Homeowner’s Bad Faith Claim Barred by Statute of Limitations, Arizona Court Concludes

William U. Thompson claimed that his home was burglarized between July 24, 2009 and July 31, 2009. He reported the burglary to the police department in Scottsdale, Arizona, estimating the value of his stolen items to be approximately $40,000.

In August 2009, Thompson submitted a claim to his homeowner’s insurance company, Property & Casualty Insurance Company of Hartford, for his alleged loss. On October 21, 2009, Hartford received Thompson’s proof of loss, which listed 465 items that he claimed were stolen from his home. He valued his loss at $211,189.

When Hartford investigated the claim, it learned that Thompson had made at least 10 prior insurance claims, including five prior burglary claims at the same residence. Hartford took Thompson’s examination under oath, during which Thompson testified to losses that increased the value of his claim to between $353,189 to $463,149.

On May 3, 2011, Hartford sent Thompson’s attorney a letter in which Hartford denied coverage. The letter also stated, “If you believe that Hartford has erred in any way in its investigation or analysis, please let us know and we will be happy to consider your position.”

Thompson’s counsel wrote to Hartford to ask for a revised decision, indicating that “[m]y client does not accept the decision from your client.”

On September 11, 2012, Hartford sent the attorney a letter in which Hartford concluded that “we have determined that Mr. Thompson intentionally concealed or misrepresented material facts and circumstances regarding his claim and therefore coverage under his policy is denied.” This letter also stated that Hartford would be happy to consider Thompson’s position if he believed that Hartford had erred in its investigation or analysis.

Thompson sued Hartford on October 29, 2013 for breach of contract, unjust enrichment, and breach of the covenant of good faith and fair dealing. The insurer moved for summary judgment on Thompson’s bad faith claim.
The Court’s Decision

The court granted Hartford’s motion to dismiss Thompson’s bad faith claim.

In its decision, the court explained that, under applicable Arizona law, a bad faith claim against an insurer must be brought within two years from the date on which the cause of action accrued. Thus, the court continued, a plaintiff must bring a bad faith claim within two years from the date on which the insurer intentionally denied or failed to process or pay a claim without a reasonable basis.

The court then found that Thompson’s cause of action for bad faith had accrued on May 3, 2011, when Hartford had issued the first letter to him, and not on September 11, 2012, when Hartford had issued the second letter. The court rejected Thompson’s argument that “there was no unequivocal denial indicated in the May 3, 2011[] letter” because Hartford’s letter had requested that Thompson inform Hartford if he believed that Hartford had erred in its investigation or analysis.

The court ruled that that language could “not override the fact that the May 3, 2011 letter unequivocally denied [Thompson] coverage under the [p]olicy.” As the court noted, the letter stated that Hartford had completed its investigation and had determined that there was no coverage under the policy. The court declared that, “[t]here was no room for ongoing negotiation in this statement.”

The court concluded that Hartford had unequivocally denied coverage under the policy in its May 3, 2011 letter, that Hartford’s alleged breach of the policy had begun on that date, that Thompson’s cause of action for bad faith had accrued on that date, and that, under the two year statute of limitations, Thompson was required to bring his bad faith claim no later than May 3, 2013. Because he had filed his lawsuit on October 29, 2013, the statute of limitations barred his claim for bad faith.

The case is Thompson v. Property & Cas. Ins. Co. of Hartford, No. CV-13-02437-PHX-JAT (D. Ariz. March 30, 2015).