Policy’s One Year Suit Limitation Does Not Apply to Claims Challenging the Insurer’s Claims Handling

    The California Supreme Court held that the policy's suit limitation of one year, consistent with the statute requiring suit be file within twelve months after a loss, did not apply to claims alleging violation of the state's unfair competition law (UCL). Rosenberg-Wohl v. State Farm Fire and Cas. Co., 2024 Cal. LEXIS 3806 (Cal. July 18, 2024).

    Plaintiff held a homeowners policy issued by State Farm that provided coverage for all risks except those specifically excluded under the policy. The suit limitation provision provided, "Suit Against Us. No action shall be brought unless there has been compliance with the policy provision.The action must be started within one year after the date of loss or damage." 

    On two occasions in late 2018 or early 2019, plaintiff's neighbor stumble and fell as she descended a staircase at plaintiff's residence. Plaintiff discovered that the pitch of the stairs had changed, and replacement of the stairs was required to fix the issue. She contacted State Farm on or around April 23, 2019. On August 9, 2019, plaintiff submitted a claim to State Farm, seeking reimbursement for what she paid to repair the staircase. State Farm denied the claim, advising there was no coverage and identifying several exclusions as potentially applicable.

    Plaintiff filed suit in October 2022, asserting a cause of action under the UCL. The complaint alleged that "State Farm has a practice of summarily denying and regularly summarily denying property insurance claims unless State Farm believes the particular claim falls into a category of likely coverage." Further, State Farm "followed that practice" with plaintiff's claim and "because State Farm did not investigate Plaintiff's claim, State Farm had no reasonable basis for its determination that coverage should be denied." According the plaintiff, "The failure of State Farm to investigate all claims made in good faith and reasonable manner constitute . . . an unfair business practice" under the UCL. Plaintiff sought declaratory relief, injunctive relief, and attorney fees and costs. 

    The superior court granted State Farm's demurrer to the UCL cause of action, concluding that the one year limitation period applied to all of plaintiff's causes of action, including her claim for unfair practices because the essence of the relief sought related to the denial of her claim. A divided Court of Appeal affirmed. 

    The California statute provided, "No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss." The one-year timelines provision thus applied when a cause of action was "on the policy" and "for the recovery of a claim."

    Plaintiff argued that her action was not "on the policy" insofar as it challenged State Farm's business practices generally, not the insurer's rejection of her claim specifically. State Farm argued that "for the recovery of any claim" should be read broadly as meaning "for the recovery of any relief."

    The Supreme Court concluded that the lawsuit was not a "suit or action on the policy for the recovery era of any claim.," This language was concerned with causes of action that in some manner sought a financial recovery attributable to a claimed loss that was coverable under a policy. Plaintiff was pursuing broad declaratory relief pertaining to State Farm's alleged claims-handling practices and an injunction that would require State Farm to "give at least as much consideration to the interests of its insured as to its own interests." Plaintiff was not pursuing a financial recovery under her policy but rater broad injunctive and declaratory relief. Therefore, this was not a suit to which the statutory language applied. 

    Since plaintiff's lawsuit was Brough within the four-year period provided under the UCL, the judgment of the Court of Appeal was reversed and the case remanded.