The U.S. District Court for the Eastern District of Pennsylvania has ruled that an insurer need not demonstrate prejudice to be able to rely on a suit limitations provision in its policy.
The Case
Mail Quip, Inc., alleged that, on or about March 17, 2015, an ink cartridge refill machine that it used in its business was “misappropriated” – but that it only discovered the “misappropriation” of the machine on April 6, 2017 when it saw it listed for sale on eBay.
According to Mail Quip, it reported the machine – which it valued at $10,429 – as stolen to the police and filed a claim with Allstate Insurance Company under a commercial property insurance policy that included coverage for “theft of machinery and equipment.”
Asserting that Allstate had improperly denied its claim, Mail Quip sued Allstate for breach of contract on January 16, 2019.
Allstate moved to dismiss based on the suit limitation provision in its insurance policy, which required that Mail Quip bring a legal action against Allstate within two years of the date of loss.
For its part, Mail Quip asserted that Allstate could not enforce the policy's suit limitation provision without a showing of prejudice and that a four year statute of limitations applied.
The District Court's Decision
The court granted Allstate's motion.
In its decision, the court, relying on Hospital Support Services, Ltd. v. Kemper Group, Inc., 889 F.2d 1311 (3d Cir. 1989), ruled that an insurer was not required to show prejudice to enforce a suit limitation clause. The court found that because Mail Quip alleged that its loss had occurred on or around March 17, 2015, it had to bring its breach of contract action against Allstate by March 17, 2017.
Because Allstate did not have to show prejudice to rely on the suit limitation provision, Mail Quip's breach of contract claim was untimely, the court concluded.
The case is Mail Quip, Inc. v. Allstate Ins. Co., No. 19-223 (E.D. Pa. May 23, 2019). Attorneys involved include: For MAIL QUIP, INC., Plaintiff: WILLIAM T. LAWSON, III, LEAD ATTORNEY, PHILADELPHIA, PA. For ALLSTATE INSURANCE COMPANY, Defendant: BONNIE S. STEIN, LEAD ATTORNEY, CURTIN & HEEFNER LLP, YARDLEY, PA.
Insurance Coverage Law Center Comment
A number of other Eastern District of Pennsylvania cases have followed the Third Circuit's holding in Hospital Support Services. See, e.g., Ina Management Consultants, Inc. v. Conti Cos. Co., No. CV 14-4924 (E.D. Pa. Apr. 14, 2016) (“[U]nlike an insurer's invocation of a notice of loss provision, the insurer need not show prejudice in order to bar a suit based on a limitation of suit clause”); Mabrat v. Allstate Ins. Co., No. CIV.A. 12-1293 (E.D. Pa. Dec. 12, 2012) (“Courts have repeatedly refused to extend Brakeman's 'sweeping language' to other types of contract provisions, including limitation-of-suit clauses and claims-made policies.”) (internal citations omitted); Am. Collision & Auto. Ctr., Inc. v. Windsor-Mt. Joy Mutual Ins. Co., No. 11-CV-06947 (E.D. Pa. Sept. 27, 2012) (“[A]n insurance provider is not required to demonstrate prejudice to enforce a suit limitation clause.”); Coln Vill. Assocs., L.P. v. Home Indem. Co., 75 F. Supp. 2d 404, 410 (E.D. Pa. 1999) (“Provided that the insurer did not lead the insured to believe that the contractual limitation period would not be enforced, an insurer does not need to show prejudice to enforce a suit limitation provision.”).
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].