Suit limitation provisions in insurance policies shorten the statutory period of time that a plaintiff may bring a suit against an insurer for certain causes of action. A New York court recently held that an appraisal award issued a few months after the suit limitation expired was unenforceable where the insured failed to file suit before the suit limitation expired. MZM Real Estate Corp. v. Tower Ins. Co. of New York, 2017 N.Y. Misc. LEXIS 1292 (Apr. 7, 2017). MZM incurred damages as a result of Storm Sandy on October 29, 2012. The Tower insurance policy contained a typical suit limitation provision stating that no one may bring action against the insurer unless suit is filed within two years “after the date on which the direct physical loss or damage occurred.” In November 2012, Tower Insurance paid $4,000, the undisputed amount of the claim. On October 28, 2013, over a year after the date of the loss, MZM demanded appraisal. On February 2, 2015, an unsigned appraisal award was issued in the amount of $170,129. Tower refused to pay the appraisal award on various grounds, including that the award included amounts that were not covered by the insurance policy.

MZM filed suit on June 19, 2015, more than two and a half years after the date of loss by filing a motion for summary judgment in lieu of a complaint. The court disagreed with MZM’s argument that completion of the appraisal process was a condition precedent to filing suit, and found that the appraisal provision in the policy was elective, not mandatory.  The court stated that an insured can protect itself from the suit limitation period by either seeking a waiver from the insurer or filing suit before the suit limitation period expires. The court also found it compelling that Tower did nothing to lull MZM into “sleeping on its rights.” Rather, Tower consistently reminded MZM in written correspondence that Tower reserved all of its rights under the policy. As a result, the case against Tower was dismissed even before any complaint was filed.

The suit limitation provision in insurance policies serves to shorten the time period that an insurer is exposed to potential liability. Where lengthy adjustment and appraisal procedures are at issue, including reservation of rights language in written correspondence to the insured may be useful in ensuring that a late filed suit is terminated early in the litigation.