IFCA’s 20-day notice provision may be strictly construed. And an insured who fails to file suit within the contractual limitations period, even in the face of the insurer’s failure to timely communicate in violation of the WAC, may lose its breach of contract claim.
In Norgal v. National Surety Corp., 2012 WL 137762 (W.D. Wa.)(4/19/12), the plaintiff insured operated a multi-family apartment building where water intrusion caused rot. Although the insurer paid an initial claim for repairs, the insured conducted additional repairs. The loss at issue in this case was the “loss or damage caused by or resulting from risks of direct physical loss involving collapse of a building or any part of a building caused … by … [h]idden decay of the Covered Property.” The court rejected the insured’s argument that the contractual limitation period did not begin to run until it discovered the full extent of its loss by removing the last bit of exterior siding from the building and revealing the last bit of hidden decay. More than two years elapsed between the time the “hidden decay” involving a risk of collapse was exposed and the date on which the action was filed in March 2011.

Although the court ruled in a companion order in the case (2012 WL 1377853) that the insurer violated WAC 284–30–360(3) (failure to respond to communications within 10 working days) and WAC 284–30–380(3) (failure to provide monthly updates re: unresolved claim) as a matter of law, the court declined to apply equitable estoppel to excuse the insured from the contractual limitations period. The court found: “Plaintiff has not identified any act or representation inconsistent with the assertion of the suit limitation provision. Defendant did not tell plaintiff that it would waive the limitation provision or suggest that it would pay the additional amounts demanded if given a little more time. Defendant’s communications with plaintiff during the relevant time frame invariably contained a reservation of all rights under the policy. The fact that the insurer proceeded to adjust a claim under its policy—as required by Washington law—does not automatically toll the limitation provision. Otherwise every limitation provision, regardless of the language used, would begin to run only after the insurer made its final coverage determination. Plaintiff, represented by counsel, is presumed to know the terms and conditions of its policy. Defendant apparently did nothing to mislead plaintiff into thinking that it should or could delay filing suit beyond the contractual two year limitations period. Plaintiff had every opportunity to timely file and did not do so.”

The court also declined to relieve the insured of the requirement, under IFCA, that the first party claimant “must provide written notice of the basis for the cause of action to the insurer and office of the insurance commissioner” at least twenty days before filing suit. RCW 48.30.015(8)(a). The court held that, given the purpose of the notice requirement—to allow the insurer to correct violations before suit is filed—the failure to provide the 20-day notice cannot be considered substantial compliance with IFCA.