Keith A. Meyer and Kya R. Coletta | Reed Smith
On January 7, 2025, wildfires raced across Los Angeles, forcing families to evacuate and leave their belongings and heirlooms behind. Many insureds promptly filed claims under their homeowners’ insurance. Some policyholders have already been paid their policy limits. Others continue to fight over sub-limits and scope (frequently where the dwelling still stands but suffers smoke damage and asbestos/lead contamination, which insurers contend can simply be cleaned).
This month marked the six-month anniversary since the LA wildfires began. For those insureds who have encountered problems with their insurers, it may become important to know any applicable deadlines for filing suit for breach of contract or bad faith. Many policies contain contractual limitation periods requiring any suit under the policy to be filed within 12 months from the “inception of the loss.” However, equitable tolling principles may apply to extend that deadline. Which one applies? As this article will demonstrate, it depends.
Equitable Tolling of the Statute of Limitations—What Does it Mean?
Property insurance policies typically require commencement of suit “within one year after the loss” or “within 12 months next after inception of the loss” (or similar language such as “happening” or “occurrence” of loss). Under such provisions, the limitations period is measured from the point in time when appreciable damage occurs and is or should be known to the insured. Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal. 3d 674, 687. In California, a contractual limitations period is equitably tolled, or “paused,” while the claim is being considered by the insurer, i.e., “from the time the insured files a timely notice, pursuant to policy notice provisions, to the time the insurer formally denies the claim in writing.” Id. This tolling rule applies to first-party property claims under both commercial and homeowners’ policies. See, e.g., San Jose Crane & Rigging, Inc. v. Lexington Ins. Co. (1991) 227 Cal. App. 3d 1314, 1319; Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Assocs., Inc. (2004) 115 Cal. App. 4th 1145, 1163.
The “pause” ends, and the clock to file suit starts running, when the insurer “unequivocally” denies the claim, in whole or in part, in writing. Singh v. Allstate Ins. Co. (1998) 63 Cal. App. 4th 135, 140. Oral denials are insufficient to stop equitable tolling. An insurer’s post-denial “reconsideration” does not re-pause the statute. Practically, a phone call or vague status email should not be treated as the trigger; instead, calendar the deadline from the carrier’s unequivocal written denial. And if the carrier offers to “take another look” after denying, the limitations clock keeps running, so policyholders should continue to protect the deadline (including by filing suit if necessary) while any reconsideration is pending.
Whether a denial is “unequivocal” or “unconditional” is where “it depends” comes in. This is often a fact question for the trier of fact based on all relevant correspondence and contacts between the insurer and insured. The insurer need not adopt “firm, unmovable positions before a denial letter can be considered unconditional.” Liberty Transport, Inc. v. Harry W. Gorst Co., Inc. (1991) 229 Cal. App. 3d 417, 430–31 (disapproved on other grounds by Adams v. Murakami (1991) 54 Cal. 3d 105). And an insurer’s failure to use the words “deny” or “denial” does not necessarily render the denial equivocal, nor does failure to mention the time limit for filing suit. Migliore v. Mid-Century Ins. Co. (2002) 97 Cal. App. 4th 592, 605. Where an insurer issues a formal denial of some portions of the claim but expressly continues to investigate the remainder, principles of equity—and the Prudential-LMI tolling rationale—would likely support continuation of tolling as to the still-open issues until the carrier completes its investigation or issues an unequivocal written denial on those issues.
The rationale for tolling is straightforward: policyholders should not be required to sue while their insurer is still investigating whether benefits are owed under the policy. The rule avoids premature and potentially unnecessary litigation.
What’s more, California law requires that if a loss is related to a state of emergency, the time limit to bring suit is extended to 24 months after inception of the loss. Cal. Ins. Code § 2071. Subdivision (b) of Government Code § 8558 defines a “state of emergency” as conditions of disaster or extreme peril caused by, among other things, fire. Governor Newsom declared a state of emergency on January 7, 2025 to support ongoing response and secure federal resources for the Palisades, Eaton, and Hurst fires. As a result, the Governor’s state of emergency declaration extended the deadline for insureds to file suit for losses arising from the LA wildfires until January 7, 2027, and that deadline can be further extended as a result of equitable tolling.
Practical Example
- Loss occurs: January 7, 2025 (during a State of Emergency) → statutory period to file suit against an insurer is 24 months from this date (January 7, 2027).
- Claim submitted: January 14, 2025 → equitable tolling starts here.
- Claim denied: August 10, 2025 → equitable tolling ends here.
- Tolling period: 208 days (Jan 14 to Aug 10, 2025).
- Deadline to sue: Original January 7, 2027 deadline plus 208 days → August 3, 2027.
- Result: Because the loss occurred during a State of Emergency, the filing window is 24 months from the loss date, and equitable tolling paused the statute of limitations during the claims process. In this example, the policyholder would have until August 3, 2027, to file suit.
We saw this issue arise after the Camp Fire that began in Paradise, California on November 8, 2018, which destroyed thousands of structures. A State of Emergency was proclaimed for Butte County that same day. Under California’s standard fire-policy suit-limitation clause (Ins. Code § 2071), the period is ordinarily 12 months, but when the loss is “related to a state of emergency,” it extends to 24 months from the date of loss. For Camp Fire claims, the statute of limitations would have expired on November 8, 2020, subject to equitable tolling.
It should be noted that if an insurer misleads the policyholder as to any material fact and the policyholder then relies thereon in not commencing suit, the insurer may be estopped to assert the contractual limitation as a defense. For example, if an adjuster represents that the loss is below the deductible, or that testing found no hazardous residue, and the insured, relying on that statement, refrains from filing until after the deadline, a court may bar the insurer from invoking the limitations clause. Vu v. Prudential Prop. & Cas. Ins. Co. (2001) 26 Cal. 4th 1142, 1152; Prudential-LMI Comm’l Ins. v. Sup. Ct. (Lundberg) (1990) 51 Cal. 3d 674, 689–90.
Key Takeaways for All LA Wildfire Victims
- Give prompt notice. Timely claim notice triggers the Prudential-LMI tolling protection while the insurer evaluates the claim.
- Don’t delay filing the claim. Waiting eats into the time left after a denial: “If an insured waits 11 months after discovering the loss to make his claim, he will have only 1 month [where the policy required suit within 12 months] to file his action after the claim is denied before it is time-barred.” Prudential-LMI Com. Ins. v. Superior Court (1990) 51 Cal. 3d 674, 692.
- Document everything. Keep a clean record of submissions and correspondence; the date of an unequivocal written denial is what restarts the limitations clock.
- Know your window. For wildfire losses tied to a declared State of Emergency, insureds have 24 months from inception of loss, plus any equitable tolling, to file suit.
Given the intricacies surrounding “inception of loss” and whether there has been an “unequivocal” written denial, policyholders should be alert to these requirements to determine their precise deadline and next steps. As families work to get their lives back on track and rebuild, determining whether their insurers will honor the coverage benefits they paid for should be the least of their worries.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.