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Katherine Rosenberg-Wohl had a homeowners insurance policy with State Farm Fire and Casualty Company (State Farm), providing coverage on her home in San Francisco. The policy has a limitation provision that requires lawsuits to be “started within one year after the date of loss or damage.”
In Katherine Rosenberg-Wohl v. State Farm Fire And Casualty Company, A163848, California Court of Appeals, First District, Second Division (July 11, 2023) she sought indemnity to remedy a defect in the home. State Farm refused to pay because there was no insurable event and because the suit was filed more than a year after the alleged loss.
FACTS
In late 2018 or early 2019, plaintiff noticed that on two occasions an elderly neighbor stumbled and fell as she descended plaintiff’s outside staircase and learned that the pitch of the stairs had changed and that to make the stairs safe the staircase needed to be replaced. In late April 2019, plaintiff authorized the work and contacted State Farm, and on August 9, she submitted a claim for the money she had spent.
The denial was based on the investigation findings and concluded there was no evidence of a covered cause for accidental direct physical damage to the property. The denial also stated that the policy does not provide coverage for preventative nor safety measures to the property. Maintenance would be the responsibility of the property owner to properly maintain the property to keep it safe.
Plaintiff submitted a claim to State Farm for her construction expenses, which by then were approximately $52,600, with another $16,800 in anticipated expenses for additional work. By letter dated August 26-plaintiff alleged, without any investigation-State Farm denied the claim. The letter also specifically referenced “the suit limitation period” as a “policy defense.”
Plaintiff filed two lawsuits against State Farm in San Francisco Superior Court. One alleged two causes of action for breach of the policy and for bad faith. That lawsuit was removed to federal court and was resolved against plaintiff on a motion to dismiss based on the one-year limitation provision. It is currently on appeal in the Ninth Circuit.
The second suit before the the Superior Court purports to allege a claim for violation of California’s unfair competition law. This case was also resolved against plaintiff, also based on the limitation provision, when the trial court sustained a demurrer to the second amended complaint without leave to amend. Plaintiff appealed.
On October 22, 2020-some 18 months after she had replaced the staircase, 14 months after State Farm had denied her claim the first time, and nearly six months after the one-year limitation period of the policy had expired-plaintiff filed two lawsuits in San Francisco County Superior Court.
On April 20, 2021, Judge Massullo sustained the demurrer with leave to amend to add additional facts supporting waiver. On May 21, plaintiff filed a second amended complaint (SAC), adding, apparently without leave of court, a claim for false advertising. The SAC then states, again in capitalized boldface, that “This Is Not A Lawsuit For Damages For Breach Of Contract; Rather It Is A Challenge To How State Farm Does Business.”
State Farm filed a demurrer and a motion to strike the SAC. On July 29, Judge Massullo entered her order sustaining the demurrer without leave to amend, a comprehensive order indeed, eight pages of thoughtful analysis. She held that “the Court is persuaded that Plaintiff’s claims are nonetheless ‘on the policy’ because they are ‘grounded upon [State Farm’s] failure to pay policy benefits.’” She also concluded that “[a]ll of the alleged acts which form the basis of Plaintiff’s claims occurred during the claim handling process.” Finally, Judge Massullo held that State Farm had not waived the limitation provision.
DISCUSSION
The one-year limitation provision in the State Farm policy is there because it was required by statute. [Califonria Insurance Code section 2071] The one-year limitation provisions have long been held valid as mandated by statute.
The One-Year Policy Limitation Provision Applies
State Farm asserted that “the Legislature has expressly endorsed the provision under Insurance Code section 2071” and argued that because the allegations here all concern how it handled plaintiff’s claim, the suit is subject to the policy limitation period under applicable law. In sum, the crux of plaintiff’s claim is grounded upon a failure to pay policy benefits.
An insured cannot plead around the one-year limitations provision by labeling her cause of action something different than breach of contract which, of course, includes claims for bad faith. Conduct by the insurer after the limitation period has run cannot, as a matter of law, amount to a waiver or estoppel.
The policy requires any waiver to be in writing. Plaintiff does not allege State Farm agreed to waive anything in writing. Therefore, the judgment was affirmed and State Farm was allowed to recover its costs on appeal.
ZALMA OPINION
The Court of Appeal spent many pages resolving this fairly simple dispute. The plaintiff sued to collect benefits she believed were owed under a policy of insurance only to find that the suit was filed to late. To avoid that problem she amended the suit to allege unfair business practices and sought an injunction, all of which were seen to be an alternative way to obtain policy benefits and failed again. For more than 120 years the California Supreme Court and Courts of Appeal have upheld the private limitation of action provision required by statute and no amount of creative pleading can avoid its effect.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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