The Boisverts further alleged that, on about December 27, 2012, State Farm sent them correspondence indicating that it would pay $2,650.43 for the initial damage to their home. On the same day, the Boisverts contended, State Farm also sent them a letter advising them of the requirement to file an internal appeal with State Farm if they contested its coverage decisions and letting them know that only then, if they were unsatisfied with the result, could they contact the New Jersey Department of Banking and Insurance.

The Boisverts alleged that this letter led them to believe that they had to appeal through State Farm's internal process.

Thereafter, State Farm sent an adjuster to evaluate the structural damage. The Boisverts alleged that the adjuster did not properly evaluate the damage.

On April 29, 2013, State Farm sent the Boisverts a letter indicating that the structural damage had been caused by settling and was not covered by their policy. The Boisverts informed State Farm that they disagreed with its decision not to cover the structural damages to their home.

State Farm sent a second adjuster to the Boisverts' home to assess the structural damage. Nevertheless, on July 26, 2013, State Farm sent the Boisverts a letter again indicating that the structural damage was not covered by their policy. In the July 26, 2013 letter, State Farm invited the Boisverts to submit additional information for State Farm's consideration.

On July 31, 2013 and August 1, 2013, the Boisverts sent a letter to State Farm stating they needed State Farm “to state the exact problem and not a general statement” and “would like some clarity on exactly why this claim is being denied.” Thereafter, on October 3, 2013, the Boisverts participated in mediation with State Farm to resolve the dispute. During this mediation, State Farm invited the Boisverts to provide additional documents in support of their claims for reconsideration.

Ultimately, State Farm denied the Boisverts' claims.

On September 16, 2014, the Boisverts filed a three-count complaint, alleging breach of contract, breach of good faith and fair dealing, and a violation of the New Jersey Consumer Fraud Act (“CFA”).

State Farm moved to dismiss, contending that the Boisverts' claims were time barred by the policy's one-year suit limitations period. State Farm argued that the July 26, 2013 denial letter was unambiguous and that the Boisverts had failed to allege any facts that gave rise to equitable tolling.

For their part, the Boisverts argued that tolling applied:

(1) because the July 26, 2013 letter was not an unequivocal denial of the Boisverts' structural damage claim;

(2) by State Farm's suggestion that the Boisverts should contact the New Jersey Department of Banking and Insurance;

(3) by State Farm's request for additional information in the July 26, 2013 letter;

(4) because State Farm did not pay the uncontested claim within a timely manner; and

(5) because the Boisverts relied on State Farm's action in seeking mediation.

The Court's Decision

The court granted State Farm's motion to dismiss the first two causes of action but denied its motion to dismiss the third.

In its decision, the court noted that, under New Jersey law, contractual limitations periods in insurance contracts were tolled during the time that the insurer investigated the claim – from the time the insured gave notice until liability was formally declined.

The court found that the July 26, 2013 letter was an unequivocal denial of the Boisverts' claim, noting that it “clearly stated” that there was a “denial,” that the damage was “not covered by [the] policy,” and that any “action must be started within one year after the date of loss or damage.”

Moreover, the court observed, the Boisverts sent State Farm correspondence on July 31, 2013 and August 1, 2013 requesting “clarity exactly on why [the] claim is being denied,” and asking whether the uncontested claim was “also being denied.” (Emphasis added.)

The court ruled, therefore, that based on the plain language of the July 26, 2013 letter and the Boisverts' concessions, the July 26, 2013 letter was an unequivocal denial and the Boisverts were not entitled to tolling based on that letter.

Similarly, the court ruled that tolling was not appropriate based on State Farm's suggestion that the New Jersey Department of Banking and Insurance (“DOI”) could resolve a dispute or that they were told that they had to participate in mediation. The court explained that State Farm had denied the Boisverts' claims on July 26, 2013, when the one-year period to sue began to run; that the Boisverts had requested mediation on September 3, 2013, 39 days later; and that the period had begun to run again on October 3, 2013, once mediation had been completed. Thus, the court ruled, the Boisverts had 326 days (365 days minus 39 days) from October 3, 2013 to file suit – by August 25, 2014. Because they had not filed suit until September 16, 2014, their complaint was untimely, the court ruled.

Next, the court rejected the Boisverts' argument that the period should be tolled because State Farm's July 26, 2013 letter had requested additional information. The court acknowledged that the letter indicated that State Farm would accept additional information, but found that the “plain language” of the letter was not misleading – and that it “clearly indicated” that it was a “denial” and stated that any “action must be started within one year after the date of loss or damage.” Without any facts demonstrating that this was “intentional inducement or trickery” by State Farm that led the Boisverts to withhold filing a complaint, this tolling argument was “unpersuasive,” the court said.

The court also rejected the Boisverts' argument that tolling was appropriate because State Farm had not paid its admitted liability on their uncontested claims until September 2013. The court explained that although an insurer may be barred from raising a statute of limitations defense if it failed to make payment on an admitted liability, here the Boisverts argued only that the payment had been untimely.

The court reached a different result with respect to the Boisverts' CFA claim, ruling that State Farm had not cited any authority to support the position that the suit limitations period for the Boisverts' CFA claim was governed by the policy. It stated:

[The Boisverts] have alleged more than mere underpayment or failure to pay. Indeed, [the Boisverts] allege that [State Farm] was “deceptive in the adjustment of this claim” and acted “fraudulently” and “in reckless disregard” for its obligations under the policy with respect to telling policyholders that the losses were not covered…. [The Boisverts'] CFA claim is distinct from their breach of contract and breach of good faith and fair dealing claim – which center on [State Farm] wrongfully denying payment to [the Boisverts]. [State Farm] has failed to demonstrate why this distinct claim should be governed by the Policy's one-year statute of limitations rather than the six-year statute of limitations for CFA claims. See N.J.S.A. 2A:14-1.

The case is Boisvert v. State Farm Fire and Cas. Co., No. 14-5760 (ES) (MAH) (D.N.J. July 6, 2016).