United States: The assessment process imposes a limitation period for contractual proceedings, even for uncovered claims
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The Eleventh Circuit Court of Appeals recently ruled that under Georgian law, an assessment process provided for the two-year statute of limitations for contractual prosecutions of a commercial property policy, even for non-claims. covered. In Omni Health Solutions, LLC v. Zurich Am. Ins. Co., No. 19-12406, 2021 WL 2025146 (11th Cir. May 21, 2021) (unpublished), the insured filed a property insurance claim with his insurer, reporting hail damage on the roof of his medical facility in Macon, Georgia, and on water trespassing. Police required the insurer to give notice of its intentions with respect to a claim within 30 days of receiving sworn proof of loss. Following a lengthy assessment process, the insured sued the insurer in Georgia Superior Court for breach of contract and bad faith. In his first count, the insured argued that he breached his police duty by not making a timely coverage decision.
The insurer withdrew the suit to the Middle District of Georgia, which granted summary judgment to the insurer on the basis that the insured’s claim was prescribed by the policy’s two-year contractual limitation period. While acknowledging that under Georgian law the appraisal process generally respects the statute of limitations of an insurance policy, the court held that it was not clear whether all claims related to an insurance policy insurance policies were paid by the appraisal process or only those that were affected or dependent on the outcome of the appraisal. Ultimately, the district court ruled that the appraisal process failed to pay off the breach of contract claim as it was based on extra-contractual damages, and not on the insurer was required to cover the alleged loss.
The Eleventh Circuit disagreed, considering that the damages claimed by the insured were not extra-contractual as they naturally resulted from the alleged breach of contract. In particular, the insured claimed that the insurer’s delay in making a decision to cover resulted in the repair of the insured’s property for longer than it should have and resulted in additional business losses which did not occur. would not be produced if the insurer had complied with its contractual obligations. Thus, although outside the limits of the policy for loss of business income, the damages claimed by the insured arose naturally from the alleged breach of contract by the insurer. The court noted that neither the wording of the policy nor Georgian law limit damages for breach of an insurance contract to the amounts covered where the breach by the insurer has caused the insured damages in excess of those caused by an insured event.
The insurer argued that the insured’s delay claim should not weigh on the contractual limitation period because it was not involved in the valuation process, as evidenced by the fact that the insured was seeking a loss of business income beyond the 13 months granted under the policy. The court found this argument unconvincing for several reasons. First, the policy did not limit the assessment process to determining damages for a particular type of claim. Rather, under the express terms of the valuation provision, the valuation process established the “amount of loss” suffered by the insured, regardless of limits of coverage or liability. The court noted that the valuation committee was responsible for determining the amount of the insured’s loss, not whether the loss was covered. Second, the settlement of the insured’s delay claim depended on the completion of the appraisal process because the alleged damages overlapped with the amount of loss involved in the appraisal.
Critically, the court noted that the valuation in fact determined the amount of the insured’s loss of business income claimed as damages in his delay claim. This demonstrated that the valuation process was linked to the insured’s claim for damages. Therefore, the court concluded that the valuation process had counted the contractual limitation period for the insured’s claim for breach of contract for failure to make a timely coverage decision. The court therefore set aside the grant of summary judgment by the district court on this request. Since the insured’s bad faith claim depended on the viability of his breach of contract claim, the court also overturned the district court’s grant of summary judgment on the bad faith claim by the insured. ‘assured.
Based on the participation of the Eleventh Circuit in Omni, an insured may rely on an assessment process to impose a statutory limitation period even for claims that are not covered by the policy or for damages outside the limits of the policy. As long as the amount of loss determined by the appraisal price overlaps with the amount of damages claimed by the insured in its legal action, a court will consider the appraisal process to be sufficiently related to the lawsuit to reduce the limitation period for contractual action. Therefore, when dealing with an appraisal, insurers must be prepared to defend potential lawsuits well beyond the initial contractual limitation period set by the policy.
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