Unpublished Disposition, 859 F.2d 154 (9th Cir. 1987)

MEMORANDUM^* 

Cancun Homeowners Association [Cancun] appeals from the district court's grant of summary judgment in favor of Central Mutual Insurance Company [Central] in this declaratory judgment action. The district court found that Central had no obligation to pay for property damage suffered by Cancun because: 1) Cancun's loss occurred after the expiration of the policy, 2) Cancun failed to bring a lawsuit within one year of the loss, and 3) Central failed to plead estoppel as an affirmative defense and regardless, the elements of estoppel were not present. We affirm.

BACKGROUND

The Cancun Racquet Club Condominiums were built in or about late 1980 and early 1981. In February, 1981, Central issued Cancun a businessowner's insurance policy, effective from February 11, 1981 through February 11, 1982. The policy contained the following provision:

Suit

No suit shall be brought on this policy unless the insured has complied with all the policy provisions and has commenced the suit within one year after the loss occurs.

In late 1983, Cancun noticed damage to the property believed to be caused by unstable soil conditions and an improperly prepared building site. Cancun made a formal written claim under the policy on July 9, 1984. Cancun did not receive a response. Cancun's attorney, Stephen Rupp, made a second claim to Central on October 31, 1984. Central acknowledged receipt of the claim November 13, 1984.

After receiving no further response from Central regarding the claim, Rupp wrote another demand letter February 6, 1985, requesting a response within ten days. Top Claims Service responded May 6, 1985 on behalf of Central and requested all relevant information. Rupp then wrote to Edwin E. Petrak of Top Claims on July 10, 1985, confirming a telephone conversation in which Petrak informed Rupp that Central refused to participate in funding a joint investigation of the Cancun property. Rupp reasserted Cancun's demand for an investigation and resolution of the claim, and expressed the belief that Central was acting in violation of Cal.Ins.Code Sec. 790.03(h) (Supp.1988).

In the fall of 1985, Rupp spoke with Mr. Petrak who assured him that Central's investigation was progressing. This conversation was confirmed by a letter dated December 5, 1985. Cancun made another demand for investigation and indemnification. On December 20, Central's attorney, William Glazer, wrote to Rupp that the investigation was continuing.

Central then filed a complaint for declaratory relief in federal court January 2, 1986, seeking a declaration that Cancun's failure to file suit within one year barred any relief. Cancun filed an answer and a counterclaim for breach of contract, breach of the duty of good faith and fair dealing, and breach of fiduciary duties. Cancun filed a complaint in state court July 8, 1986.

Central moved for summary judgment in the federal court action¹  on July 8, 1987, on the grounds that the loss did not occur during the policy period, and even if it did, Cancun's lawsuit was not brought within one year. The district court granted the motion October 8, 1987. This timely appeal followed. We have jurisdiction pursuant to 28 U.S.C. § 1291.

STANDARD OF REVIEW

This court reviews the grant of summary judgment de novo to determine whether, viewing the evidence in the light most favorable to the nonmoving party, there are genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Ashton v. Cory, 780 F.2d 816, 818 (9th Cir. 1986).

ANALYSIS

The district court ruled that Cancun's loss occurred in 1983, while its insurance policy with Central expired in February, 1982. Moreover, the district court found that even if the loss occurred during the policy term, the policy expressly provided that a suit must be brought within one year. We assume without deciding that Cancun incurred a loss during the policy period and that Cancun's cause of action accrued when it discovered the loss, at the latest in February of 1984. Regardless, Cancun did not file a lawsuit until March of 1986, well after the one-year contractual statute of limitations had expired. Cancun argues that Central was estopped from asserting the one-year suit provision by its conduct between 1984 and 1986. The district court found that Cancun waived its estoppel claim by not pleading it as an affirmative defense and regardless, the elements of estoppel were not present.

Cancun has not waived its estoppel claim. Although Rule 8(c) of the Federal Rules of Civil Procedure provides that affirmative defenses such as estoppel are to be raised in the initial pleadings, this circuit has not construed Rule 8(c) to mean that a defense not raised in the answer is waived. Absent prejudice to the plaintiff, a defendant may raise an affirmative defense in a motion for summary judgment. See Rivera v. Anaya, 726 F.2d 564, 566 (9th Cir. 1984); Healy Tibbitts Constr. Co. v. Insurance Co. of N. Am., 679 F.2d 803, 804 (9th Cir. 1982) (per curiam).²  Central does not allege that it was prejudiced in any way by Cancun's failure to allege estoppel as an affirmative defense.

Cancun, however, has not alleged facts sufficient as a matter of law to establish estoppel. The elements of estoppel are: 1) the party to be estopped must be apprised of the facts, 2) the other party must be ignorant of the true state of the facts, 3) the party to be estopped must have intended that its conduct be acted upon or so act that the other party had a right to believe it was so intended, and 4) the other party must rely on the conduct to its prejudice. Muraoka v. Budget Rent A Car, Inc., 160 Cal. App. 3d 107, 116, 206 Cal. Rptr. 476, 480 (1984).

Cancun contends that during the period following Cancun's claim, Central did not affirmatively reject the claim and continued to state that it was investigating. Central did not assert that it intended to rely on the one year suit provision until it filed the instant declaratory relief action. And Central continued to discuss with Cancun its investigation of the claim after the one year period would have expired.

Central, however, did not ever enter into settlement negotiations with Cancun. Nor did Central tell Cancun or even suggest that the claim would be paid and that Cancun did not need to file a lawsuit. Central merely told Cancun that investigations were ongoing; Central neither stated nor otherwise intimated to Cancun that the investigation would in fact lead to a determination to pay the claim. Cancun was at all times represented by experienced counsel and Cancun's attorney had in his possession a copy of the insurance policy containing the one-year suit provision. Under these circumstances, we find that Cancun's reliance on Central's statements that the claim was under investigation to excuse Cancun's failure to file suit was not reasonable. Central is therefore not estopped from asserting the one-year suit provision in this action.

AFFIRMED.