Superior Court Affirms Application of Contractual Statute of Limitations in Insurance Policies

 The PA Superior Court, in an opinion written by Judge Gantman, reversed the August 2, 2006 jury award totaling $3,000,000 for Prime Medica Associates on a breach of contract claim and remanded with instructions.

 Prime Medica Associates (PMA) the owner of an office building insured by Valley Forge Insurance Company (VFIC) suffered casualty and vandalism losses when its tenant, Tenet Healthcare Systems, abandoned the building during March 2001, stopped making rent payments on April 1, 2001 and removed some of the office equipment.  Further losses arose when the building was vandalized on April 16, 2001 and medical equipment was again taken.  PMA  was unsuccessful in re-leasing the space and filed suit against Tenet on September 15, 2001.  A jury awarded damages on May 30, 2003.  PMA filed suit against VFIC on November 4, 2004, more than 3 years after the vandalism and casualty losses, claiming VFIC had breached the policy by failing to cover the casualty losses stemming from Tenet’s departure and the later acts of vandalism.  The jury decided the VFIC case on August 2, 2006 and awarded $3,000,000 in damages to PMA.

 VFIC appealed on the basis that the insurance policy included a suit limitation clause, requiring PMA to bring any legal action within two years of the date on which the loss or damage occurred.  PMA, on the other hand, claimed that it was induced to refrain from suing while VFIC investigated the claim.  PMA also averred that VFIC’s attorney had a duty at deposition to raise the running of the limitations period and was therefore estopped from raising such a defense as it was waived.  The court disagreed with PMA noting that waiver occurs by a party’s express declaration or undisputed acts or language so inconsistent that it leaves no opportunity for a reasonable inference to the contrary.  The court referred to four separate letters from VFIC during the limitations period referencing the importance and requirements of the limitations provision in the policy and noted that PMA failed to request any relief from or extension of the limitations period.  The court also noted that the mere declaration that the insurer was investigating the claim was insufficient to prove PMA was induced to forbear from commencing suit.

Dated:  March 5, 2009