{"id":904793,"date":"2025-09-11T16:13:24","date_gmt":"2025-09-11T22:13:24","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=904793"},"modified":"2025-09-11T16:13:27","modified_gmt":"2025-09-11T22:13:27","slug":"statute-of-limitations-pause-pay-or-proceed","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/statute-of-limitations-pause-pay-or-proceed\/","title":{"rendered":"Pause, Pay, or Proceed:\u00a0Statute\u00a0of Limitations and Filing Suit After the LA Wildfires"},"content":{"rendered":"\n

Keith A. Meyer and Kya R. Coletta | Reed Smith<\/a><\/p>\n\n\n\n

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\u2019 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). <\/p>\n\n\n\n

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 \u201cinception of the loss.\u201d However, equitable tolling principles may apply to extend that deadline. Which one applies? As this article will demonstrate, it depends.<\/p>\n\n\n\n

Equitable Tolling of the Statute of Limitations\u2014What Does it Mean?<\/strong><\/p>\n\n\n\n

Property insurance policies typically require commencement of suit \u201cwithin one year after the loss\u201d or \u201cwithin 12 months next after inception of the loss\u201d (or similar language such as \u201chappening\u201d or \u201coccurrence\u201d of loss). Under such provisions, the limitations period<\/a> is measured from the point in time when appreciable damage occurs and is or should be known to the insured. \u00a0Prudential-LMI Com. Insurance v. Superior Court<\/em>\u00a0(1990) 51 Cal. 3d 674, 687. In California, a contractual limitations period is equitably tolled, or \u201cpaused,\u201d while the claim is being considered by the insurer,\u00a0i.e<\/em>., \u201cfrom the time the insured files a timely notice, pursuant to policy notice provisions, to the time the insurer formally denies the claim in writing.\u201d \u00a0Id<\/em>. This tolling rule applies to first-party property claims under both commercial and homeowners\u2019 policies. \u00a0See, e.g.<\/em>,\u00a0San Jose Crane & Rigging, Inc. v. Lexington Ins. Co<\/em>. (1991) 227 Cal. App. 3d 1314, 1319;\u00a0Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Assocs., Inc<\/em>. (2004) 115 Cal. App. 4th 1145, 1163.<\/p>\n\n\n\n

The \u201cpause\u201d ends, and the clock to file suit starts running, when the insurer \u201cunequivocally\u201d denies the claim, in whole or in part, in writing. Singh v. Allstate Ins. Co<\/em>. (1998) 63 Cal. App. 4th 135, 140. Oral denials are insufficient to stop equitable tolling. An insurer\u2019s post-denial \u201creconsideration\u201d 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\u2019s unequivocal written <\/em>denial. And if the carrier offers to \u201ctake another look\u201d 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.  <\/p>\n\n\n\n

Whether a denial is \u201cunequivocal\u201d or \u201cunconditional\u201d is where \u201cit depends\u201d 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 \u201cfirm, unmovable positions before a denial letter can be considered unconditional.\u201d  Liberty Transport, Inc. v. Harry W. Gorst Co<\/em>., Inc. (1991) 229 Cal. App. 3d 417, 430\u201331 (disapproved on other grounds by Adams v. Murakami<\/em> (1991) 54 Cal. 3d 105). And an insurer\u2019s failure to use the words \u201cdeny\u201d or \u201cdenial\u201d does not necessarily render the denial equivocal, nor does failure to mention the time limit for filing suit.  Migliore v. Mid-Century Ins. Co<\/em>. (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\u2014and the Prudential-LMI <\/em>tolling rationale\u2014would 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.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

What\u2019s 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 \u00a7 2071. Subdivision (b) of Government Code \u00a7 8558 defines a \u201cstate of emergency\u201d 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\u2019s 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.<\/p>\n\n\n\n

Practical Example<\/strong><\/p>\n\n\n\n