Commercial Division Blog

Posted: March 13, 2017 / Categories Commercial, Insurance

Whether Insurer Waived Limitations Period By Seeking Information Creates Question of Fact

On March 2, 2017, Justice Singh of the New York County Commercial Division issued a decision in Anthony T. Rinaldi, LLC v. Anchorage Construction Corp., 2017 NY Slip Op. 30427(U), declining to dismiss a claim as time barred because of issues of fact as to whether an insurer waived the limitations defense, or was estopped from invoking it.

In Anthony T. Rinaldi, a contractor terminated a subcontract for cause and then sought coverage under a subcontract performance bond. The bond provided that any lawsuit must be commenced within one year after construction work under the subcontract ceased. As the end of the limitations period approached, the contractor was negotiating with the insurer, which sought additional information concerning the claim. According to the contractor’s counsel, the insurer gave assurances that "if any time was required to complete the determination process beyond the impending deadline to commence a legal action under the terms of the performance bond, [the insurer] would have no objection to agreeing to an extension." However, when the contractor subsequently filed suit, the insurer moved to dismiss the claim as untimely.

The court explained the standards for governing a waiver of the statute of limitations, and the related doctrine of equitable estoppel:

While it is well established that an insurer's request for documentation regarding an insured's claim does not waive or toll a contractual limitations period, a contracting party may orally waive enforcement of a contract term notwithstanding a provision to the contrary.

However, waiver should not be lightly presumed and must be based on a clear manifestation of intent to relinquish a contractual protection. In order to establish waiver and avert summary judgment, plaintiff must show a clear manifestation of intent by defendant to relinquish the protection of the contractual limitations period. Generally, the existence of an intent to forgo such a right is a question of fact.

An estoppel rests upon the word or deed of one party upon which another rightfully relies, and, so relying, changes his position to his injury. A party may not, even innocently, mislead an opponent, and then claim the benefit of his deception. . . . Courts have found that an estoppel may be predicated upon evidence that the defendant, by resort to settlement negotiations, intended to lull the plaintiff into inactivity to induce it to continue negotiations until after the expiration of the time within which an action could be maintained.

(Citations omitted). Justice Singh proceeded to find issues of fact as to what assurances the insurer had given concerning the statute of limitations. Accordingly, he declined to dismiss the claim pending discovery.

One lesson here is not to rely on oral assurances that an adversary will waive a statute of limitations defense. Instead, get a written tolling agreement if settlement negotiations are ongoing and a limitations period is drawing to a close.