Usually the suit limitations provision in a policy dictates when a suit to recover can be filed. However, recently the Federal District Court of Washington held that under certain circumstances that is not necessarily true. In Holden Manor v. Safeco,1 the trial court refused to dismiss a homeowners association’s coverage suit as untimely, notwithstanding the fact that the suit was filed in 2015 and sought coverage under a policy that ended in 1982.
Background: Construction of the Holden Manor Condominium was completed in 1979. The Holden Manor Homeowners Association (“HOA”) purchased an all-risk policy from Safeco which covered the condominium from August 27, 1980 to August 27, 1982. The policy provided a one-year suit limitations provision and stated that the policy “applies only to loss to property during the policy period.” The HOA submitted a claim to Safeco on September 5, 2014, where it asserted that “the Safeco policy may provide coverage for the cost of repairing hidden damage … caused by rainwater intrusion by wind-driven rain.” The HOA further asserted that “Safeco’s policy provides coverage for the cost of repairing portions of the building that are at risk of collapse.” During invasive testing performed in late 2014—early 2015, the HOA’s expert concluded that “wind driven rain began to have an impact on wall assemblies and cause damage from the time the building was completed.” Safeco denied coverage in August, 2015 and the HOA filed suit on September 16, 2015. Safeco moved to dismiss on summary judgment arguing that the HOA’s suit is untimely as a matter of law. The court disagreed and denied Safeco’s motion.
HOA’s position: The HOA argued that the loss was hidden damage from wind-driven rain due to faulty-construction and this loss had been present (albeit hidden) since the community’s completion. The HOA argued that the “one-year suit limitations clock did not start running until its loss was exposed during invasive testing on Holden Manor in 2014.”
Insurers’ position: Defendants argued that because the policy required the HOA to sue within one year after the loss occurred, the HOA’s suit was time-barred, given that the policy ended in 1982 and suit was filed in 2015.
Decision: The trial court relied primarily on two cases: Panorama2 and Queen Anne,3 both of which dealt with homeowners associations in similar positions as Holden Manor. In Panorama, which had a one-year suit limitation, the court held that “one year after a loss occurs” does not mean “one year after the loss began,” but one year after the loss concluded or was exposed, whichever comes first.” The Queen Anne court affirmed the Panorama holding. In Queen Ann, it was discovered that the building’s siding was leaking 11 years after its policy expired and filed suit two years later. There, because the policy had a two-year suit limitations, the court held that suit was timely.
Here, the court rejected Defendants’ attempt to limit the Panorama and Queen Anne holdings to policy that cover “collapse caused by hidden decay” and that because the HOA’s policy did not provide such coverage the HOA’s suit remained untimely. The court, relying on Eagle Harbour,4 stated that “where an insurance policy’s suit limitations period hinges on the date a loss “occurs,” the Panorama holding applies regardless of whether the policy makes “the hidden nature of damage a prerequisite to coverage.” The court clarified that “where a policy’s suit limitations period relies on the date a loss “occurs,” all of that policy’s covered losses may be sued on within one year of the date they are exposed or concluded, regardless of whether they are “hidden.” On the issue of “Express Coverage for Hidden Decay” the court concluded that the HOA’s suit was “not time-barred,” stating:
Because the Safeco policy insured against “all risks,” it must be construed as covering risks of loss due to hidden damage or decay, since they were not expressly excluded. Therefore, Defendants have failed to prove that, as a matter of law, the [HOA’s] policy with Safeco did not cover the losses alleged exposed in 2014.
This decision is of paramount importance to all condominium and homeowners’ associations. While this case may be an extreme in terms of the length of time that hidden damage may fester and prolong coverage, it shows the importance of not accepting a denial as being final and creative and passionate advocacy. If your association discovers old damage, make sure to consult with a claims professional to see what avenues may be available for you.
1 Holden Manor Homeowners Ass’n v. Safeco Ins. Co. of America, No. C15-1676 JCC (W.D. Wash. June 16, 2016).
2 Panorama Vill. Condo. Owners Ass’n Bd. of Directors v. Allstate Ins. Co., 144 Wash. 2d 130, 135 (2001).
3 Queen Anne Park Homeowners Ass’n v. State Farm Fire & Cas. Co., 2012 U.S. Dist. LEXIS 160592 (W.D. Wash. Nov. 8, 2012).
4 Eagle Harbour Condo. Ass’n v. Allstate Ins. Co., 2016 U.S. Dis. LEXIS 15791 (W.D. Wash. Feb. 9, 2016).