The California Supreme Court recently reversed lower court judgments by saying a fair claims suit against State Farm Fire and Casualty Co. is allowed to proceed under the four-year statute of limitations set in the state’s Fair Claims Act versus the one-year deadline outlined in the plaintiff’s policy.

An opinion from the court on July 18 said the suit is not bound by the policy deadline because it does not seek relief for a claim or action made in the policy.

“Plaintiff, however, pursues only broad declaratory relief pertaining to State Farm’s alleged claims-handling practices and an injunction that would require State Farm to “give at least as much consideration to the interests of its insured as to its own interests,’” the opinion says.

The plaintiff, Katherine Rosenberg-Wohl, submitted a claim in 2019 after discovering the pitch of the stairs in her house had changed, according to the suit. The claim allegedly was denied by a letter that said the company had found no evidence of a covered cause or loss nor any covered accidental direct physical loss to the stairway.

A year later Rosenberg-Wohl followed up on the claim and was once again denied, the suit says.

Two lawsuits were filed in state courts against State Farm in October 2020. The plaintiff abandoned her first lawsuit that sought damages for allegations of claims for breach of contract after the one-year deadline in the policy was challenged, the opinion says.

According to the opinion, the remaining complaint alleges, “State Farm has a practice of summarily denying and regularly summarily denies property insurance claims unless State Farm believes the particular claim falls into a category of likely coverage.”

The complaint alleges State Farm did not investigate the claim, had no reasonable basis for its determination, and its conduct is designed to deny claimants coverage for all but the most obvious claims.

Under the lawsuit, the plaintiff seeks declaratory and injunctive relief along with attorney fees. It also disavows any claim for damages, the opinion says.

A superior court sided with State Farm’s claims that the case was limited by the policy’s one-year deadline, the opinion says. The majority on a divided Court of Appeals affirmed the superior court decision, it says.

Both courts said, “the crux of plaintiff’s claim is ‘grounded upon a failure to pay policy benefits,’” according to the opinion.

“In the [Court of Appeals] dissent’s view, ‘the crux’ of plaintiff’s lawsuit [citation] is that State Farm is marketing homeowners insurance to the public, promising benefits on defined terms, while its claims adjustment process is, by design, so superficial (little to no investigation) and obscure (no communication with insureds about the basis for denials) that it manages to avoid paying out on all but the claims that are obviously covered,’” the opinion says.

The opinion says the Supreme Court agrees with the dissenting view.

“We conclude that the one-year limitations period within section 2071 and plaintiff’s insurance policy with State Farm does not apply to her UCL cause of action seeking declaratory and injunctive relief,” the opinion says. “Since plaintiff’s lawsuit was brought within the four-year period provided under the UCL, we reverse the judgment of the Court of Appeal and remand the matter to that court with directions that it be remanded to the superior court for further proceedings consistent with our decision.”

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