CHAPMAN v. STANDARD FIRE INSURANCE COMPANY

Filing 29

DECISION AND ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT granting 21 Motion for Summary Judgment. By JUDGE D. BROCK HORNBY. (mnw)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
HEATH M. CHAPMAN,
PLAINTIFF
v.
STANDARD FIRE INSURANCE
COMPANY,
DEFENDANT

)
)
)
)
)
)
)
)
)
)

NO. 1:11-CV-459-DBH

DECISION AND ORDER ON DEFENDANT’S
MOTION FOR SUMMARY JUDGMENT
The issue on this motion for summary judgment is whether the
limitations period has run on a policy claim for fire damage and on two
statutory unfair claims practices claims. The fire occurred on March 4, 2009,
and the first denial was June 16, 2009. The complaint in this case was filed in
state court on October 28, 2011. I conclude that all the claims are time-barred
by the policy language and the applicable statute of limitations.
FACTUAL AND PROCEDURAL BACKGROUND1
On March 4, 2009, fire damaged the plaintiff Heath Chapman’s home,
which was insured by Travelers Home and Marine Insurance Company.2 The

The relevant facts are mostly undisputed and provided in the parties’ Stipulation of Facts
(ECF No. 20).
2 The defendant and the plaintiff are discussing the substitution of Travelers Home and Marine
as the correct underwriting party defendant. Stipulation at 1 n.1. The plaintiff admits that the
“actual underwriting defendant . . . is Travelers Home and Marine Insurance Company.” Pl.’s
Reply Mem. Law Opp’n Def.’s Mot. Summ. J. at 1 n.1 (ECF No. 27).
1

Travelers policy required that any suit against the company be “started within
two years after the date of loss.” Chapman immediately notified Travelers of
the fire. After investigation, Travelers concluded that it was not obligated to
cover Chapman’s damage. On June 16, 2009, Travelers sent Chapman a letter
denying his claim.
In early September 2009, a lawyer contacted Travelers on Chapman’s
behalf and requested copies of Chapman’s insurance policy and statements.
From

all

that

appears,

Travelers

complied.

There

were

no

further

communications until July 27, 2011, when Chapman’s new and current
counsel requested that Travelers send him a list of the specific facts upon
which it had denied Chapman’s claim.

After additional correspondence

between the parties, Chapman filed this lawsuit in state court on October 28,
2011, making three claims: failure to pay under the policy; a statutory claim of
unfair claims settlement practices; and a statutory claim for interest, costs and
attorney fees. Travelers removed the lawsuit to this court, basing jurisdiction
upon diversity of citizenship. Travelers has moved for summary judgment.
ANALYSIS
The Policy Claim
The policy requires that suits be “started within two years after the date
of loss.” Insurance Policy at 32 (ECF No. 20-1). This language conforms with
Maine’s statutory fire insurance policy language, which requires that all fire
policies issued on Maine property contain the following condition:
No suit or action on this policy for the recovery of any claim
shall be sustainable in any court of law or equity unless all
2

the requirements of this policy shall have been complied
with, and unless commenced within two years next after
inception of the loss.

24-A M.R.S.A. § 3002 (emphasis added).3 The fire occurred on March 4, 2009,
and Chapman filed his lawsuit on October 28, 2011, more than 2 years later.
Maine’s Law Court has observed that courts are divided on the meaning
of the statutory phrase “inception of the loss” and that judicial interpretations
range from what would be, in this case, the date of the fire, to the date of denial
of coverage. L & A United Grocers, Inc. v. Safeguard Ins. Co., 460 A.2d 587,
n.7 (Me. 1983). In Palmero v. Aetna Casualty & Surety Co., however, the Law
Court ruled that, in an action for breach of contract against an insurance
company, the cause of action accrues at the time the company denies benefits.
606 A.2d 797, 798 (Me. 1992) (uninsured motorist coverage). In this case, I
take that time to be the date upon which Travelers notified Chapman―in a
manner acceptable under Maine’s insurance statute―that it refused to pay.
Since that interpretation of the language is most favorable to Chapman, I use it
for purposes of ruling on the motion.
Chapman argues that his complaint did not fall outside the two-year
limitations period, because Travelers did not properly notify him of its refusal
until at least September 2011, when Travelers sent a more detailed letter
explaining the basis of its denial to his new counsel. Pl.’s Objection Def.’s Mot.

3 Travelers is a company based in Connecticut and, therefore, its insurance contracts must
also comply with 24-A M.R.S.A. § 2433, the Maine statute governing foreign insurers. This
statute forbids a foreign insurer from requiring policy holders to file suits less than two years
after a cause of action accrues. In this case, because Travelers’s policy incorporated a two-year
statute of limitations, Insurance Policy at 32, it met the § 2433 requirement as well. 

3

Summ. J. and Incorporated Mem. Law at 4 (ECF No. 22). Chapman relies on
24-A M.R.S.A. § 2436(2), which requires an insurer disputing a claim to
furnish the insured with a written document stating both that the claim is
disputed and the grounds upon which the claim is disputed.

The statute

requires that these statements “must be based upon a reasonable investigation
of the claim and must include sufficient detail to permit the insured or
beneficiary to understand and respond to the insurer’s position.” Id.4
Chapman asserts that Travelers’ initial denial letter of June 16, 2009,
was insufficiently detailed to meet these requirements. I disagree. The June
2009 letter is addressed to Chapman and says in its first paragraph that “your
claim for damages resulting from the above-referenced fire [the caption gives
the date and address of the fire] is denied.” Tedford & Henry Letter at 1 (ECF
No. 20-3). The letter describes the investigation that the company conducted
(“retaining technical experts to determine the origin and cause of the fire and
retaining counsel to examine you and Tracy Wells under oath”). Id. It states
that the company “has determined that this loss arose out of an act committed
by you or was the result of an act which you conspired with another to commit
with the intent to cause the loss.” Id. It also says that the “claim for this loss
is also denied for the reason that you intentionally concealed or misrepresented
material facts or circumstances, engaged in fraudulent conduct and made false
statements relating to this insurance and loss.” Id. The letter quotes relevant
provisions of Chapman’s insurance policy. Id. at 1, 2.

4

Chapman has not argued that Travelers’ investigation was not reasonable.

4

Chapman says that he did not lie to Travelers or cause the fire, Pl.’s
Objection at 3, but that is not the issue on the limitations period defense.
Travelers’ June 16, 2009, letter notified Chapman that it denied his claim, and
it provided “sufficient detail” for him to understand Travelers’ position.
Travelers did not mislead Chapman; indeed, he consulted a lawyer who made
further inquiry on his behalf. Pl.’s Objection at 2. On September 2, 2009, that
lawyer sent Travelers a letter declaring that she represented Chapman and
requested a copy of his insurance policy. Butler Correspondence at 3 (ECF No.
20-4).

In the ensuing days, Chapman’s lawyer corresponded with Travelers’

attorney and requested that he provide “any statements you have . . . relating
to Heath Chapman’s claim.” Id. at 1. Travelers’ lawyer agreed to provide any
statements that Chapman lacked.

Id.

This activity does not suggest that

Chapman and the lawyer were confused about Travelers’ position, but the
contrary. I conclude that the June 16, 2009, letter was sufficient to trigger
both the insurance policy’s two-year limitations period and the statutory twoyear period. As a result, the allowable time had run completely by the time
Chapman filed suit on October 28, 2011. Chapman’s claim under the policy,
therefore, is time-barred.
The Statutory Claims
Chapman has brought two statutory claims as well.

In Count II, he

makes an “unfair claims settlement practice” claim under 24-A M.R.S.A.
§ 2436-A, asserting that Travelers’ allegations in the June 16, 2009, letter “are
false, and defendant’s refusal to pay is without just cause.” Compl. ¶ 12. In
5

Count III, he makes an “interest on overdue payments” claim under 24-A
M.R.S.A. § 2436, asserting that Travelers’ “refusal to pay the plaintiff’s claim
under his policy, together with its failure to provide details and the reasons for
its denial of coverage resulted in payments under that policy being
overdue. . . .” Id. ¶ 15.
Once again, the parties dispute the limitations period that applies.
Travelers argues that, as with the policy claim, these statutory claims are
governed by a two-year limitations period―either the one provided by the policy
or the one provided in § 3002, Maine’s statutory fire insurance policy language.
Def.’s Mot. at 10.

Chapman, on the other hand, argues that his statutory

claims sound in tort and, therefore, are subject to the 6-year statute of
limitations provided by 14 M.R.S.A. § 752 for torts. Pl.’s Objection at 6-7.
The Travelers policy requires that any “suit against us” be brought within
two years of the date of loss. Insurance Policy at 32. Section 3002, Maine’s
statutory fire insurance policy language, provides that any “suit or action on
this policy for the recovery of any claim” must be “commenced within two years
next after inception of the loss.” Chapman’s two statutory claims challenging
“refusal to pay . . . without just cause,” Compl. ¶ 12, and “refusal to pay the
plaintiff’s claim under his policy,” id. ¶ 15, are―prima facie―“suit[s] against us”
that are “on this policy for the recovery of any claim.” Therefore, under both
the policy language and the statutory language, Chapman’s statutory claims
are time-barred.

6

With respect to Chapman’s argument that these really are tort claims,
however—“claims for bad faith [that] sound in tort and are governed by the
statute of limitations that applies to tort actions,” Pl.’s Objection at 2—the
thrust of Maine’s Law Court’s reasoning is against him. Maine has “expressly
refuse[d] to recognize an independent tort of bad faith resulting from an
insurer’s breach of its duty to act in good faith and deal fairly with an insured.”
Marquis v. Farm Family Mut. Ins. Co., 628 A.2d 644, 652 (Me. 1993). Instead,
according to the Law Court, an insurer’s duty of good faith “derives from a
covenant implicit in the provisions of the insurance contract.”

Id. (quoting

Linscott v. State Farm Mut. Auto. Ins. Co., 368 A.2d 1161, 1163 (Me. 1977).)
The Law Court views the statutory remedies as “additional remedies” that the
legislature has provided for the breach of the policy contract. Id. I conclude
that it would be inconsistent with this reasoning to treat these statutory
remedies as tort claims even for statute of limitations purposes. Instead, they
are “additional remedies” for Chapman’s claim under the insurance policy, and
the two-year limitations period applies.5

I recognize that cases from other jurisdictions are divided on whether such claims are “on the
policy.” Greene v. Stevens Gas Service, 858 A.2d 238, 247 (Vt. 2004), describes the division
and recommends an intermediate position, requiring a case-by-case analysis. If I followed
Greene, I would reach the same conclusion (as did Greene in adhering to the policy limitations
period). Illinois and Iowa use a similar analysis and come to the same conclusion. See Cramer
v. Insurance Exch. Agency, 675 N.E.2d 897, 904 (Ill. 1996); Stahl v. Preston Mut. Ins. Ass’n,
517 N.W.2d 201, 203 (Iowa 1994). A leading treatise on the subject adopted the conclusions of
Stahl and Greene:
For purposes of determining whether actions against the insurer
are collateral, such that suit limitation clauses do not apply, an
action is collateral if the elements of a tort are satisfied in a
manner distinct from breach of contract; if the action is nothing
more than a breach of contract claim “disguised” as a tort, the
5

(continued next page)
7

Because Chapman’s claims are time-barred, I do not address Travelers’
argument that it had “just cause” for denying Chapman’s insurance claim.
Def.’s Mot. at 12.
The defendant’s motion for summary judgment is GRANTED.
SO ORDERED.
DATED THIS 23RD DAY OF AUGUST, 2012
/S/D. BROCK HORNBY
D. BROCK HORNBY
UNITED STATES DISTRICT JUDGE

action is not collateral, and the policy’s suit limitation clause
applies.
Lee R. Russ & Thomas F. Segalla, 16 COUCH ON INSURANCE § 235:100 (3d ed. 2011). The latter
description applies to Chapman’s claims. But in any event, I follow the reasoning of Maine’s
Law Court.

8