The New York Court of Appeals on Thursday ruled against an insurance company that sought to dismiss a claim on a fire insurance policy by invoking a clause limiting the time in which the insured may bring suit under the policy.
The case, Executive Plaza L.L.C. v. Peerless Insurance Co., is predicated on a fire that severely damaged an office building in Island Park, N.Y., on February 23, 2007. Peerless paid the actual cash value of the damaged building but withheld payment of the full replacement value until the repairs on the building were completed. When Executive Plaza realized it could not complete the repairs within the two-year suit limitation specified in the contract, the building owners filed suit against the insurance company on February 23, 2009, seeking a declaratory judgment. Peerless succeeded in having that suit dismissed when a U.S. District court agreed the claim was, in effect, “too early,” as the repairs were not yet complete.
When repairs were completed in October 2010, Executive Plaza sued for payment of the unpaid portion of the policy limits, covering replacement costs. That suit was also dismissed by the U.S. District Court, but Thursday the New York Court of Appeals judges said that the plaintiffs had had the damage repaired “as soon as reasonably possible” after the loss and were entitled to the money.
“We hold that such a contractual limitation period, applied to a case in which the property cannot reasonably be replaced in two years, is unreasonable and unenforceable,” the judges' decision states.