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California Supreme Court:
Insurance Policy Time Limit Does Not Bar Injunctive Relief
Guerrero Says Lawsuit Challenging Insurer’s Handling of Claims Is Governed by UCL’s Statute of Limitations
By Kimber Cooley, Staff Writer
The California Supreme Court held yesterday that a one-year deadline for filing suit on a homeowner’s insurance policy does not determine the timeliness of an action by the insured alleging unfair business practices in the insurance provider’s handling of claims which seeks declaratory and injunctive relief on behalf of all policyholders.
The question arose in a lawsuit filed by Katherine Rosenberg-Wohl against State Farm Fire and Casualty Co. more than one year after the insurer denied her claim for coverage over the rebuilding of stairs in her home due to a change in pitch.
Rosenberg-Wohl’s policy provided coverage for losses due to “wear, tear, marring, scratching, deterioration, inherent vice, latent defect or mechanical breakdown” and for “settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundation, walls, floors, roofs or ceilings.” It also applied to losses caused by fire.
Insurance Code §2071 prescribes a standard form fire insurance policy which provides:
“No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss.”
Rosenberg-Wohl’s homeowners policy includes fire insurance and provides:
“Suit Against Us. No action shall be brought unless there has been compliance with the policy provisions. The action must be started within one year after the date of loss or damage.”
State Farm Demurs
State Farm demurred to the cause of action under the Unfair Competition Law, codified at Business and Professions Code §17200 et seq. (“UCL”), as untimely.
San Francisco Superior Court Judge Anne-Christine Massullo sustained the demurrer without leave to amend, finding that the one-year limitation period in the policy “applies to all of Plaintiff’s causes of action, including her claim for unfair practices…because the essence of the relief sought relates to the denial of her claim.”
A divided Div. Two of the First District Court of Appeal, in an opinion written by Justice James Richman and joined by Justice Marla J. Miller, affirmed the ensuing judgment of dismissal. Presiding Justice Therese M. Stewart dissented, reasoning that the action should be governed by the four-year statute of limitations for lawsuits brought under the UCL.
Chief Justice Patricia Guerrero wrote the opinion for a unanimous court reversing the judgment of the Court of Appeal. She said:
“We conclude that the one-year limitations period within section 2071 and plaintiff’s insurance policy with State Farm does not apply to her UCL cause of action seeking declaratory and injunctive relief. Since plaintiff’s lawsuit was brought within the four-year period provided under the UCL, we reverse the judgment of the Court of Appeal and remand the matter to that court with directions that it be remanded to the superior court for further proceedings consistent with our decision.”
Claim for Coverage
In late 2018 or early 2019, Rosenberg-Wohl’s elderly neighbor on two occasions stumbled and fell as she descended the plaintiff’s outdoor staircase. The plaintiff submitted a claim to State Farm in April 2019.
In August 2019, the insurer denied the claim, advising her by letter that there was “no evidence of a covered cause or loss nor any covered accidental direct physical loss to the front exterior stairway” and pointed to several exclusions within her policy as potentially applicable.
The homeowner filed the present suit against the insurer in October 2020, alleging in her complaint that “State Farm has a practice of summarily denying…property insurance claims” and that “State Farm has a practice of obfuscating and regularly fails to make clear precisely what the basis is for its denials.”
The complaint avers that “[t]he failure of State Farm to investigate all claims made in a good faith and reasonable manner” and to “to identify the applicable reasons for its denial” constitute unfair business practices under the UCL.
The complaint disavows any claim for damages and seeks an order that would require the insurer “to give at least as much consideration to the interests of its insured as to its own interests” in adjudicating property claims and declaring that State Farm has engaged in a widespread practice of summarily denying claims without proper explanation.
Statutory Language
The chief justice was unpersuaded by State Farm’s contention that the phrase “on this policy” in §2071 should be read broadly as meaning “for the recovery of any relief.” She wrote that “[a]lthough section 2071’s ‘on this policy’ text is relevant here, we do not limit our review to any particular word or phrase appearing in a statute, but instead consider the language of a statute as a whole.”
She opined:
“Regardless of what ‘on this policy’…and ‘for the recovery of any claim’…might mean in isolation, we conclude that this lawsuit is not a ‘suit or action on [the] policy for the recovery of any claim’….We regard this language, read in the context of the statute as a whole, as concerned with causes of action that in some manner seek a financial recovery attributable to a claimed loss that was coverable under a policy.”
Guerrero continued:
“Plaintiff…pursues only broad declaratory relief pertaining to State Farm’s alleged claims-handling practices and an injunction….These requests for declaratory and injunctive relief do not directly or indirectly pursue the recovery of benefits under plaintiff’s insurance policy, or for that matter any financial recovery for plaintiff. Instead, these forms of relief are being invoked here on behalf of consumers generally and in service of the UCL’s protective and preventive functions.”
Equitable Relief
The insurer argues that the one-year time limit must extend to causes of action seeking declaratory and injunctive relief because the limitations language in §2071 refers to suits brought in courts of “law or equity.”
Disagreeing, Guerrero said that “this reference to courts of equity, read in context, is better understood as concerned with suits or actions that invoke equitable theories and remedies, such as unjust enrichment, in pursuing financial recovery on an insurance claim.”
She distinguished Court of Appeal decisions relied upon by State Farm which found the one-year time limit to be applicable to various causes of action, saying:
“State Farm misreads the holdings of these decisions. These cases all involved attempts to recover damages owing to an assertedly improper failure to provide benefits under an insurance policy subject to section 2071. None of the appellate decisions cited by State Farm had occasion to consider a lawsuit such as plaintiff’s that challenges an insurer’s general claims handling protocols and seeks only broad injunctive and declaratory relief to stop an allegedly unfair and widespread business practice.”
She added:
“To be clear, we agree with these decisions that the prescribed limitations period applies to a cause of action for damages…even if the cause of action is alleged to sound in tort instead of contract and a plaintiff alleges resulting damages going beyond the withheld policy proceeds….Likewise…we leave open the possibility that on different facts, a cause of action that requests only equitable relief nonetheless may be regarded as subject to section 2071’s limitations provision….But those are not the circumstances presented in this case.”
Guerrero noted that “[t]he Court of Appeal majority…determined that plaintiff must be regarded as seeking policy benefits through her UCL cause of action because otherwise she would lack standing” but said that “[t]he UCL’s standing requirement does not provide grounds for perceiving plaintiff’s UCL cause of action as seeking something it is not.”
The case is Rosenberg-Wohl v. State Farm Fire and Casualty Co., 2024 S.O.S. 2435.
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