The issue in Fabozzi v. Lexington Ins. Co., 2010 U.S. App. LEXIS 7040 (2nd Cir. April 6, 2010), was whether the limitations period for suit against the insurer was triggered when damage to the insureds' home occurred or when all the conditions precedent to filing suit had been met.
When first issuing a policy for the insureds' home in 2001, Lexington was aware of the property's beach-front location. The insureds first became aware of structural deterioration of their home during a renovation that began in 2001. By April 2002, their house had to be propped up to prevent it from fully collapsing. In May 2002, the insureds submitted their claim to Lexington. A lengthy investigation commenced, which included requesting documents, obtaining an engineer's evaluation, and taking the insureds' oral examination.
After a two year investigation, Lexington denied coverage in July 2004, stating that the damage was excluded as "wear and tear, deterioration, inherent vice, latent defect, wet and/or dry rot, as well as earth movement."
The insureds sued. Although the investigation took more than two years, the district court found the policy provision requiring suit that against Lexington be filed "within two years after the date of loss" had not been met.
On appeal, the insureds argued that the requirement to bring suit "within two years after the date of loss" meant the date on which all the conditions precedent to bringing a claim had been satisfied. The Second Circuit canvassed relevant cases decided by New York courts. Although some policies required suit be filed within a specified time frame "after the inception of the loss," the language in the insureds' policy tied the limitations period to the moment the claim accrued.
Here, the district court did not consider what conditions were precedent to filing suit nor did it determine at what point a breach occurred. Therefore, the case was remanded to the district court for consideration of when the insureds' claim accrued and whether the suit was timely.