Niagara Bottling, LLC v. Zurich Am. Ins. Co., No. EDCV19113PAKKX, 2019 WL 6729756 (C.D. Cal. Oct. 5, 2019)
This suit arose out of Niagara’s $20 million loss from its recall and destruction of bottled water after a test at the water’s source came back positive for e-coli bacteria. Niagara destroyed the water at the direction of the State of Pennsylvania Bureau of Safe Drinking Water despite the fact that it had successfully killed the e-coli bacteria prior to bottling. Niagara submitted claims under a property policy for the loss of the bottled water, for lost business income, and for the significant expenses associated with the product recall and destruction of the bottled water. Zurich American denied coverage on each of these claims, and Niagara sued alleging bad faith.
On summary judgment, Zurich American argued that Niagara’s suit was time barred based on the insurance policy’s 12-month suit limitations provision. Niagara had not brought its claim under the insurance policy until 16 months after the loss and had waited an additional eight months after the claim denial to file its lawsuit. Niagara challenged Zurich American’s suit limitations argument on a number of grounds. First, Niagara argued that Zurich American had waived the suit limitations argument by failing to assert it prior to the litigation. Second, Niagara argued that the 12-month suit limitations provision was not enforceable because Zurich American was not prejudiced by Niagara’s delay in filing suit. Third, Niagara argued that the suit limitations provision was not enforceable under the law of Pennsylvania, where the loss occurred.
The court granted summary judgment in favor of Zurich American on each of Niagara’s claims. It ruled that Zurich American had not waived the suit limitations provision by not asserting it during the claims handling procedure because the relevant period had already run when Zurich American first received notice of the claim. The court agreed with Zurich American that the decision to investigate the claim despite the fact that it was time-barred complied with California law. The court also agreed with Zurich American that California law does not require an insurer to show prejudice in order to enforce a suit limitations provision. Finally, the court ruled that even if Pennsylvania law applied, the analysis under Pennsylvania law arrives at the same result on each of these issues.