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A federal district court in New Jersey has granted summary judgment in favor of an insurer, holding that an insured's lawsuit seeking coverage of its claim for damage caused by Superstorm Sandy was untimely because it was filed well after the policy's two-year suit limitations period.

The Case

On November 15, 2012, soon after Superstorm Sandy struck New Jersey, Scottsdale Insurance Company received a notice of claim from G. Matts Hospitality, LLC t/a Sands Motel, claiming a loss on October 29, 2012.

G. Matts claimed damage on its property caused by, among other things, flooding and winds as a result of Superstorm Sandy.

Scottsdale investigated and adjusted G. Matts' claim for property damage.

On July 11, 2013, Marie Hampton, a claims analyst for Scottsdale, sent G. Matts a coverage letter indicating that Scottsdale would issue a payment of $6,975.97, accounting for a deduction of the $8,000 deductible. The coverage determination letter stated:

"The water damage in the stairwell is due to a wind created opening therefore it is covered. All the other water intrusion is due to long term seepage and or plumbing leaks. In order for there to be coverage for interior rain, the policy requires the rain [to] enter through an opening created by a covered cause of loss. Since there was no opening created due to a covered cause of loss through which the rain entered, there is no coverage for the other interior water damage. The policy also excludes any water damage due to continued or repeated seepage.

"There is coverage for the wind damage to the siding, gutters and roof.

"A check for the covered damage in the amount of $6,975.97, after consideration of the $8,000 wind deductible, will be sent under separate cover.

"[Scottsdale] reserves the right to review any additional claims or amendments to this claim and to make a separate determination as to whether a new claim or amendment to this claim is covered by the policy. Any decision we make regarding coverage is based on the facts as presented to us prior to our coverage determination and should not be construed as applicable to a new claim or an amendment to this claim. Our right to have notice of either situation is reserved, as are the notice conditions of the policy… .

"If you believe there is additional information that should be considered or some other reason the policy should provide coverage, please provide that information in writing within 30 days of receipt of this letter."

Scottsdale also sent the July 11, 2013 coverage determination letter via certified mail, return receipt requested, to G. Matts' public adjuster, which it received on July 15, 2013.

On October 11, 2016, the adjuster contacted Scottsdale and requested that it consider additional payments based on a Datacom Services Inc. estimate dated January 14, 2013.

On October 20, 2016, Scottsdale informed the adjuster that it would not consider any additional payments and it was committed to the position articulated in the July 11, 2013 denial letter.

On June 29, 2017, G. Matts sued Scottsdale, which moved for summary judgment.

The insurer argued that G. Matts' action was untimely and barred by the policy's suit limitation provision because G. Matts failed to file its complaint within the two-year limitation period, and Scottsdale's July 11, 2013 correspondence was a clear and unequivocal determination of coverage such that the two-year suit limitations provision began to accrue then.

In response, G. Matts argued that the July 11, 2013 coverage determination letter was ambiguous as to its denial of coverage, and Scottsdale's first actual, definitive disclaimer of coverage came via a reply dated February 22, 2017, thereby tolling the contractual time bar until that time.

The District Court's Decision

The district court on Sept. 30 granted the motion.

In its decision, the district court explained that, pursuant to applicable New Jersey law, the contractual suit limitation provision in the Scottsdale policy was tolled from the time G. Matts gave notice until Scottsdale formally declined liability.

The district court pointed out that:

• Matts sought recovery for property damage it sustained from Superstorm Sandy on October 29, 2012;
• Matts provided notice of this loss to Scottsdale on November 15, 2012; and
• Scottsdale undertook an eight-month long investigation of G. Matts' claim before making its coverage determination through its July 11, 2013 letter, indicating that it would disburse $6,975.97 on G. Matts' claim.

Accordingly, the district court ruled, pursuant to the policy's two-year suit limitation period, G. Matts had until July 11, 2015 to file its lawsuit. Because it did not file its complaint until June 29, 2017, nearly two years after the limitations period had expired, its complaint was untimely.

The district court was not persuaded by G. Matts' argument that the July 11, 2013 coverage determination letter was ambiguous, and therefore an improper disclaimer of coverage for purposes of the contractual suit limitations period. It reasoned that the letter "meticulously explained which claimed property damages were and were not covered and the grounds for each decision."

Moreover, the district court continued, the letter also explicitly notified G. Matts that there was "no coverage for the other interior water damage" as the policy excluded any water damage "due to continued or repeated seepage."

In the district court's opinion, the July 11, 2013 coverage determination letter was "an unequivocal denial of coverage sufficient to begin G. Matts' allotted time to bring suit."

The case is Hospitality v. Scottsdale Ins. Co., No. 3:17cv6826 (D.N.J. Sept. 30, 2019). Attorneys involved include: For G. MATTS HOSPITALITY, LLC, trading as, SANDS MOTEL, Plaintiff: MAURO CARLO CASCI, LEAD ATTORNEY, LAW OFFICES OF MAURO C. CASCI, LEONARDO, NJ. For SCOTTSDALE INSURANCE COMPANY, Defendant: THEODORE ALFRED MOTTOLA, RIKER DANZIG, MORRISTOWN, NJ; LANCE J. KALIK, RIKER DANZIG SCHERER HYLAND & PERRETTI, LLP, MORRISTOWN, NJ.

Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. Mr. Meyerowitz is the Director of the Insurance Coverage Law Center and editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. He may be contacted at [email protected].