Travelers wins ruling against homeowners association

A federal appeals court affirmed a lower court ruling in favor of a Travelers Cos. Inc. unit Tuesday in a dispute with a homeowners association over policy language that required the policyholder to file legal action against the insurer within two years of damage to its property.

In September 2016, Indianapolis-based Legend’s Creek Homeowners Assn. Inc. filed a claim with Travelers Indemnity Co. of America for hail and wind damage that had occurred in May of that year to the north-facing sides of insured condominium buildings, according to the ruling by the 7th US Circuit Court of Appeals in Chicago in Legend’s Creek Homeowners Assn., Inc. v. Travelers Indemnity Co. of America.

Legend Creek’s adjuster initially agreed with the Travelers agent on repair of the north-facing sides of the condominium buildings, and Travelers issued a $644,674.85 check. After Travelers was informed the repairs was unacceptable, it submitted additional checks totaling $267,204.90.

Travelers was told the repairs were still insufficient and the north-facing sides had to be replaced. Less than three weeks before the two-year contractual deadline to bring a legal action, however, the adjuster demanded that Travelers replace all sides of the condominium buildings because the new sides did not match the undamaged ones to his satisfaction.

Travelers denied the request, stating it would replace only the damaged sides and paint them to match, and Legend’s Creek filed suit, charging the insurer with a breach of contract and bad faith.

The US District Court in Indianapolis ruled in the insurer’s favor, stating the association had failed to meet the two-year deadline for filing suit.

It was affirmed by a three-judge appeals court panel. “In Legend’s Creeks’ reading, the policy makes it impossible for an insured to initiate legal action against the insurer in situations where the claim investigation takes more than two years,” the opinion said.

“Whatever weight such a concern might generally have, it has little relevance here. Legend’s points to no term in the policy that it did not or could not have abided by without the two-year window,” the ruling said, in affirming the lower court.

Attorneys in the case did not respond to requests for comment.

In February, a federal appeals court ruled in favor of an insurer that sought to rescind its policy for a homeowner’s association, holding the association had failed to disclose a situation likely to give rise to a claim in its coverage application.