The California Court of Appeal has ruled that an insured’s allegation that it relied on its insurer’s investigation of damage was sufficient to establish a basis for equitable estoppel to bar a limitations defense. (Doheny Park Terrace Homeowners Association, Inc. v. Truck Insurance Exchange (2005) 132 Cal.App.4th1076)
Facts
Doheny Park Terrace Homeowners Association owned property that was damaged by the 1994 Northridge earthquake, and submitted a claim to Truck Insurance Exchange. After inspecting the property, Truck concluded that the damage did not exceed Doheny Park’s deductible.
Doheny Park did nothing further until February 2003, when it retained an expert to inspect the property. Doheny Park’s expert concluded that the damage caused by the Northridge earthquake exceeded the deductible. Doheny Park filed suit against Truck for breach of contract, breach of the implied covenant of good faith and fair dealing and fraud.
In its complaint, Doheny Park alleged: (1) Doheny Park made a claim to Truck for damage arising out of the Northridge earthquake; (2) Doheny Park entrusted Truck to assess the damage; (3) Truck’s representative, a purported expert in the evaluation of property damage, concluded that the cost to repair the covered damages did not exceed the policy deductible; (4) the conclusion of Truck’s expert was a misrepresentation; (5) Truck intentionally misled Doheny Park by making such a representation; (6) Truck failed to fully and properly inspect the property, but led Doheny Park to believe the contrary; and (7) Doheny Park reasonably relied on Truck’s representation that the damage to the property was below the deductible.
The trial court sustained Truck’s demurrer without leave to amend, concluding that Doheny Park had not timely filed its action and that Doheny Park had failed to allege facts sufficient to establish a basis for the application of the doctrine of equitable estoppel. The Court of Appeal reversed.
Holding
The Court of Appeal held that Code of Civil Procedure Section 340.9 (which revived certain claims for damages suffered in the Northridge earthquake) did not supplant the doctrine of equitable estoppel as to time-barred actions. The Court also held that Doheny Park had pled facts which, if proved, would raise an equitable estoppel.
Comment
The Court flatly rejected the notion that the Code of Civil Procedure Section 340.9 supersedes the application of equitable estoppel in Northridge earthquake claims.
However, the impact of this case extends far beyond cases arising out of the Northridge earthquake. Although any insured can allege detrimental reliance on an insured’s investigation, many insureds will find it difficult to actually prove reasonable detrimental reliance.