Yesterday in Nurse v. Omega U.S. Insurance., Inc., 2015 Mass. App. LEXIS 158, 2015 WL 5774390 (Mass.App., Oct. 5, 2015), a unanimous panel of Massachusetts’ intermediate level appellate court held that the two-year suit limitation provision in a first-party contract of insurance was not subject to a discovery rule. The decision was a case of first impression in the Bay State’s courts (although two federal cases in the Commonwealth had split on the issue).
The insured owned a three-unit residence in Boston which was vacant in December of 2009. The heat was turned off at the time. On December 19th, records from the city’s Water and Sewer Commission showed that the rate of water usage at the property “increased dramatically” in the words of the opinion – it jumped seventeen-fold. The policyholder visited two days later on December 21st, but he did not go into any of the individual units and saw no damage. On December 28th, the Commission notified that insured of the spike in usage, and he returned to the property and found a leak under a sink in the third floor apartment and substantial water damage to the structure.
The dwelling insurer was notified, and it denied on January 14, 2011 after a year of investigation. The insured then brought suit, but he waited until December 28, 2011 to do so. The carrier moved for summary judgment, asserting a number of defenses including the two-year statute of limitations in the policy. The trial court agreed that the action was time-barred and granted the motion, and an appeal followed. On Monday, October 5th, the Appeals Court of Massachusetts affirmed in an opinion authored by Justice Ariane Vuono.
In accordance with Massachusetts statutes – G.L. c. 175, § 99 – the suit limitation provision recited as follows:
No suit or action against this company for the recovery of any claim by virtue of this policy shall be sustained in any court of law or equity in this Commonwealth unless commenced within two years from the time the loss occurred[.]
Neither party disputed that the loss “occurred on December 19, 2009” or that the policyholder’s lawsuit was filed more than two years after that date.
The insured’s principal argument on appeal was that the court should apply a discovery rule to the commencement of the two-year limitation period provided for in the contract of insurance. Beginning in 1974 with Hendrickson v. Sears, 365 Mass. 83 (1974), Massachusetts courts had adopted such a rule and applied it to certain types of insurance claims, tolling the statute of limitations until the claimant discovered or reasonably should have discovered the damage.
The justices surveyed other states’ decisions but found that they were little help. According to the panel, “the application of the discovery rule in this context varies across jurisdictions” and the court could therefore “draw no clear guidance from the relevant decisions” elsewhere. The justices noted that courts in California, Nevada and Michigan had sanctioned use of the doctrine to toll the limitations period, that courts in Minnesota and Connecticut had applied it only to claims predicated on “nonobvious injury or loss,” and that courts in Illinois, Oregon, and Wisconsin had rejected it altogether in this situation.
Justice Vuono’s opinion then declined the policyholder’s invitation to extend the Hendrickson line to first-party insurance policies. Instead, the panel “conclude[d] that the discovery rule does not apply to claims governed by § 99.” The court noted that Hendrickson and its progeny – which had sanctioned the use of the rule in cases involving legal malpractice coverage, medical malpractice coverage, and instances of fraudulent misrepresentation – all involved contracts of insurance that set forth limitation periods that began when a cause of action “accrued.” As a 1990 Supreme Judicial Court case observed, Hendrickson specifically developed the doctrine “for the purpose of determining when the cause of action accrues.”
The provision in the statute and the contract of insurance at bar dealt with when loss occurred. As Justice Vuono explained, “the phrase ‘loss occurred’ is unambiguous [and it] clearly denotes the time at which the damage to the property happens.