First-party coverage evaluations and investigations that are dependent upon the insured’s cooperation can become frustrating when the insured refuses to provide necessary documents and other information.
Most of these investigations involve facts surrounding a questionable claim and verifying whether or not there is a covered cause of loss. While you may have done all you can do to investigate a claim in good faith, there are occasions when the insured refuses to comply, and the suit limitation expires. A letter is sent to the insured explaining that the suit limitation has expired and that the claim is being closed for lack of cooperation.
But is the claim really over? One month after the suit limitation has expired, an attorney representing the insured sends you a letter claiming that your company has waived the policy’s suit limitation, and that you are estopped from raising a suit-limitation defense. You have made every effort to request the information and investigate the claim in good faith, yet your efforts are now being described as a waiver. If that is the case, how do you investigate in good faith and attempt to elicit the insured’s cooperation without the threat of committing a waiver of the suit-limitation condition in the policy?
First, the investigator, and any adjuster communicating with insureds, must have a working knowledge of what is a waiver and what actions could constitute a waiver of the suit limitation in the state in which the claim is filed. “Waiver” is generally defined as a “voluntary and intentional relinquishment of a known right.” (see Albert J. Schiff Assoc, Inc. v. Flack). As with many issues relating to insurance claims, states have taken different views regarding what actions would be deemed a waiver. Waiver in some states is guided by statute, while other states address waiver through issuance of case law.
For example, in Georgia, the actions taken by an insurer that do not constitute waiver of any policy provision of defense arising under the policy are identified in O.C.G.A. § 33-24-40. These non-waiver actions include (1) acknowledgment of the receipt of notice of loss or claim under the policy; (2) furnishing forms for reporting a loss or claim, for giving information relative to the loss or claim, or for making proof of loss or receiving or acknowledging receipt of any forms or proofs completed or uncompleted; or (3) investigating any loss or claim under any policy or engaging in negotiations looking toward a possible settlement of any loss or claim.
New York’s law on waiver of a policy’s suit limitation has been developed by the appellate courts over the years. New York’s highest court has ruled that ‘‘[e]vidence of communications or settlement negotiations between an insured and its insurer either before or after expiration of a limitations period contained in a policy is not, without more, sufficient to provide waiver or estoppel” with regard to the timeliness defense of a suit-limitations provision. (See Plon Realty Corp. v. Travelers Ins. Co.).
Other courts apply equitable principles to determine whether the contractual suit-limitations provision can be suspended. In Illinois, equity will not bar an insured’s time to file suit where the insurer has not lulled the insured into a “false sense of security” that the claim may be resolved without the insured having to file litigation. (See Koclanakis v. Merrimack Mut. Fire Ins. Co.).
Whether the law on waiver is developed statutorily or through case law, the common concept to avoid waiver is not leading the insured to believing that the limitation period for the insured to file suit is going to be enlarged or not enforced. Whether there has been a waiver largely rests on the activities the insurance carrier took to investigate and adjust the claim.
Below is a sampling of those actions that courts have held did and did not constitute a waiver of the suit limitations provision of the policy:
Non-waiver (summary judgment granted for insurance company):
• All settlement letters to the insured explicitly stated that the insurer reserved “all rights and defenses” under the policy. Allstate Ins. Co. v. Sutton (Georgia).
• Requested that a contents form be executed, requested an interview and other documents, and took a short EUO. Zieba v. Middlesex Mut. Assurance Co. (Connecticut).
• Requested proof of loss form, conducted EUO, and requested additional documents after the EUO. Investigation was lengthy because the plaintiffs did not return requested documents in a timely manner; claim denied after the time limit had expired. Smith v. Allstate Ins. Co. (Kentucky).
• Telling an insured that the claim is “open and active” after the suit limitation has already expired. Endemann v. Liberty Ins. Corp. (New York).
• Prepared an estimate for repairs, requested a packet of documentation, exchanged emails with insured over several months, requested more documents in order to arrange a re-inspection of the property; requests and actions stopped within the time limitation. Zewdie v. Safeco Ins. Co. of Am. (Oklahoma).
Waiver (to be determined by the jury):
• Retained surveyor, requested various documents, but failed to decline the claim until after the time limit passed despite the insurer knowing it planned to deny the claim. N. Am. Foreign Trading Corp. v. Mitsui Sumitomo Ins. U.S.A. Inc. (New York).
• Insurer’s representatives made statements to the insured that the contractual limitation would not be enforced. Hall v. South River Restoration, Inc. (D.C.).
• Insurer promised to adjust and pay a loss under a fire policy as soon as a certain contingency should happen, and, by reason of the promise, the insured did not file until after the policy’s suit limitation expired. Hartford Fire Ins. Co. v. Amos (Ga.).
With knowledge of what may constitute a waiver, an investigator or adjuster should consider implementing certain best practices in an attempt to avoid a claim that the actions taken waived the suit-limitations defense.
Instances in which it has been determined the insurer committed a waiver almost always involve the insurer’s claims representatives or investigators not adhering to fair claims-settlement practices. Any time an insurer investigates a claim, it should avoid: misrepresenting to the insured the policy provision related to the suit limitation; failing to acknowledge pertinent communications with reasonable promptness; failing to implement procedures for the timely investigation and settlement of claims; and failing to affirm or deny coverage of a claim within a reasonable time after the insurer completes its investigation.
If a judge or jury is asked to decide if the insurer waived the suit limitation and there was no language advising an insured that the carrier is insisting on strict compliance with the policy, including the suit limitations, the decision may not be favorable, especially if the trier of fact senses an insurer has intentionally delayed its investigation and/or payment.