The Oregon Court of Appeals, in Brockway v. Allstate Prop. And Cas. Ins. Co., 284 Or.App. 83 (March 1, 2017), recently ruled in favor of an insurance company’s reliance on a suit limitation policy provision, issuing an opinion that reinforces the value for an insurance company in the practice of reserving all of  its rights and defenses and disavowing any waiver or estoppel in claims correspondence with its insured.  The Court’s holding also illuminates the scope of contractual claims for breach of the implied covenant of good faith and fair dealing in first-party insurance claims-handling cases.  A strong thread running through the Court’s holdings is  that when an insurance company represents to an insured that it is investigating a claim or loss, if it is not misrepresenting that fact or acting improperly in its investigation, the insurance company’s position in relying on a suit limitation provision is bolstered significantly.

The case involved the following facts.  On September 8, 2009, the insureds notified  Allstate of a theft of property from their backyard.  More than two years after the loss, Allstate denied coverage for the loss, asserting that the insureds had misrepresented material facts and failed to cooperate with the investigation. The insureds then sued Allstate, seeking damages for breach of contract and for breach of the implied covenant of good faith and fair dealing.  Allstate obtained summary judgment against all of the insureds’ claim because of a suit-limitation provision in their two policies that required them to bring any claim “related to the existence or amount of coverage or the amount of loss for which coverage is sought” within two years of the date of the loss.  The insureds appealed, asserting that the trial court erred by holding that there were no genuine issues of fact regarding whether Allstate was estopped from relying on the suit-limitation provision.  They further asserted that a different suit limitation provision in the policy, which was triggered by the accrual of the claim rather than the date of the loss, applied to their claim of breach of the duty of good faith and fair dealing.

The Court of Appeals rejected the insureds’ arguments, and affirmed the summary judgment in favor of Allstate. Regarding estoppel, the insureds had argued that they were justified in relying on Allstate’s conduct because every letter from Allstate recited that Allstate was continuing to investigate the claim, even in letters sent after the two-year suit limitation period elapsed.  They also emphasized that, even after the limitation period elapsed, Allstate’s attorney wrote to inform them that “Allstate can neither admit nor deny coverage at this time.”

The doctrine of equitable estoppel required that Allstate must have done something that affirmatively induced the insureds to delay their suit, and the Court held that there was no evidence that would allow a reasonable juror to infer that.   The Court explained that there was no evidence that Allstate made any misrepresentation, and that the evidence was that, even though Allstate had no duty to remind the insureds of the suit limitation, a year after the loss, Allstate did so in a letter.  In addition, Allstate repeatedly stated in its letters that it reserved all of its rights, and no waiver or estoppel was intended or should be inferred.    Also, in Allstate’s many communications with the insureds, it informed them that it was continuing to investigate the claimed loss, and there was no evidence suggesting that was not the case.   The Court also observed that, as a matter of law, under ORS 742.056, Allstate’s investigation of a loss or claim does not estop it from asserting any policy provision or defense under the policy.

The insureds had emphasized Allstate stated that it was continuing to investigate the claim in letters sent after the two-year suit limitation period elapsed.  The insureds asserted that Allstate, to be consistent with its position at trial on the suit limitation provision, should have written instead that the claim was barred.   The Court dismissed this argument as inapt, noting that the suit limitation provision was a condition of forfeiture that does not nullify coverage, but instead bars a suit once the limitation period passed.  The court also noted that those letters could not have influenced the insureds’ decision to not file a suit before the suit-limitation period elapsed.

In their second assignment of error, the insureds argued that the trial court erred in granting summary judgment to Allstate on their claim for breach of an implied covenant of good faith.   The insureds relied on the same conduct that they asserted had estopped Allstate from relying on the suit limitation provision.  The insured’s had argued that they had a reasonable expectation that Allstate would fairly evaluate and investigate the claim, and that a jury could find that Allstate breached its duty of good faith by taking more than 17 months to evaluate a simple property theft, by requiring EUOs and further documentation after the limitation deadline, and the issuing a denial based on misrepresentations and concealment after the deadline passed.

The Court rejected the insured’s arguments, explaining at the outset that under Oregon law, a claim for breach of the duty of good faith and fair dealing in first-party insurance claims handling cases is a breach of contract.   Under the case law the Court relied upon for that proposition, such claims are not tort claims or extra-contractual bad faith claims.  The Court explained that duty of good faith and fair dealing was to be applied in a manner that would effectuate the objectively reasonable expectations of the parties to the insurance policies, and it held that there was no evidence that any of Allstate’s actions were contrary to the insured’s reasonable expectations based on the terms of the insurance policies.

The Court explained that it made no difference that Allstate did not remind the insureds of the suit limitation in every letter it sent, because the insurance policies imposed no such duty on Allstate., and the insureds had no objectively reasonable expectation that Allstate would inform them of the suit limitation, much less that it would repeat that information after having already done so once during its investigation. The Court further explained that Allstate’s communications reflected its continued attempts to determine the losses attributable to the claimed theft, and the insureds pointed to no evidence that suggested the investigation was improper.   Finally, it also noted again that there was no evidence that Allstate did anything that reasonably induced the insured to not commence any legal action until after the suit limitation period elapsed.