Unpublished Disposition, 936 F.2d 579 (9th Cir. 1986)

No. 89-56249.

United States Court of Appeals, Ninth Circuit.

Before CANBY and RYMER, Circuit Judges, and WARE, District Judge.^* 

MEMORANDUM^** 

Defendant and counterclaimant Rivers J. Morrell, III ("Morrell") appeals from the decision of the United States District Court for the Central District of California, granting the motion by plaintiff and counterclaim defendant Safeco Insurance Company of America ("Safeco"), a Washington corporation, for summary judgment on Safeco's complaint for declaratory relief and on Morrell's counterclaim for declaratory relief, and contract and tort claims for Safeco's alleged wrongful denial of benefits under the policy.

We have jurisdiction pursuant to 28 U.S.C. § 1291. We review the grant of summary judgment de novo, Continental Casualty Co. v. City of Richmond, 763 F.2d 1076, 1078-79 (9th Cir. 1985), and we affirm.

In February 1982, Morrell purchased a home located in Laguna Niguel, California ("the Laguna Niguel property"). On January 21, 1983, Safeco issued a policy of homeowners insurance to Morrell for the Laguna Niguel property. The policy was in effect from January 21, 1983 to January 21, 1984, and renewed for a policy period beginning January 21, 1984. Morrell cancelled the policy effective October 19, 1984. The coverage in both the original and renewal policies was limited to loss occurring during the term of the policy, and the policies contained a one-year private limitation on actions clause.

In February 1982, Morrell began the installation of a swimming pool, decking and patio in the backyard of the Laguna Niguel property. In mid to late 1983, approximately one year after the installation of the pool, Mr. Morrell noticed cracking in the deck and patio area. Excerpts of Record 42, 65 ("ER"). Morrell did not notice cracks in his pool until mid to late 1985. ER 44, 65. On October 26, 1984, approximately one week after Morrell cancelled his Safeco policy, Morrell filed a lawsuit in the Orange County Superior Court entitled Rivers J. Morrell, III v. The Goeden Company, et al., Case No. 44 23 86, for breach of contract and negligence against the parties involved in constructing the improvements. In the state court lawsuit, Morrell alleged that " [d]efendants ... negligently installed and constructed said patio and pool so as to cause cracking and destruction to plaintiff's patio and pool area and caused severe deterioration to plaintiff's property."

On October 11, 1985, almost one year after Morrell filed the third-party lawsuit and cancelled his policy with Safeco, Safeco was first notified of Morrell's insurance claim for the alleged damage. Safeco filed the present declaratory relief action in February 1988 to obtain a judicial determination concerning coverage for Morrell's claims under the policy. In March 1989, Morrell filed his counterclaim. The trial court granted Safeco's motion for summary judgment, concluding that no coverage existed under the policy for Morrell's claims of loss and that as a matter of law Safeco could not be held liable with respect to the claims set forth in the counterclaim.

The issue on appeal is whether Morrell's declaratory relief claim for loss under the policy and his tort and contract claims are barred by the one-year private limitations on actions in the policy. Under California law, an insured's suit on the policy will be deemed timely if it is filed within one year after "inception of the loss," defined as that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable insured would be aware that his notification duty under the policy has been triggered. Prudential-LMI Com. Insurance v. Superior Court, 51 Cal. 3d 674, 687, 274 Cal. Rptr. 387 (1990). "To take advantage of a delayed discovery rule, however, the insured is required to be diligent in the face of discovered facts." Id.

In the instant case, Morrell submitted sworn statements that he was on notice of the damage to the deck and patio area by mid to late 1983. ER 42, 65. Morrell filed a lawsuit in state court against third-party tortfeasors on October 26, 1984. Morrell contends that at the time he filed the state court lawsuit, he was only aware of damage to his deck and patio area, but that he was not aware of damage to his pool and residence. Once Morrell knew of certain land subsidence losses, Morrell should have acted with diligence to determine the extent of the land subsidence losses. Prudential-LMI, 51 Cal. 3d at 687; Magnolia Square Homeowners Association v. Safeco Insurance Company of America, 221 Cal. App. 3d 1049, 1060, 271 Cal. Rptr. 1 (1990). Morrell's failure to act with diligence to determine the extent of the land subsidence losses to his dwelling and pool cannot now be claimed as a defense against the 12-month private limitations on actions contained in the policy. Id. Because Morrell did not notify Safeco of the loss until October 1985, more than one-year after inception of the loss, Morrell is barred from bringing the present action by the one-year private limitation on actions contained in the policy.

The one-year limitation period is equitably tolled from the time the insured files a timely notice, pursuant to policy notice provisions, to the time the insurer formally denies the claim. Prudential-LMI, 51 Cal. 3d at 693. Because Morrell did not file a timely notice, the equitable tolling rule, announced in Prudential-LMI and relied on by Morrell, has no applicability to the instant case.

Morrell's claims for breach of the implied covenant of good faith and fair dealing and breach of fiduciary duty are based on denial of a claim under the policy. As such, they are also barred by the contractual statute of limitations. Abari v. State Farm Fire & Casualty Co., 205 Cal. App. 3d 530, 536, 252 Cal. Rptr. 565 (1988); Lawrence, 204 Cal. App. 3d 565, 574-75, 251 Cal. Rptr. 319 (1988).

Morrell further argues that Safeco waived or was estopped to assert the 12-month limitation period because Safeco, by a letter dated June 26, 1986, acted to lull Morrell into delaying the filing of suit. Since the June 26, 1986 letter was written after the 12-month limitation period had run, Safeco could not have waived or be estopped from asserting the 12-month limitations period. Magnolia Square, 221 Cal. App. 3d at 1063; Lawrence, 204 Cal. App. 3d at 574; see also Stinson v. Home Insurance Company, 690 F. Supp. 882, 885 (N.D. Cal. 1988) (waiver of limitations period exists if carrier engages in affirmative acts to induce the insured to delay filing suit beyond the limitations period).

For all the foregoing reasons, the district court's judgment is

Affirmed.