A recent federal court decision favoring Liberty Mutual Insurance Company in a pipe burst claim1 left me thinking about two lessons. First, this case strongly reminds policyholders to be aware of time limits in their insurance policies and take action as soon as they believe their claim is not being handled fairly. This is especially true of one-year limitation periods to file a lawsuit. It also highlights the importance of hiring a public adjuster when an insurer refuses to determine the value of a claim fairly.
In April 2019, the policyholder’s home and personal belongings were damaged when a pipe burst in her basement, causing a flood that was mixed with sewage. The damage was severe, leaving many of her belongings covered in filth. She reported the claim to her insurance company, which hired a contractor, 1-800-Packouts, to remove her damaged property and place it in storage. However, the items were never cleaned before being put into storage, leaving them contaminated and covered in mold over time.
The insurance company later determined how much it would pay for repairs and personal property damages. The homeowner believed she was owed much more and argued that the insurance company had failed to properly evaluate the extent of her losses. She eventually sued her insurer, claiming breach of contract and bad faith. However, the insurance company asked the court to dismiss the case because she had filed her lawsuit too late.
Virtually all insurance policies include a deadline for filing lawsuits. While some states may override what is found in the policy, all policyholders and public adjusters should determine soon after a loss when the deadline is to file a lawsuit in the event there is a disagreement with the insurance company. In this case, the policy required any legal action to be brought within one year of the date of loss, meaning the homeowner had until April 2020 to sue. She did not file her lawsuit until April 2022, more than two years after the loss. The court ruled in favor of the insurance company, stating that she had waited too long and could not proceed with her case.
The homeowner argued that the insurance company caused delays by suspending its investigation and refusing to determine the value of her damaged belongings. She was left to sort through the filthy, contaminated items at the storage facility to create an inventory list. Despite spending significant time documenting her losses, she struggled to complete the process while dealing with work obligations and the impact of the COVID-19 pandemic. The insurance company refused to step in and value the items, despite its good faith responsibility to fully investigate claims—including the contents claim. Instead, Liberty Mutual insisted that the homeowner complete the inventory herself, even though the condition of the removed items arguably made that task nearly impossible.
On March 5, 2020, just six weeks before the lawsuit deadline, the insurance company sent a letter to the homeowner stating that it was suspending its investigation. The letter said the company would wait until she completed the proof of loss and provided the necessary information. She argued that this letter led her to believe that the claim process was still ongoing and that she did not need to rush to file a lawsuit. However, the court disagreed. It ruled that even though the insurance company had paused its investigation, the homeowner was still responsible for meeting the policy’s deadline to file suit.
This case is a cautionary tale for policyholders. Insurance companies often have strict time limits for lawsuits, and courts typically enforce them without exception. Waiting too long to take legal action can mean losing the right to recover any additional money, even if the insurance company acted unfairly.
Another key lesson from this case is the importance of hiring a competent public adjuster if an insurance company refuses to determine the value of a claim. The homeowner in this case struggled to document her losses, leading to delays and confusion. A public adjuster, who works for policyholders rather than insurance companies, could have helped her properly inventory her damaged items and negotiate a fair settlement. A public adjuster would have also pushed the insurance company to fulfill its duty to evaluate the loss rather than placing the entire burden on the homeowner.
A possible third lesson is to hire a competent attorney. While all the facts are not clear on this point, the insurance company made the following argument in its brief:
Defendant did not lull Plaintiff into sitting on her contractual rights because she was represented by counsel. On September 11, 2019, Plaintiff’s counsel forwarded Defendant a letter of representation advising that his firm was retained by Plaintiff to represent her in her claim… As the date of loss was April 21, 2019, Plaintiff had legal representation at least seven months before the contractual limitation period expired, which made it even less probable that she could have been lulled into missing the deadline for filing suit. In the District of Columbia, ‘[a]lthough a claimant’s representation by an attorney is not dispositive in determining whether an insurance company is estopped because of misleading statements from asserting the statute of limitations… courts generally are reluctant to find the claimant has been misled by the insurance company where the claimant was sophisticated in business matters or had retained legal counsel….’
Filing an insurance claim can be complicated. When an insurance company disputes the value of a claim or refuses to assess it properly, a public adjuster can help. Indeed, the best time to hire a public adjuster is right after the loss happens. If a dispute cannot be resolved, a competent attorney may be needed. However, as this case shows, it is critical to be aware of time limits to file suit and take legal action before the deadline expires.
Homeowners dealing with insurance claims should carefully read their policies, document their losses as thoroughly as possible, and seek professional help. In my experience, many insurance companies fail to adjust contents losses properly. Many make the policyholder, the adjuster, and the policy a self-service product when it comes time to investigate and evaluate personal property coverage. If your insurance company is handing you pieces of paper and telling you to determine the contents loss by yourself, hire a competent public adjusting firm with personal property specialists who will adjust your entire claim.
An example of a competent public adjuster who handles contents claims the right way and in the manner all insurance companies should do as well is found in my post, Alice Young—Public Adjuster Spotlight. Alice Young is on the Board of Directors for the National Association of Public Insurance Adjusters, an organization in which many of the country’s finest public adjusters are members.
Thought For The Day
If a man is called to be a street sweeper, he should sweep streets even as Michelangelo painted, or Beethoven composed music, or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, ‘Here lived a great street sweeper who did his job well.’
—Martin Luther King Jr.
1 Andrews v. Liberty Ins. Corp., No. 22-1694 (D.D.C. Jan. 24, 2025).
