Demand Appraisal Before the Suit Limitation Period Runs

Most property insurance policies have a one or two year suit limitation period. Some states will extend this time frame to bring a lawsuit for various reasons. However, I sometimes run across instances where a public adjuster or policyholder thinks that the suit limitation period has no impact on the time to demand appraisal. This is not correct, and a demand for appraisal should always be made before the suit limitation period runs.

A recently decided case in Pennsylvania demonstrated this point. 1 The facts of the case are as follows:

On July 18, 2021, a fire damaged the Houtzes’ property…At the time, the Houtzes had an active insurance policy issued by State Farm…After the Houtzes submitted notice of the loss, State Farm accepted the loss was covered under the Houtzes’ policy. From July 2021 to March 2023, the Houtzes and State Farm negotiated the insurance claim, and State Farm issued payments under the policy. On July 13, 2023, after a dispute arose regarding the loss amount, the Houtzes demanded an appraisal of the loss amount pursuant to the policy’s appraisal provision. The next day, State Farm denied the appraisal request as untimely because it was not made within one year after the date of the loss, in violation of the policy’s suit limitation provision. The suit limitation provision, titled ‘Suit Against Us,’ states: ‘No action will be brought against [State Farm] unless there has been full compliance with all of the policy provisions. Any action by any party must be started within one year after the date of loss or damage.’

A lawsuit was filed, and the court eventually sided with State Farm on the breach of contract action:

The Houtzes have not alleged any facts suggesting State Farm waived the suit limitation defense. Instead, the Amended Complaint suggests the opposite. In its July 2023 letter denying the Houtzes’ appraisal request, State Farm explicitly stated it was not waiving any limitations or provisions, and also claimed it had reminded the Houtzes of the suit limitation provision in ‘correspondence throughout this claim and [as] early as [its] letter dated August 12, 2021.’ State Farm’s explicit reliance on the suit limitation provision for almost two years does not constitute waiver, and the Amended Complaint includes no allegations to the contrary.

There are also no facts pled to suggest State Farm induced the Houtzes to delay bringing this action. The Houtzes claim had they known State Farm ‘would take an unreasonable and unjustified position to refuse appraisal simply because they were beyond the suit limitation, suit would have been previously filed.’ Because the appraisal denial occurred long after the one-year limitation period expired, the implication is State Farm induced them to delay their appraisal request until after the one-year limitation. But the Complaint contains no factual allegations to this effect. Indeed, the Houtzes allege almost no facts regarding State Farm’s conduct prior to its appraisal denial, and no facts suggesting any inducement. The Houtzes only allege they ‘continued to negotiate the claim’ and State Farm ‘was complying with its responsibilities.’ These facts do not plausibly suggest State Farm induced the Houtzes to delay this action.

In their response in opposition, the Houtzes argue State Farm ‘purposefully, or even inadvertently, wait[ed] until one year ha[d] passed from the date’ of the fire to deny appraisal, once State Farm ‘believed it was immune from suit.’ The Court is unpersuaded given the Houtzes’ own allegations demonstrate the opposite. The Houtzes allege ‘[a] dispute rose as to the amount of the loss.’ Am. Compl. Once the Houtzes demanded appraisal, State Farm acknowledged receipt of their demand and explicitly denied the demand under the suit limitation provision one day later. The Court cannot find estoppel to apply when the Houtzes have not provided any information—beyond their own conclusory allegations—on how State Farm allegedly delayed this action. Because the Houtzes have not alleged facts plausibly suggesting waiver or estoppel, the suit limitation provision is enforceable. Houtzes’ breach of contract claim is thus time-barred by the provision. Accordingly, Count I will be dismissed.

The first lesson is to demand the appraisal timely and before the suit limitation period runs. The second lesson to remember is that many states require a lawsuit to be filed within the suit limitation period, even if the matter is in appraisal. I noted this second lesson in When Does the Statute of Limitations Run After a Texas Appraisal:

Appraisals are a common alternative method to litigation for resolving property insurance disputes. Still, the time to file suit varies from state to state, even when an appraisal is invoked. Policyholders should be wary that even though an appraisal is invoked, some states still allow the time to bring suit to run despite the ongoing appraisal. Statutes of limitation when an appraisal is involved can be a complex and often overlooked aspect of a claim with disastrous results if the issue is not legally analyzed.