The U.S. Court of Appeals for the Eleventh Circuit has ruled that a suit limitation provision in a homeowner's insurance policy barred an action filed by a contractor, as the assignee of the insureds, against the insurer.
|The case
After Larry and Nancy Mitchell discovered that raccoons had taken up residence in the attic and crawl space of their home in Savannah, Ga., they contracted with A+ Restorations, Inc. (A Plus) to remedy the situation. In exchange for repair and restoration work on their home, the Mitchells assigned A Plus certain rights under the homeowner's insurance policy they had acquired from Liberty Mutual Fire Insurance Company, including the right to collect benefits for the services performed by A Plus directly from Liberty, as well as “all rights to proceed against the insurance company obligated to provide such benefits, including, but not limited to, initiating legal suit to enforce such payments.”
When the work was completed, A Plus tendered invoices to Liberty for the materials and services provided on the project. Liberty remitted a portion of the claim, but refused to reimburse A Plus for the full amount, leaving $98,794.79 unpaid.
A Plus submitted a final demand seeking payment of the full amount, but Liberty declined.
Related: 5 homeowner tips to reduce fall & winter property damage, insurance costs
|Breach of contract claim
Nearly two years later, A Plus sued Liberty, asserting breach of contract. A Plus included a count for the actual value of services performed (known as a “quantum meruit” claim) and unjust enrichment in the complaint.
The U.S. District Court for the Southern District of Georgia granted judgment on the pleadings in favor of Liberty.
The district court determined that the suit limitation clause in the Liberty policy applied to the right to sue assigned by the Mitchells to A Plus. The district court ruled that because A Plus had failed to file its complaint within two years of the loss under the policy, its action was barred. The district court also determined that A Plus' quantum meruit and unjust enrichment claims were barred under the provision as well. It entered judgment in favor of Liberty.
A Plus appealed to the Eleventh Circuit. It contended that the suit limitation provision in the Liberty policy did not apply to it because the assignment it had received from the Mitchells was limited to the right to sue and did not include the suit limitation provision found in the policy. A Plus asserted that the six-year limitation period for breach of contract actions provided under Georgia law prevailed instead, and that its claim was viable.
The assignment from the Mitchells to A Plus provided that it was “not intended to assign rights beyond that necessary to collect, or enforce collection, of the charges for services rendered by [A Plus] and is not an assignment of, nor an attempt to assign the insurance policy itself.”
The Liberty policy provided:
Suits Against Us.
No action can be brought unless the policy provisions have been fully complied with and the action is started within two years after the date of loss.
|The Eleventh Circuit's decision
The circuit court affirmed the lower court's ruling.
In its decision, the circuit court found that when A Plus accepted the Mitchells' assignment in exchange for its services, A Plus received the right to “stand[] in the shoes” of the Mitchells under the policy. As the Mitchells' assignee, the circuit court continued, A Plus could “obtain[] no greater rights than the [Mitchells] possessed at the time of the assignment.”
The circuit court found it “abundantly clear” that the Mitchells' right to sue Liberty under the policy was contractually limited by the suit limitation provision, and ruled that the right of A Plus to sue, assigned to it by the Mitchells, was limited as well.
The Eleventh Circuit then rejected A Plus' assertion that it had filed its complaint within the prescribed period because the two-year limit began to run when Liberty finally refused A Plus' demand for payment. According to the circuit court, although “loss” was not defined in the policy, it “clearly” did not mean “the refusal of the insurer to pay a claim” but, rather, was the “adverse event” for which coverage was available. Here, the circuit court ruled, the date of the loss was, at the latest, the date when the Mitchells had discovered the damage to their attic and crawlspace.
Finally, the circuit court concluded that the policy's suit limitation provision — which referred to any “action” — also barred A Plus' quantum meruit and unjust enrichment claims.
The case is A+ Restorations, Inc. v. Liberty Mutual Fire Ins. Co.
Steven A. Meyerowitz, Esq., ([email protected]) 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. This story is reprinted with permission from FC&S Legal, the industry's only comprehensive digital resource designed for insurance coverage law.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
