Court Affirms "Discovery Rule" in First-Party Insurance Claim
We have been writing quite a bit over the last couple of years about the evolving legal landscape of first-party insurance claims in the Pacific Northwest. As more community associations that are otherwise outside of the window to bring construction defect claims for property damage instead bring claims under their own historical insurance policies, courts are getting more of an opportunity to address key issues.
Just a couple of days ago, in Eagle Harbor Condominium Association v. Allstate Insurance , a federal district court in Seattle denied a defendant insurance company request to find that its liability was cut off, at the latest, one year after the end of its last policy period. In rejecting the insurance company's request, the court found that a discovery rule applies to both "collapse type" claims that rely on hidden decay as well as other claims based on water intrusion.
The facts were similar to a lot of community associations who are finding long hidden damage as they prepare to renew their buildings. The stucco clad structures at issue were built in 1968 and 1980. Defendant Allstate insurance insured the buildings from 1988 to 1997. During this time the condominium suffered "ongoing and progressive damage" to stairwells, decks and other areas. The association repaired the areas as needed, but while repairing a stair tower in approximately 2014 noticed extensive damage and tendered the claims to Allstate, it past carrier, shortly thereafter.
In denying the Allstate Insurance's request to effectively cut off its liability to pay claims just one year after it last policy period in 1998, the court affirmed the right to bring a claim within one year of discovery.
"Discovery", in its legal context, can mean a lot of things. It is generally understood to mean when an issue was discovered, or, in the exercise of reasonable care, should have been discovered. The determination of when a loss is discovered can therefore be very fact specific.
The Eagle Harbor ruling underscores that insurance claims brought under insurance policies from long ago may be a viable option for communities having to repair significant property damage. It is also a critical reminder to consult with qualified consultants and attorneys as soon as you "discover" significant property damage to ensure that any claims are preserved.