Fidelity adopted the adjuster's recommendation and paid Mr. Migliaro.

Five months later, Mr. Migliaro submitted a proof of loss, claiming an additional $236,702.57 in damages.

On July 15, 2013, Fidelity sent Mr. Migliaro a letter titled "Rejection of Proof of Loss." The letter stated:

The Proof of Loss cannot be accepted under the terms and conditions of the insurance policy for the following reason:

1. The amount claimed is not an accurate reflection of covered damage.

This is not a denial of your claim. Your field adjuster provided you with an estimate and Proof of Loss regarding covered damages. If there are additional covered damages identified, please forward documentation and they will be considered on a supplemental basis and a new corrected estimate and a new Proof of Loss will be provided.

Mr. Migliaro did not provide additional documentation or otherwise attempt to submit a second proof of loss. Instead, on December 13, 2013, he sued Fidelity in the U.S. District court for the District of New Jersey.

In September 2014, Mr. Migliaro filed a motion for voluntary dismissal; the district court granted the motion and dismissed Mr. Migliaro's complaint without prejudice.

He filed a second complaint against Fidelity in the same court on July 22, 2015.

Fidelity moved for summary judgment, arguing that the suit was barred by the SFIP's one-year statute of limitations. Fidelity urged that the July 15, 2013 letter rejecting Mr. Migliaro's proof of loss was a "written denial of all or part of the claim," which triggered the statute of limitations. Because Mr. Migliaro's second complaint was filed almost two years after he had received the letter, Fidelity argued that his claim was time-barred.

In response, Mr. Migliaro argued that the July 15, 2013 letter rejecting his proof of loss was not a "written denial of all or part of the claim" because it explicitly said it was not a denial of his claim. According to Mr. Migliaro, he had never received a written denial of his claim, so the statute of limitations had never begun to run.

The district court granted summary judgment in favor of Fidelity, and Mr. Migliaro appealed to the Third Circuit.

The SFIP

The SFIP's loss payment provision provided:

2. If we reject your proof of loss in whole or in part you may:

a. Accept our denial of your claim

b. Exercise your rights under this policy; or

c. File an amended proof of loss as long as it is filed within 60 days of the date of the loss. 

The SFIP also provided:

You may not sue us to recover money under this policy unless you have complied with all the requirements of the policy. If you do sue, you must start the suit within one year after the date of the written denial of all or part of the claim[.] . . . This requirement applies to any claim that you may have under this policy and to any dispute that you may have arising out of the handling of any claim under the policy.

(Emphasis added.)

The Third Circuit's Decision

The circuit court affirmed, holding that a written rejection of a proof of loss constituted a denial of the claim if, based on it, the policyholder filed suit against the WYO carrier, thereby accepting the written rejection of a proof of loss as a written denial of the claim.

In its decision, the circuit court first rejected Fidelity's argument that, based on the policy's loss payment provision, the rejection of a proof of loss was per se a denial of the claim. The circuit court explained that a policyholder had three options after his or her proof of loss was rejected. Under option (a), the policyholder may accept the rejection as a denial of the claim. Alternatively, under option (b), the policyholder may exercise his or her rights under the SFIP, including the right to demand an appraisal of the loss, the right to cancel the policy, and the right to file suit "within one year after the date of the written denial of all or part of the claim." Finally, under option (c), the policyholder may file an amended proof of loss and attempt to show the WYO carrier that he or she indeed was entitled to additional compensation.

The Third Circuit then rejected Mr. Migliaro's argument that because he had exercised his rights under option (b) by suing Fidelity, he had not chosen option (a) and accepted the rejection as a denial of his claim.

According to the circuit court, Mr. Migliaro's argument meant that he admitted that he viewed the July 15, 2013 letter rejecting his proof of loss as a written denial of his claim because the private right of action against a WYO carrier was "limited to a suit challenging the complete or partial denial of his claim." Therefore, the circuit court continued, the very act of bringing suit signaled that, to Mr. Migliaro's mind, his claim had been denied.

Moreover, the circuit court said, by statute a policyholder's cause of action arose "upon the disallowance . . . of any [SFIP] claim, or upon the refusal of the claimant to accept the amount allowed upon any such claim." 42 U.S.C. § 4072. The only communication of the disallowance was the written rejection of the proof of loss in the July 15 letter. Thus, by filing suit, Mr. Migliaro "himself held out the July 15 letter rejecting his proof of loss as a denial of his claim," the Third Circuit ruled.

Therefore, the circuit court said, because a policyholder could not bring suit until the policyholder's claim had been denied in writing, Mr. Migliaro must have accepted that the July 15, 2013 letter constituted a written denial of his claim leading him to sue Fidelity on December 13, 2013.

The Third Circuit added that the statement in the July 15 letter that it was "not a denial of [the] claim" was "technically true at the time it was made" because, at that time, the door to additional compensation for his claim "remained open." In the July 15 letter, the circuit court pointed out, Fidelity invited him to submit additional documentation to support his initial proof of loss; moreover, by law, he had the right to seek an appraisal of the loss or file an amended proof of loss within 60 days. Mr. Migliaro, the circuit court concluded, "closed the door" by failing to seek an appraisal, file an amended proof of loss within 60 days, or submit additional documentation. By suing, he acknowledged that, by virtue of the letter rejecting his proof of loss, his claim had been denied, the Third Circuit reasoned.

Because the dismissal of Mr. Migliaro's first complaint without prejudice meant that, for statute of limitations purposes, it had to be treated as if it had never existed, and because Mr. Migliaro's second complaint was filed almost two years after he had received the July 15, 2013 letter, the district court had properly dismissed his suit as time-barred, the Third Circuit concluded.

The case is Migliaro v. Fidelity National Indemnity Ins. Co., No. 17-1434 (3d Cir. Jan. 29, 2018). Attorneys involved include: Steven C. Feinstein (Argued), Daniel W. Ballard, Zenstein Ballard, Warminster, PA, Counsel for Appellant. Francis X. Manning (Argued), Stradley Ronon Stevens & Young, Cherry Hill, NJ; Adam J. Petitt, Brandon M. Riley, Stradley Ronon Stevens & Young, Philadelphia, PA. Counsel for Appellee.