Court Finds That Lawsuit Filed Against Insurance Company Was Timely Filed

Plaintiffs Marlene Romhen and Ibrahim Mirkhan filed a lawsuit against the defendant insurance company Franklin Mutual Insurance Inc. based upon a theft loss that occurred at their insured residence.  The claim was denied by Franklin Mutual by letter dated September 17, 2021.  According to the denial letter, the insured needed to file suit against them within twelve (12) months of the date of the letter.  The issue in Romhen v. Franklin Mutual Insurance, Inc., 2024 N.J. Super. Unpub. LEXIS 708 (App. Div. Apr. 25, 2024) was whether the lawsuit was timely filed because it was filed on the Monday after the one year time period expired the prior Saturday.

The theft occurred at the insured residence on March 30, 2021.  Plaintiffs reported the loss to Franklin Mutual on April 1, 2021.  The insurance policy contained a provision that any lawsuit filed against Franklin Mutual must be filed within twelve (12) months of the date of the denial letter.  The denial letter was issued on September 17, 2021.

However, the plaintiffs did not file their complaint against Franklin Mutual until Monday, September 19, 2022.  Franklin Mutual argued before the trial court that the complaint needed to be filed on or before Saturday, September 17, 2022 to meet the 12 month shortened suit requirement, and, therefore, the complaint was filed two days late.

The trial court accepted that argument and dismissed the complaint.  This appeal ensued.

The Appellate Division noted the well settled law that “because insurance policies are contracts of adhesion, if any ambiguity exists, the ambiguity must be construed so as to effect the ‘reasonable expectations of the insured.’”  Further, the Court noted that if the policy language supported two meanings, one that favored the insurer and the other one that favored the insured, the policy should be construed so as to sustain coverage in favor of the insured.

Under New Jersey court rules, in computing any period of time fixed by rule or court order, if the last day of the time period falls on a Saturday, Sunday, or legal holiday, the time period would not run until the end of the next day which is neither a Saturday, Sunday, nor legal holiday.  The trial court, however, found that this court rule did not apply because it was applying the terms of the insurance policy, which is a contract between the parties.  The Appellate Division agreed with that rationale. 

However, the Court noted that it was not disputed that the parties agree to an abbreviated deadline, commonly referred to as a “shortened suit clause,” which shortens the time period from the normal six (6) year statute of limitations that would generally apply to a breach of contract in a civil case.

But, the Appellate Division found that there was an ambiguity in the insurance contract.  It noted that if Franklin Mutual “wanted to ensure strict adherence to a one-year deadline with no exceptions or extensions for weekends, it could have said so explicitly in the endorsement it drafted.”  Further, when it sent out its denial of coverage letter, it could have specified the exact date when the deadline for filing a lawsuit would expire.  By specifying the exact date, that would have left no doubt as to its interpretation of the policy clause and would have provided clear notice of the last day in which a lawsuit could be filed.  However, the denial letter left it up for the policy holders to determine the one year deadline because the letter made no reference to the fact that, in this instance, the expiration of the one year time period fell on a Saturday.

The Appellate Division applied a liberal interpretation of the shortened suit clause in the insured’s favor, “coupled with the general preference to hear cases on their merits rather than dismiss them based on strict enforcement of procedure rules.”  Hence, the Court determined that the lawsuit challenging Franklin Mutual’s denial of coverage as to the lawsuit which was filed on Monday, September 19, 2022 was deemed timely under the shortened suit clause endorsement.  Thus, the Appellate Division reversed the trial court decision and remanded the case back to the trial court for further proceedings.

Tags: Appellate Division, insurance, insurance policy, shortened suit clause, statute of limitations