State Farm argued that the Longs' claim was barred by a contractual limitations period in their homeowners' policy. In particular, State Farm argued that the Longs' complaint was barred because it was filed on Jan. 25, 2017, almost three years after the loss.

For their part, the Longs argued that State Farm had waived the limitation, which, even if not sufficiently alleged in their original complaint, was sufficiently alleged in the proposed amended complaint that they tried to file.

The State Farm policy stated that no action could be brought unless the insured was in compliance with the policy provisions and that any suit had to be brought within one year after the date of loss or damage.

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What the court said

The district court granted the Longs' motion for leave to amend their complaint and denied State Farm's motion to dismiss.

In its decision on the motions, the district court reasoned that the Longs had plausibly alleged that State Farm had waived the one-year suit limitation provision in its policy.

The district court noted that the Longs contended that:

— State Farm had waived the limitation provision by accepting liability on the Longs' claim and making payments on it without any mention of, or adjustment for, diminished value in an attempt to “run[] out the clock on its insureds by purposefully concealing its legal and contractual duty to assess for diminution in value.”

— State Farm's acceptance of liability without any mention of diminished value was, in light of State Farm's practice of explaining all relevant coverage, calculated to lull the Longs and similarly situated insureds into believing that their claim would be paid in full without the need to bring suit, as was State Farm's policy of remaining silent on the issue of diminished value unless diminished value were “affirmatively raised by an insured.”

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The court then ruled that the Longs' proposed amended complaint alleged facts that “plausibly support[ed] these arguments,” including the following:

— State Farm accepted the Longs' claim as a covered event under the policy.

— State Farm adjusted the claim arising out of the loss, authorized repairs to the Longs' home, and subsequently paid certain repair costs.

— State Farm assured the Longs that their claim was progressing toward conclusion without notifying them that State Farm would not assess for diminution in value and either pay it or deny its existence as required by Georgia law.

— State Farm never indicated that any portion of the Longs' loss was not covered despite having “an internal policy on how to avoid waiver of a contractual provision, which requires claims handlers to put an insured on notice if there is a question regarding coverage.”

— State Farm was obligated to explain to insureds if there was no coverage and, if there was coverage, some assessment of damage.

— State Farm's actions were part of a “policy of concealing from its insureds its duty to assess for diminution in value and pay diminution in value when found.”

The district court rejected State Farm's argument that the Longs' proposed amended complaint's additional allegations as to State Farm's general practices and guidelines had “no connection whatsoever” to the Longs or the facts of their individual claim. In the district court's view, the policies and procedures were “relevant to show how State Farm acted in relation to the Longs.” It reasoned that the Longs alleged that State Farm had been accepting coverage for claims, paying claims, and communicating to its insureds what was purported to be a full disclosure of their coverage, but simply omitting any mention of diminished value.

The district court found that it was “reasonable” to infer that State Farm, in an effort to avoid two Georgia Supreme Court rulings regarding diminished value, did this to “sleep” the claims through the limitations period. The district court said that if this were proven true, it was “clear” under Georgia law that State Farm could not raise the limitations period in defense to the Longs' claims because it plausibly could be inferred that State Farm may have waived the one-year limitation.

The case is Long v. State Farm Fire and Casualty Co.

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FC&S Legal Comment

This is the second recent Georgia federal court decision involving State Farm reaching the same conclusion on the same issue in similar circumstances.

In Thompson v. State Farm Fire and Cas. Ins. Co., State Farm moved for summary judgment, arguing that all claims with a date of loss more than one year prior to the filing of the lawsuit were barred by the one-year limitations provision in insureds' policies. State Farm claimed that its actions could not, as a matter of law, constitute waiver according to Georgia law.

The district court in the Thompson case denied State Farm's motion, finding “genuine disputes of material fact as to whether State Farm waived the policies' one-year contractual limitations period” on a record similar to the Longs' allegations. The district court ruled that, under Georgia law, a jury could find that “State Farm's actions and conduct, when taken together and considered as a whole, may amount to an intentional relinquishment of a known right.”

Another court in the Middle District of Georgia, hearing a diminished value case (Morrow v. Allstate Indemnity Company), recently denied the insurance company's motion to dismiss for failure to state a claim when the plaintiffs amended their complaint to allege conduct similar to the actions the Longs alleged State Farm had taken, thereby waiving the contractual limitations period.

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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. Email him at [email protected].