1206, 58 N.Y.S.3d 842 (N.Y. App. Div. 2017)
