Troisi, Riverso, and Welch Obtain Dismissal for Homeowners Insurer, Defeating Policyholder’s Estoppel Claim

Rivkin Radler partners, Michael Troisi, Pia Riverso, and Michael Welch, defeated a policyholder’s suit for breach of contract and bad faith on the basis that the policyholder’s claim was time-barred and was not subject to tolling.  The dispute arose from a retaining wall that was damaged a decade earlier.  The policyholder filed a claim with her homeowners insurer, but the insurer’s investigation revealed that the retaining wall was damaged by excavation and construction work on neighboring property.  The insurer denied coverage based on the earth movement exclusion.   The policyholder then sued her neighbors, claiming they caused the retaining wall to collapse.  As that action was approaching trial, and nearly ten years after the insurer’s denial, the policyholder sued the insurer for breach of contract, bad faith, and declaratory judgment.

The insurer moved to dismiss on the grounds that the claims were barred under the policy’s two-year contractual limitations clause, as well as New York’s six-year statutory provision.  The policyholder sought to toll the limitations period based on a novel estoppel theory – that the insurer should have known about the litigation against the policyholder’s neighbors and should have informed the neighbors of the insurer’s disclaimer.  The policyholder contended that her neighbors shared an interest in seeing that she was insured and that the neighbors should have had an opportunity to contest the denial of coverage.  The policyholder conceded that she did not notify the insurer of the suit against her neighbors.

U.S. District Judge Nina Gershon of the Eastern District of New York found that the policyholder’s claim was barred under both the contractual and statutory limitations provisions.  She next rejected the policyholder’s estoppel argument.  Equitable estoppel, the court observed, “is appropriate in the insurance context if ‘a carrier engages in a course of conduct which lulls the policyholder into inactivity in the belief that its claim will be paid, or where the insured is induced by fraud or misrepresentation to refrain from commencing a timely action.’”  Those circumstances did not exist here, nor was the insurer under any duty to notify the neighbors that it denied the policyholder’s claim.

The policyholder further attempted to evade the limitations bar by contending that while the insurer denied coverage for the retaining wall, it never made a determination as to her claim for “other property damage,” suggesting that the limitations period had not yet begun to run as to that claim.  The court rejected this argument as well, finding that the policyholder submitted a single claim, which the insurer completely denied.   Determining that the policyholder’s claim for bad faith and declaratory judgment were duplicative of her breach of contract claims, the court dismissed those claims as well.

The case is Maniello v. State Farm Fire and Cas. Co., No. 16-cv-1598 (NG)(LB) (E.D.N.Y. Feb. 6, 2017) and was featured in Mealey’s Insurance: Time-Barred Breach of Contract Claim Dismissed in Homeowners Insurance Dispute (Feb. 8, 2017).