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An insurance policy unambiguously states legal action in connection with a loss must be filed within two years after the loss occurred, said a federal appeals court, in upholding a lower court’s ruling in a Travelers Corp. unit’s favor in a coverage dispute.
Jackson Heights, New York-based Classic Laundry and Linen Corp. had purchased an insurance policy from Travelers Casualty Insurance Co. of America, a unit of Hartford, Connecticut-based Travelers Cos. Inc., that provided coverage to Classic’s business personal property and any business income loss or incurred extra expense resulting from a covered loss, according to Tuesday’s ruling by the 2nd U.S. Circuit Court of Appeals in New York in Classic Laundry and Linen Corp. v. Travelers Casualty Insurance Co. of America.
On May 1, 2013, there was a fire at Classic’s business premises. Travelers paid Classic for damage to its business personal property but denied coverage for business income and incurred extra expense because, among other reasons, it had failed to return an executed sworn statement proving its losses on a timely basis, according to the ruling.
Classic filed suit against Travelers in state court for business income and extra expense almost three years later, on March 3, 2016. The case was transferred to the U.S. District Court in White Plains, New York, which granted Travelers motion to dismiss the litigation because more than two years had elapsed since the loss occurred.
A three-judge appeals court panel unanimously affirmed the ruling. Classic argued the two-year clock starts to run for business income and extra expense claims at the time the claim accrues. “The clause at issue is unambiguous,” said the ruling, however. It states that legal action must be “brought within 2 years after the date on which the direct physical loss or damage occurred.” New York courts have interpreted this date “to refer to the date of the physical loss, casualty or accident, not the day on which the insured’s claim accrued,” said the decision, in affirming the lower court’s judgment.
A federal appeals court has reversed its earlier ruling and held a Travelers Cos. Inc. unit is not obligated to pay a subcontractor in a public project under its payment and performance bonds.