State Farm Mut. Auto. Ins. Co. v. Frank, No. 1 CA-CV 23-0282 (App. Div. I, March 21, 2024) (J. Catlett) https://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2024/CV%2023-0282%20State%20Farm.pdf

AUTO POLICY UIM COVERAGE NOT AVAILABLE TO INSURED WHERE TIME LIMIT OF 3 YEARS TO FILE CLAIM FOR ARBITRATION NOT MET BUT UMBRELLA POLICY WHICH REQUIRED THE INITIATION OF A LAWSUIT IN STATE OR FEDERAL COURT WITHIN 3 YEARS OF “MAKING CLAIM” ALLOWS INSURED TO PROCEED AGAINST UMBRELLA POLICY

Karen Frank had $100,000 UIM coverage under her auto policy and a separate $2,000,0000 in UIM coverage under a personal umbrella policy, both with State Farm Mutual Automobile Insurance Company  [State Farm].  Frank was involved in a rear-end accident and after collecting the adverse driver's liability limits of $15,000 brought  UIM claims against both policies.  State Farm denied the claims taking the position the claims were brought beyond the three year time limitation  to bring such a claim under the auto policy.  Plaintiff then sued in 2019 under both policies. State Farm then brought his declaratory relief action seeking a declaration the UIM claims under each policy were time barred. See A.R.S. § 12-555(C)(2).  The trial court granted State Farm's motion for summary judgment on this ground and Frank appealed. The Arizona Court of Appeals affirmed in part and vacated and remanded in part.

A.R.S. § 12-555(C)(2) provides“[a] person shall request arbitration or file suit pursuant to the terms of the insurance contract within three years of giving written notice of the claim.”  The three years begins to run from the date the notice of claim is made and is not controlled by the policy's time limits for the insurer to respond to the claim. This time limitation was not met by Frank despite the fact State Farm's notice, also being late was accompanied by an agreement to extend Frank's deadline to run from the date of State Farm's late notice. 

Frank's claimed that the time limit did not apply here because the case was settled for policy limits when State Farm failed to respond to the policy limit demand for a year. Silence in the face of a settlement offer can only be found to be a binding acceptance when the silence “has the effect to mislead” the offeror/insured. Here there was no evidence of Frank being misled.

Frank's argument that equitable estoppel should have been applied to rescue her from the time limitation also fails. 

Four factors must be established for equitable estoppel to

apply: (1) one party must engage in affirmative conduct causing

forbearance; (2) the conduct must cause forbearance; (3) the conduct must

be reasonably expected to cause forbearance; and (4) the claimant must

bring an action within a reasonable time after the conduct stops.

Here there were no facts supporting a claim that State Farm had engaged in conduct that would reasonably induce to Frank to forbear filing a timely claim for arbitration.

In contrast the State Farm Umbrella policy only required Frank file suit in state or federal court within 3 years of filing notice of her UIM claim. She complied with this time limit in bringing her lawsuit in 2019 against State Farm. While the pleadings in this suit principally alleged bad faith, there were sufficient allegations of the right to UIIM benefits to support compliance with the time limit.  This does not preclude State Farm from contesting liability and damages in that lawsuit.

Finally, there being no evidence that Frank had changed her position in making the UIM auto claim and then in bringing the 2019 lawsuit, judicial estoppel would have no application to Frank's 2019 lawsuit.

Accordingly summary judgment for State Farm on the auto policy is affirmed but reversed as to the umbrella policy and the matter remanded to further proceedings in the trial court consistent with this decision.