Liberty Mutual determined that the Ryans were owed $4,784.14 for non-flood-related damage caused by Sandy. It denied benefits for flood damage on the ground that the Ryans’ policy did not cover water damage, and because Liberty Mutual previously had made a payment to the Ryans for damage to a living room wall during a previous storm, but inspection revealed that they had not repaired the wall. The letter stated:

We have completed our investigation of your claim.... Based on our investigation into your claim, we regret to inform you that the damage to your home’s flooring, contents in the home and the garage cannot be paid for at this time as your policy does not afford coverage for water damage related to flood.... With respect to said damage, we have reviewed the adjuster’s report along with the loss settlement of a prior claim under your Homeowner’s Policy, and as such, it appears repairs to the living room wall have not been made. Likewise, no documentation has been received verifying repairs were made to the living room wall. If said property was repaired or replaced prior to 10/29/2012, please advise and send us documentation verifying same.... Since payment for damage to living room wall has been previously settled in accordance with the provisions [of the policy] but not since repaired or replaced, no payment under this claim can be made.

The letter also notified the Ryans that they could contact Liberty Mutual with any questions or additional “information which might be used to reconsider our coverage decision.”

Finally, the letter stated that Liberty Mutual had an internal appeals process, and provided contact information for submitting an appeal.

The Ryans received a copy of this letter by email on December 10, 2012.

Related: N.Y. appeals court affirms dismissal of claims against insurance aent in Superstorm Sandy dispute

That day, Ms. Ryan asked Paul Englund, a representative of Liberty Mutual, for recommendations for a contractor to perform the necessary repair work on their home, and thanked him in advance for “revisiting” the claim summary. Mr. Englund replied, offering to send another Liberty Mutual claims adjuster out to the Ryans’ home. The Ryans also were provided with the names and addresses of recommended contractors.

Ms. Ryan responded to Mr. Englund, noting concern that no benefits were paid for the garage, which was both flooded, and “damaged by the storm.” The Ryans apparently never provided Liberty Mutual with any additional information regarding benefits for damage to the garage.

On January 30, 2013, Ms. Ryan asked Liberty Mutual for a payment letter setting out all homeowners’ benefits paid to the Ryans by Liberty Mutual for Federal Emergency Management Agency (“FEMA”) purposes. Liberty Mutual provided the Ryans with a letter for this purpose.

Continue reading...

This Wednesday, Oct. 31, 2012 file aerial photo shows a collapsed house along the central Jersey Shore coast. (AP Photo/Mike Groll, File)

On March 5, 2013, Ms. Ryan notified Liberty Mutual via telephone that she was going to send documentation supporting a claim for “additional living expense” homeowner benefits for pet transportation, airfare, food receipts, and “much more.” Liberty Mutual advised Ms. Ryan to send the documentation to Liberty Mutual for review, but it apparently was never sent.

Ms. Ryan contacted Liberty Mutual again on January 24, 2014, notifying the insurer that she would be sending a list of damaged items and invoices relating to the Ryans’ claim, but apparently no documentation was provided.

Alleged breach of contract, bad faith, violation of N.J. Consumer Fraud Act

The Ryans filed a lawsuit against Liberty Mutual on October 10, 2014 alleging breach of contract, bad faith, and violation of the New Jersey Consumer Fraud Act.

Liberty Mutual moved to dismiss, based on a provision in its homeowner’s policy that required that any suit had to be filed within one year of the date of the loss.

Liberty Mutual asserted that the limitations period began to run on October 29, 2012, was tolled on October 30 when the Ryans submitted their claim, and then began to run again on December 10, 2012, the date that it completed its factual investigation and paid the Ryans the benefits that they were due. The insurer contended that the limitations period then ran without further tolling for 12 months, until December 10, 2013, after which point the Ryans were prohibited from bringing suit.

For their part, the Ryans argued that the letter they received on December 10, 2012 was not an unequivocal denial sufficient to stop the tolling of the statute of limitations.

The District Court’s Decision

The district court granted the Liberty Mutual motion.

In its decision, it found that the one-year suit limitations period in the Ryans’ homeowner’s policy began to run on October 29, 2012 – the date that Sandy damaged their home – and was tolled from October 30, 2012 – the date the Ryans made a claim for homeowner’s insurance benefits – until the date Liberty Mutual declined liability.

It then decided that the benefits letter was an unequivocal denial of coverage, which acted to restart the running of the suit limitations period.

The district court found that the provision in the benefits letter stating, “We regret to inform you that the damage to your home ... cannot be paid for at this time as your policy does not afford coverage for water damage related to flood,” was “clear and direct in its denial of benefits. The language [was] as plain as it could be.” The inclusion of a statement of benefits paid for wind damage did “not obscure” the denial, according to the district court.

Related: N.Y. opens criminal probe into rejected Sandy claims

The district court rejected the Ryans’ contention that the benefits letter was ambiguous in its denial of benefits because the word “denial” did not appear anywhere in the benefits letter. According to the district court, all that was required was “unequivocal denial language.” It found that the statement in the benefits letter that “we regret to inform you that the damage to your home ... cannot be paid for at this time as your policy does not afford coverage for water damage related to flood,” was “synonymous with denial.” That the actual word “denial” did not appear was immaterial, the district court ruled. “Plain language with plain meaning [was] present,” it declared.

Next, the district court ruled that the benefits letter did not have to refer to the policy’s suit limitation period or otherwise bring that to the Ryans’ attention.

Finally, the district court ruled that the existence of an internal appeals process also did not prevent the benefits letter from acting as an “unequivocal denial.”

Accordingly, it concluded, after December 10, 2013, the Ryans were barred from bringing suit based on their contractual agreement with Liberty Mutual.

The case is Ryan v. Liberty Mutual Fire Ins. Co., No. 14-6308 (WHW)(CLW) (D.N.J. Jan. 18, 2017).

Steven A. Meyerowitz, Esq., is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. He can be reached at [email protected].