NOVEMBER 2012 BAD FAITH CASES: COURT GRANTS CARRIER’S MOTION FOR JUDGMENT ON THE PLEADINGS BECAUSE CARRIER’S REINSTATEMENT OF INSURED’S APPLICATION FOR REIMBURSEMENT, AFTER THE INITIAL DENIAL OF BENEFITS, DID NOT INITIATE A NEW LIMITATION PERIOD (Middle District)
In Cozzone v. Axa Equitable Life Ins. Society, the carrier filed a motion for judgment on the pleadings in a breach of contract and bad faith claim brought by its insured. The dispute started after the carrier denied the insured’s application for overhead expense coverage as a part of its disability policy. The insured filed suit and the carrier removed.
At issue was the carrier’s motion, which alleged that the insured’s bad faith claim was time-barred under the two-year statute of limitations that attaches to statutory bad faith claims. The carrier claimed that the limitations period began on April 25, 2007, when the carrier initially denied the insured’s claim for reimbursement benefits.
However, the insured asserted a two-fold argument against the carrier’s motion. First, the insured claimed that it had also asserted a claim for common law breach of the covenant of good faith, which carries a four-year statute of limitations. The court disagreed, recognizing that such a claim is merged with the insured’s breach of contract action. Moreover, this common law claim was not asserted in the insured’s complaint, which could not be amended by a subsequent brief.
Second, the insured argued that the statute of limitations did not begin in April of 2007, but at a later point, meaning that its claim is still viable. This contention is based upon a September 2007 letter sent by the carrier that informed the insured it would reinstate the reimbursement application process. Yet, the court disagreed, finding that no issue of fact existed with respect to the limitations issue. The April 25, 2007 letter unequivocally denied the insured’s claim and thus triggered the limitations period. As such, the court granted the carrier’s motion.