When You File Suit Late You Lose

Private Limitation of Action Provision Defeats Suit Against Insurer

Post 5072

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In Vishnudut Ramyead et al. v. State Farm General Insurance Company, B329614, California Court of Appeals, Second District, Second Division (April 29, 2025) resolved a purported class action suit because it was filed late.

After their personal property suffered water damage, plaintiffs and appellants Vishnudut and Teika Ramyead (collectively, plaintiffs) submitted a claim to their property insurer, defendant and respondent State Farm General Insurance Company (State Farm). State Farm paid plaintiffs a total of $750.75. Dissatisfied with State Farm’s handling of their claim, plaintiffs filed a class action lawsuit against State Farm, bringing causes of action for alleged violations of the unfair competition law and declaratory relief.

The trial court granted State Farm’s motion for summary judgment.

FACTS AND PROCEDURAL BACKGROUND

Plaintiffs took out a homeowner’s insurance policy with State Farm, effective for one year from February 17, 2018.

The policy established that, in accordance with state law, “[n]o action shall be brought” against State Farm “unless there has been compliance with the policy provisions. The action must be started within one year after the date of loss or damage.”

Plaintiffs’ Claim

On May 8, 2018, a leaking water supply line damaged plaintiffs’ property, including a sofa and ottoman in an adjacent bedroom. On May 10, 2018, plaintiffs’ attorneys filed a claim with State Farm. They reported that the value of the sofa and ottoman was $2,500 and $1,000, respectively; both pieces were about 20 years old.

Complaint

On February 19, 2020, plaintiffs filed a class action against State Farm. Their operative first amended complaint (FAC) set forth two causes of action: (1) violations of the unfair competition law and (2) declaratory relief.

The FAC alleged that State Farm violated California law by adding sales tax to the retail price of personal property before finding and subtracting the property’s depreciated value. Plaintiffs contended that this practice effectively depreciates sales tax, “a non-depreciable item” under section 2051 and related regulations. As a result, State Farm wrongly withheld “money that is owed to [p]laintiffs and those other insureds similarly situated.” Among other things, the FAC sought “disgorgement of all sums unjustly obtained” by State Farm, and “restitution to plaintiffs” and other policyholders.

State Farm’s Motion for Summary Judgment and Plaintiffs’ Opposition

In December 2022, State Farm moved for summary judgment, arguing that (1) plaintiffs’ claims were untimely because they were brought after the one-year limitations period, and (2) as a matter of law, section 2051 does not prohibit depreciation of sales tax. The trial court granted State Farm’s motion for summary judgment.

The trial court ruled that plaintiffs’ claims are indisputably untimely. Because plaintiffs’ claims for unfair competition and declaratory relief seek to recover amounts they contend State Farm should have included in their payment under the policy and California law their claims are on the policy for purposes of the one year limitation contained in their policy.

Moreover, the trial court found that section 2051 and related regulations do not bar an insurer from depreciating sales tax when calculating the actual cash value of personal property.

DISCUSSION

The expiration of the applicable statute of limitations or private limitation of action provision is a complete defense. If the movant presents evidence establishing the defense and plaintiff did not effectively dispute any of the relevant facts, summary judgment was properly granted.

Plaintiffs’ Lawsuit is Barred by the Applicable Statute of Limitations

The parties disagree about which statute of limitations applies to plaintiffs’ lawsuit. Plaintiffs contend that it falls under the four-year period of limitations governing the unfair competition law.

The One-Year Statute Of Limitations Applies To Plaintiffs’ Lawsuit

The Court of Appeals held that section 2071 is concerned with causes of action that in some manner seek a financial recovery attributable to a claimed loss that was covered under a policy.

In the First Amended Complaint (FAC), plaintiffs request not just declaratory and injunctive relief, but also the return of money that, per plaintiffs, State Farm unlawfully withheld from the amount owed on their claim.

Plaintiffs’ Lawsuit Is Time Barred

Three dates are used to ascertain whether a plaintiff filed suit within section 2071’s one-year limitations period.

1. The limitations period starts running on the date that the insured discovers a loss to covered property. In this case, plaintiffs discovered the damage to their furniture on May 8, 2018.
2. the clock stops running on the date that the insured reports the claim. Plaintiffs submitted a claim to State Farm on May 10, 2018.
3. the limitations period resumes running on the date that the insurer closes its investigation into the insured’s claim.

Plaintiffs’ lawsuit was untimely. The limitations period began running on May 8, 2018. Plaintiffs stopped the clock two days later, when they filed their claim on May 10, 2018. At this point, two days of their one-year limitations period had already elapsed. Thus, from the date State Farm closed its investigation, plaintiffs had one year, less two days, to file suit.

Assuming that State Farm closed the investigation on November 14, 2018, plaintiffs would have had until November 12, 2019, to sue. If State Farm did not close the investigation until February 19, 2019, then plaintiffs had until February 17, 2020. But they did not file this lawsuit until February 19, 2020-two days after the last date on which the statute of limitations could have expired.

Because State Farm successfully established that the applicable statute of limitations bars plaintiffs’ lawsuit, and plaintiffs did not effectively dispute any of the relevant facts, the Court of Appeals affirmed summary judgment in State Farm’s favor.

The judgment was affirmed. State Farm is entitled to costs on appeal.

ZALMA OPINION

Private Limitation of Action provisions have existed in insurance policies since the turn of the 20th Century with the New York Standard Fire Insurance policy. California case law tolled the running of the limitation while the insurer adjusted the claim and started it running again when they were done. The plaintiffs failed to even file timely with the delay and lost.

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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