Like most jurisdictions, New Jersey allows parties to an insurance contract to shorten the six-year statute of limitations for contract actions. See N.J.S.A. 2A:14-1 (“Every action at law . . . for recovery upon a contractual claim or liability . . . shall be commenced within 6 years next after the cause of any such action shall have accrued.”). Such suit limitations clauses may be worded differently but generally function in one of two ways – the suit limitation period begins to run from either (1) the date of loss; or (2) the date of denial of the claim.
So far so good. However, in New Jersey (unlike most other jurisdictions), figuring out whether a limitation period has run is more complicated than simply counting whether 365 days have passed since the date of loss or denial of coverage. Where the suit limitation period begins to run from the date of loss the limitations period is tolled (i.e., paused) during the time period after the insured gives notice of the loss until the insurer denies coverage. See Peloso v. Hartford Fire Ins. Co., 56 N.J. 514, 520, 267 A.2d 498 (1970). Therefore, the key question under both types of clause becomes – “What constitutes a denial?”
New Jersey law requires that a denial be “unequivocal” in order to start the clock running for purposes of a suit limitation condition. For example, one New Jersey appellate court ruled that a denial letter was not “unequivocal” where it referenced the insured being able to submit additional information and suggested that the insured contact the New Jersey Department of Insurance (NJ DOI) if she disagreed with the insurer’s decision. See Azze v. Hanover Insurance Co., 336 N.J. Super. 630, 765 A.2d 1093 (App. Div. 2001). Crucially, in Azze the denial letter did not reference the suit limitations clause. As a result, the Court held that the insurer’s denial of coverage could not be considered “unequivocal” from the standpoint of a “reasonable person.”
In Biegalski v. Farmers Ins. Co. of Flemington, 2016 U.S. Dist. LEXIS 57011 (D. N.J. April 29, 2016), the Court provided some guidance about what makes a denial unequivocal. The insured sustained loss to her home as a result of combined wind and flood damage from Superstorm Sandy. The insured settled with her flood insurance carrier. The insured’s homeowner’s carrier (Farmers) denied the claim after determining the wind damage would not exceed the applicable deductible. The Farmer’s policy required that an action be brought “within 12 months after our denial of either the entire claim or that part of the claim in dispute.”
Farmers’ denial letter informed the insured, in larger font, that she was required to file suit within one year of the letter. Farmers also informed Plaintiff that she had the option of submitting her claim to an internal appeal panel at Farmers. Plaintiff argued that Farmers’ reference to the internal appeal panel rendered the denial “not unequivocal.” The Court disagreed, finding that the reference to the appeal panel was presented as an option, while Farmers had informed the insured of the suit limitation condition in clear, conspicuous language.