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Fabozzi v. Lexington Insurance Co.

April 6, 2010

PAUL FABOZZI, ANNETTE FABOZZI, PLAINTIFFS-APPELLANTS,
v.
LEXINGTON INSURANCE COMPANY, DEFENDANT-APPELLEE, JOHN DOES1-10, ABC CORPS. 1-10, DEFENDANTS.



SYLLABUS BY THE COURT

Plaintiffs-appellants appeal from a judgment of the United States District Court for the Eastern District of New York (Townes, J.) dismissing claims against the defendant on the ground that plaintiffs had failed to file suit within the limitations period specified by their insurance policy. Vacated and remanded.

The opinion of the court was delivered by: Barrington D. Parker, Circuit Judge

Argued: November 9, 2009

Before: LEVAL, B.D. PARKER, AND LIVINGSTON, Circuit Judges.

Plaintiffs-appellants Paul and Annette Fabozzi appeal from a judgment of the United States District Court for the Eastern District of New York (Townes, J.). The Fabozzis had a homeowners insurance policy with Lexington Insurance Company ("Lexington"), which covered their oceanside home on Staten Island, New York. When the house began to collapse as the result of structural damage, they filed a claim with Lexington. Twenty-six months later, Lexington denied coverage and the Fabozzis subsequently sued. Relying on a policy provision that required any suit to be commenced within two years "after the date of loss," Lexington contended that the Fabozzis had waited too long and the limitations period had expired. The district court agreed, granted Lexington's motion for summary judgment, and dismissed the suit. This appeal turns on whether, under New York law, the limitations period was triggered when the underlying damage to their home occurred, or when all the conditions precedent to bringing suit had been met. Because, under long-standing New York law, the limitations period did not begin to run until the Fabozzis' claim against Lexington accrued, rather the date of the accident, we conclude that the action must be remanded. Accordingly, the judgment of the district court is vacated.

I. BACKGROUND

The facts are undisputed unless otherwise noted. The Fabozzis purchased their home in 1992, obtaining homeowners' insurance coverage from a number of companies over the succeeding years. Lexington first insured the property in 2001, aware of the property's beach-front location, and sold the Fabozzis a specialized "Lex Elite" homeowner policy. When this policy was renewed in 2002, the annual cost of the premiums was $8,710.

The Fabozzis claim that they first became aware of structural deterioration during the course of a renovation that began in 2001. By April 2002 , their house had to be propped up to prevent it from fully collapsing. Approximately one month later, on May 13, 2002, the Fabozzis submitted their claim to Lexington. The company subsequently undertook an investigation to determine the cause of the damage, requesting documents, obtaining an engineer's evaluation, and ultimately taking Fabozzi's oral examination in January 2004. Altogether, Lexington's investigation of the claim lasted more than two years. Ultimately, on July 29, 2004, the insurance company denied coverage, stating that the damage was attributable to "wear and tear, deterioration, inherent vice, latent defect, wet and/or dry rot, as well as earth movement" -- causes that it said were excluded from coverage. On October, 29, 2004, the Fabozzis sued Lexington, alleging breach of contract and breach of the implied covenant of good faith and fair dealing.

The Fabozzis' policy contained a contractual limitations clause, which read: Suit Against Us. No action can be brought unless the policy provisions have been complied with and the action is started within two years after the date of loss. Interpreting this language, the district court held that, under New York law, "the date of loss" was the date the damage occurred, not the date the Fabozzis' claim was denied. As a result, the court concluded that the two-year contractual limitations period had expired, notwithstanding the fact that Lexington's investigation lasted more than two years while the plaintiffs' claim for coverage remained pending. The district court also rejected the Fabozzis' argument that conduct and statements by Lexington and its brokers tolled the limitations period. Although equitable estoppel is generally treated as a question of fact, the court determined that no genuine dispute precluded summary judgment. On appeal, the Fabozzis argue that the district court incorrectly applied NewYork's law on contractual limitations periods and, alternatively, that unresolved factual issues precluded summary judgment on their equitable estoppel theory. We do not reach the latter argument, concluding instead that, under New York law, the Fabozzis' limitations period did not begin to run at the time of the accident.

II. DISCUSSION

A. Standard of Review

"We review a district court's grant of summary judgment de novo, construing the evidence in the light most favorable to the non-moving party and drawing all reasonable inferences in its favor." Allianz Ins. Co. v. Lerner, 416 F.3d 109, 113 (2d Cir. 2005). We will affirm the judgment only if there is no genuine issue as to any material fact, and if the moving party is entitled to a judgment as a matter of law. See Fed. R. Civ. P. 56(c). A court of appeals reviews de novo questions as to the plain meaning or ambiguity of the language of a contract, including an insurance policy. See, e.g., New York Marine & Gen. Ins. Co. v. Tradeline (L.L.C.), 266 F.3d 112, 121 (2d Cir. 2001). An ambiguity exists where the terms of an insurance contract could suggest "more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Lightfoot v. Union Carbide Corp., 110 F.3d 898, 906 (2d Cir. 1997) (citation and internal quotation marks omitted).

B. Analysis

The Fabozzis' policy required that they bring suit "within two years after the date of loss." They argue that, under New York law, this language means the date on which the cause of action accrues -- that is, the date on which all the conditions precedent to bringing a claim have been satisfied.*fn1 In their view, New York law distinguishes between the policy language here and language in other policies that, instead, require actions be commenced within a certain period after "the inception of the loss." Only this latter term of art, or language of equal ...


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