In Rihanna Corp. v. Certain Underwriters at Lloyd’s of London, 2014 N.J. Super. Unpub. LEXIS 2216 (App. Div. Sept. 11, 2014), the plaintiff insureds sought payment under a certain business owner’s insurance policy for a fire loss suffered by Rihana Restaurant. The defendant insurance company (“Lloyd’s”) denied coverage, citing a limitation provision in its policy, which precluded suit filed more than one year from the date of loss. The trial judge granted summary judgment, agreeing that the claim was properly rejected under the policy. The plaintiffs argued in this appeal that the court should have relaxed the one year limitation period and reversed the disclaimer of coverage.
In Rihana, suspicions arose as to whether the fire was intentionally set. Lloyd’s issued a reservation of rights letter. Thereafter, it disclaimed coverage of the fire claim due to “concealment, misrepresentation, or fraud.” It also disclaimed because the insured refused to submit to a statement under oath. The insured refused because he was being investigated by the police for arson.
The plaintiffs filed a declaratory judgment action, seeking compensation under the policy. Lloyd’s filed a summary judgment citing to the limitations period in the policy, which required that any suit or action for recovery under the policy be brought within 12 months after the inception of the loss.
The suit limitation clause in the policy mirrored the standard contract provisions required to be included in every New Jersey fire insurance policy. The primary purpose of the statute of limitations is to provide defendants a fair opportunity to defend and to prevent plaintiffs from litigating stale claims.
This statute has been interpreted to allow suits filed within 12 months from receipt of the insurer’s denial of the claim, rather than the date of loss. Other cases make clear that the defendant’s conduct is relevant to the applicable statute of limitations.
However, in this case, the Appellate Division noted that even assuming the suit limitation was tolled because of the defendant’s delayed notification of the decision to deny coverage, the complaint was not filed within one year after the insured was notified that coverage was disclaimed. Inexplicably, the insured waited for 2 years after the claim was rejected to file suit. Thus, the court found no basis to justify relaxation of the suit limitation period and affirmed the dismissal of the lawsuit.
