APPELLATE DIVISION RULES: STATUTE OF LIMITATION ENDORSEMENT APPLIES EVEN IF THE  INSURED NEVER RECEIVED IT

In Matos v. Farmers Mutual Fire Insurance Company of Salem County, 399 N.J. Super. 219 (2008), the Appellate Division ruled that a Statute of Limitations endorsement contained in a homeowners policy applies even if the insured never received it, so long as he or she was aware of the provision by other means.

In Matos, Farmers Mutual Fire Insurance Company of Salem County (Farmers) issued a homeowners policy to the Matoses that insured their home in Toms River, New Jersey.  On December 10, 2004, the home suffered damage after water escaped from a broken pipe located in a crawl space. The Matoses submitted a claim to Farmers that same day, which included a claim for water damage to their patio.

An adjuster was assigned to the claim and he employed an engineer to survey the damage.  The engineer concluded that the damage to the patio was the result of normal wear and tear coupled with improper construction, and not by any flowing water emanating from the crawl space.  By letter dated May 6, 2005, Farmers denied the portion of the claim relating to the patio based on the engineer’s report, but issued a check to compensate for the remaining affected property.

The letter accompanying the denial and check informed the Matoses that Farmers had an internal appeal process in accordance with N.J.S.A. 17:29E-9.  The letter further advised that, pursuant to N.J.S.A. 11:2-17, any action based on the denial was required to be filed within twelve months of the date of the denial letter.  

The Matoses retained counsel who informed Farmers that they were appealing the denial. The attorney requested an internal appeal form, which was sent on July 1, 2005.  The letter accompanying the form again informed the Matoses of the twelve month Statute of Limitations and further advised that participation in the internal appeal did not toll it.

By letter dated July 8, 2005, the Matoses requested a copy of the engineering report and informed Farmers that they would be retaining an engineering report of their own, a copy of which would be forwarded to Farmers once completed.  On August 1, 2005, Farmers sent a letter acknowledging the appeal and enclosing their engineer’s report.  The Matoses neither supplied an engineering report nor sent any further communication in support of their appeal.  Farmers administratively closed the internal appeal on October 1, 2005.  

Fourteen months after the Matos’ last communication with Farmers and five months after the expiration of the twelve month Statute of Limitations period, the Matoses filed an action in the Superior Court.  Farmers moved to dismiss based on the expiration of the Statute of Limitations contained in the policy.  The Matos’ opposed the Motion in a Certification alleging that the policy sent to them by Farmers never included the endorsement reflecting the limitations period.

The Law Division rejected the Matoses claim that the failure to receive the particular endorsement amounted to a material fact sufficient to deny the claim and further reasoned that even if they did not receive the provision, they were nevertheless informed of it a year in advance of the expiration of the one year Statute of Limitations.  Accordingly, the court granted the Motion to Dismiss.

On appeal, the Matoses argued that the trial court erred in dismissing the complaint as untimely because Farmers failed to send them the pertinent provision of the policy informing them of the one year Statute of Limitations.  Alternatively, the Matoses argued that the Statute of Limitations was tolled by their invocation of the Farmers internal appeal process.

The issue before the Appellate Division was whether an insured under a standard homeowners policy can be relieved of a 12-month limitations period for filing suit provided in the policy if the endorsement reflecting this limitation was omitted from the copy of the policy sent to the insured.  The Appellate Division concluded that an insured is bound to the endorsement in the policy if he or she knew or should have known of this term even though he or she received notice of the limitation by means other than the policy itself.

It was undisputed that the Matoses received the May 6, 2005 letter informing them of both the denial and the one year Statute of Limitations.  Moreover, the Matoses were again informed of the Statute of Limitations in the July 1, 2005 letter containing the appeal application.  The Appellate Division reasoned that, even if the particular Statute of Limitations provision was omitted from the policy, the subsequent letters received were sufficient alternative notice to inform the Matoses of its applicability.  

The Appellate Division found the Matos’ alternative argument regarding the tolling of the Statute of Limitations equally unpersuasive.  The July 1, 2005 letter enclosing the appeal application specifically advised that participation in the appeals process did not waive any of Farmers’ rights under the policy, including the twelve month Statute of Limitations.

Insurance carriers should take note of this decision and ensure that every denial contains a provision similar to that employed by Farmers, which reminded the insured that he or she was bound to the applicable Statute of Limitations endorsement contained in the policy.  Furthermore, while the decision seems to allow carriers to invoke provisions in the policy it inadvertently fails to send to an insured, the court will hold as ineffective any portion of the policy where the insured’s ignorance of it was the result of affirmative actions of the insurer to conceal its contents.



Daniel B. McMeen, Esq.