Most homeowner’s policies issued in New Jersey contain statutes of limitation for filing a lawsuit against an insurance carrier where the homeowner (insured), disagrees with the insurance carrier’s claim payment amount, or refusal to make any payment on a claim.

In a recent unpublished United States District Court opinion, Turkmany v. Excelsior Insurance, the court reaffirmed the New Jersey Supreme Court’s holding in other cases, by ruling that the limitations period to bring suit against an insurance carrier begins to run once the insurer “flatly states that the insured will not be paid any additional funds on a claim.”

The court sought to clarify when the insured is entitled to “tolling” of the statute of limitations, the time during which the insured is granted additional time to file a lawsuit. For example, if a policy has a 1 year statute of limitations and a loss occurs on January 1 of given year, and the homeowner files a claim with the carrier on February 1, but the carrier takes until December 1, (10 months later), to issue a formal written denial of the claim, the homeowner is given the benefit of that additional 10 months to file a lawsuit. In other words, the Plaintiff will have 1 year and 10 months to file a lawsuit (in this example, November 1 of the following year).

This concept arises out of the court’s recognition that the homeowner should not be penalized for time spent by the insurance company in deciding whether to pay the claim, and should be given the benefit of the full amount of time set forth in the policy. This is most typically one or two years, although in the absence of a statement in the policy, a six-year statute would apply in New Jersey. However, given that almost all homeowner’s policies have a one or two-year limitation period stated in the form policy language, it is extremely rare that a homeowner would get the benefit of six years.

This opinion breaks no new ground, but, rather, reaffirms in slightly stronger and more clear terms, how a court might view computing the time allowed for the homeowner to sue the carrier. There has been discussion, in prior decisions, regarding an insured’s reasonable expectations, when the insurance carrier either doesn’t respond to the insured within the limitation period or provides an equivocal response – without specifically addressing whether additional monies will be paid out under the policy.

This opinion provides some guidance in that regard. The bottom line is that insureds should be diligent about putting the carrier on notice of a claim, in timely presenting proofs, and by filing suit promptly against the carrier, if necessary, to avoid statute of limitation bars. Similarly, insurance carriers must be prompt in their responses and definitive, regarding payment of claims, so that everyone knows what to expect in terms of time limitations.