Insurance Coverage & Bad Faith Newsletter - Summer/Fall 2023

Rosen-Wohl v. State Farm Fire and Cas. Co

(Homeowner Policy’s One-Year Limitations Clause Barred Insured’s UCL Action Effectively Seeking Policy Benefits, Even Though a Four-Year Limitations Period Ordinarily Applies To UCL Claims and the Insurer Briefly Reopened the Previously Denied Claim Within the One-Year Period in Response To Insured’s Inquiry)

(September 2023) - In Rosen-Wohl v. State Farm Fire and Cas. Co., 93 Cal.App.5th 436 (July 1, 2023), California’s First District Court of Appeal affirmed the trial court’s order sustaining State Farm’s demurrer in an unfair competition law (UCL) action arising out of State Farm’s denial of homeowner benefits, based on the policy’s one-year contractual limitations period.

The plaintiff’s State Farm owner policy had a limitation provision requiring lawsuits to be “started within one year after the date of loss or damage.” In late 2018 or early 2019, the plaintiff noticed that on two occasions an elderly neighbor stumbled and fell as she descended the 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, the plaintiff authorized the work and contacted State Farm, and on August 9, she submitted a claim for the money she had spent. On August 26, State Farm denied the claim. Sometime later, the plaintiff's husband reached out to State Farm “to see if anything could be done,” and in August 2020 a State Farm adjuster said it had reopened the claim — and a few days later denied it.

In October 2020, represented by her husband, the 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 the plaintiff on a motion to dismiss based on the one-year limitation provision. The plaintiff appealed to the Ninth Circuit.

The second subject action purported to allege a claim for violation of California's unfair competition law. The plaintiff opposed State Farm’s demurrer on the grounds that a four-year limitations period applied under the UCL, emphasizing that she sought injunctive relief for an alleged unfair business practice. The trial court rejected this argument, holding that the gravamen of the plaintiff’s was the denial of benefits and therefore that the policy’s one-year limitations period applied.

On appeal, the Court of Appeal agreed that the labeling of the cause of action as a UCL claim is not dispositive. The nature of the right sued upon and the circumstances underlying its invocation control. Here, the plaintiff sought policy benefits, plain and simple. Accordingly, the policy’s one-year limitation period applied.

Like the trial court, the Court of Appeal also rejected the plaintiff’s argument that State Farm waived the limitations period by reopening her claim in response to her husband's follow-up inquiry. The Court cited the California Supreme Court’s decision in Prudential-LMI Com. Ins. v. Superior Court, 51 Cal. 3d 674, 690 n.5 (1990) wherein the Supreme Court held that “conduct by the insurer after the limitation period has run — such as failing to cite the limitation provision when it denies the claim, failing to advise the insured of the existence of the limitation provision, or failing to specifically plead the time bar as a defense — cannot, as a matter of law, amount to a waiver or estoppel.” The plaintiff could not show that State Farm intentionally relinquished its right to rely on the limitations provision, and Ninth Circuit case law contradicted her argument that reopening a denied claim waives a limitations defense. Gordon v. Deloitte & Touche, LLP Grp. Long Term Disability Plan, 749 F.3d 746, 752 (9th Cir. 2014) (insurer's reopening of claim did not constitute waiver, “[e]ven if waiver were possible after the limitation period has run”).

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