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Appeals court rules 2016 water damage loss time barred

Posted On: Dec. 19, 2022 8:28 AM CST


A federal appeals court on Thursday ruled in favor of a Liberty Mutual Insurance Co. unit in a lawsuit filed by a restaurant seeking coverage for water damage, holding its claim was time-barred.

In August 2016, water intrusion into the China Grove Restaurant in China Grove, North Carolina, caused damage to the facility and disrupted business operations, according to the ruling by the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, in Manoula LLC, d/b/a China Grove Restaurant, v. Ohio Security Insurance Co.

Manoula notified its insurer, Liberty Mutual unit Ohio Security, and took steps to determine the water intrusion’s source, stop further intrusion and remediate the effects, including hiring third-party contractors to excavate portions of the parking lot and of the restaurant’s interior, the ruling said.

The company alleged that although it submitted timely proof of the loss, Ohio Security only made partial payments and did not pay the balance due under the policy, although an insurer representative had advised it that it was fully covered and issued a partial payment for remediation expenses. According to the complaint, damages exceeded $25,000, but more details were not disclosed.

Manoula sued Ohio Security in state court in June 2021, charging breach of contract and violation of North Carolina’s Unfair Trade Practices Act. 

The insurer moved the case to U.S. District Court in Winston-Salem, North Carolina, which ruled the lawsuit was time barred, and also dismissed the Unfair Trade Practices Act claim.

The 4th Circuit’s three-judge panel affirmed the ruling.

Manoula argued that North Carolina’s general three-year breach of contract limitations period runs from the date of the contract breach, and therefore its breach-of-contract claim was filed within that period, the ruling said.

“However, the district court correctly concluded that a separate three-year statute of limitations, covering certain insurance policies and running from the date of the loss, applies here,” the court said, in also affirming dismissal of the UTPA claim.

Attorneys in the case did not respond to requests for comment.

The 4th Circuit ruled earlier last week  that an apartment complex owner who sought funds to replace property that was damaged in a fire was too late, in a dispute over the relevant statute of limitations