In the past, Rhode Island courts have upheld insurance policy provisions that require insureds to commence legal action against the insurance company within a time period that is less than the legislatively-enacted statute of limitations. See, e.g., National Refrigeration, Inc. v. Travelers Indemnity Co. of America, 947 A.2d 906, 912 (R.I. 2008) (two-year limitation provision upheld; Hay v. Pawtucket Mutual Insurance Co., 824 A.2d 458, 460, 461 (R.I. 2003) (Rhode Island courts “have long adhered to the validity of limitations provisions in insurance contracts”). Recently, the Rhode Island Supreme Court in Chase v. Nationwide Mutual Fire Insurance Co., 160 A.3d 970 (2017) demonstrated that suit limitation provisions will be enforced under Rhode Island law, even though they may be less than the applicable statute of limitations provided that no estoppel exists.
In Chase, the insured, Eric Chase, insured a property that he owned with Nationwide. The property suffered a casualty loss in June 2010 which resulted in extensive interior and exterior damage. The loss was reported in a timely manner and, after investigating the loss, Nationwide accepted the claim as being covered under the policy. Nationwide authorized Chase to repair the property. Nationwide then authorized a partial release of funds to enable Chase to begin the repairs. Unfortunately, the released funds were not sufficient to pay for the repairs as well as covering Chase’s additional living expense (ALE). When Chase requested the release of additional funds, Nationwide refused. In March 2014, nearly four years after the loss, Chase attempted to invoke the policy’s appraisal clause. Nationwide rejected appraisal because, according to Nationwide, there was a significant passage of time regarding the loss date and the date for the appraisal request and the fact that Chase failed to provide documentation regarding the claim that had previously been requested by Nationwide. Because of this, Chase filed suit in November 2014, four years after the loss. In the lawsuit, Chase alleged that Nationwide had “engaged in a pattern of dilatory conduct, thereby refusing to fulfill its obligations under the [p]olicy.”
In the bad faith lawsuit, Nationwide filed a Motion for Judgment on the Pleadings. Chase responded that Nationwide should be estopped from enforcing the contractual two-year limitation provision in the policy. However, Chase offered nothing to support that argument. The trial court granted the Motion for Judgment on the Pleadings.
The Rhode Island Supreme Court began its analysis by focusing on Chase’s estoppel argument. The court noted that with respect to Rhode Island’s statute of limitation, enforcement of the limitation period could be tolled through estoppel in situations where settlement negotiations involved statements or conduct calculated to lull the claimant into a reasonable belief that his claim would be settled without a lawsuit. 160 A.3d at 974 citing National Refrigeration, Inc. v. Travelers Indemnity Co. of America, 947 A.2d 906, 911 (R.I. 2008). Nevertheless, the court also observed that “[m]ere negotiations between the insurer and a claimant cannot alone justify the application of estoppel. If so, settlement negotiations would be frustrated and impeded.” Id. citing Greater Providence Trust Co. v. Nationwide Mutual Fire Insurance Co., 355 A.2d 718, 721 (1976). For estoppel to occur, the proponent of the estoppel argument must demonstrate “(1) the insurer, by his actions or communications, has assured the claimant that a settlement would be reached, thereby inducing the late filing, or (2) the insurer has intentionally continued and prolonged the negotiations in order to cause the claimant to let the limitation pass without commencing suit.” Id. citing McAdam v. Grzelczyk, 911 A.2d 255, 260 (R.I. 2006).
The court in Chase then turned to the complaint that was filed by Chase. Acknowledging that the court was required to assume everything plaintiff alleged in the complaint as being true, it was clear to the court that Chase did not comply with the terms of the insurance policy because he failed to bring suit within two years from the date of loss. The insurance policy clearly required any action against the insurer to be commenced within two years after the date of loss or damage and not from the date the claim was rejected. The facts were simple: The casualty loss occurred in June 2010 but the suit was not filed until November 2014. The only way Chase could possibly extract himself from the two-year limitation provision was through the successful argument of estoppel. Unfortunately, Chase did not plead sufficient facts that would create a prima facie estoppel argument. The only hint in the complaint that Nationwide might be estopped from enforcing the two-year provision was Chase’s broad and undetailed allegation that Nationwide “engaged in a pattern of dilatory conduct thereby refusing to fulfill its obligations under the [p]olicy.” Without more, the court could not make the leap to assuming that the delay was aimed at inducing or causing Chase to exceed the two-year contractual window to file the suit. Therefore, Chase’s estoppel argument failed.
The Chase case demonstrates the importance of pleading technique. All relevant facts and allegations should be placed into the pleading in order to avoid dismissal motions which require the court to take the allegations in the complaint as true. A dismissal is rare because most competent lawyers will plead sufficient facts to at least establish a colorable argument – assuming the facts are true – for the allegations and legal theories asserted.