Don’t Let Delay or Non-Cooperation Doom Your Insurance Claim

Contractual suit limitations clauses and cooperation clauses were examined by a recent appellate decision ¹ upholding a trial court ruling ² in favor of the insurer in Lennox Carwash, Inc. v. AMCO Insurance Company. These provisions are frequently at issue in cases where insurers are not making clear denials of coverage while investigations seemingly drag on. This outcome serves as a warning for policyholders and public insurance adjusters, especially those involved in managing claims through complex post-loss investigations. Do not delay filing suit, and make certain that cooperation occurs.

Lennox Carwash, Inc. operated a carwash business and maintained a Premier Businessowners insurance policy with AMCO Insurance. In December 2018, the business experienced a significant theft and vandalism loss. A second break-in occurred in September 2019.

Lennox submitted claims for both incidents but ultimately sued AMCO after the claims were denied. The litigation focused on whether the 2018 claim was barred by the policy’s one-year limitation for bringing legal action and whether Lennox’s conduct during the claims investigation breached the policy’s cooperation clause to the extent that AMCO was relieved of its obligations.

The policy at issue contained a standard suit limitation clause requiring any legal action against the insurer to be brought within one year of the date of the direct physical loss or damage. Under California law, this limitation period is subject to equitable tolling during the period in which the insurer is investigating the claim. Tolling ends once the insured receives notice that the claim is denied.

Lennox argued that it did not receive timely or effective notice of AMCO’s February 2022 denial of the 2018 claim until May 5, 2022, when its former counsel contacted AMCO and received a copy of the letter. Lennox contended that AMCO initially sent the letter to an incorrect email address and that certified mail delivery documentation failed to confirm that the letter actually reached counsel’s office.

Despite these assertions, both the district court and the Ninth Circuit Court of Appeals held that AMCO’s mailing created a presumption of delivery, and Lennox’s rebuttal evidence, primarily a declaration from former counsel stating he was unaware of the letter, was insufficient to overcome that presumption. As a result, the courts concluded that the suit was filed more than one year after tolling ended, rendering the 2018 claim untimely as a matter of law.

The second significant issue involved the cooperation clause, which obligated the insured to assist in the investigation or settlement of the claim and required participation in examinations under oath. For the 2018 claim, Lennox’s CEO eventually appeared for two EUOs but failed to sign the transcripts under penalty of perjury as requested. The court ruled that signing the EUO was a condition precedent to coverage, and the failure to do so warranted denial.

For the 2019 claim, the court found that Lennox provided no documents to support the claim despite repeated requests for a list of stolen items, receipts, estimates, and a police report. The court determined that this lack of cooperation substantially prejudiced AMCO because it could not verify the loss or calculate the amount. Even though Lennox argued that some requested documents did not exist and that AMCO had ample opportunity to conduct an investigation, the court concluded that these explanations did not overcome the clear policy requirement to cooperate or AMCO’s demonstration of prejudice.

Beyond breach of contract, Lennox also pursued claims for breach of the implied covenant of good faith and fair dealing, declaratory relief, and punitive damages. These claims were dismissed along with the breach of contract claims. Under California law, a bad faith claim cannot proceed in the absence of a valid breach of contract unless very narrow exceptions apply, none of which were present in this case. Without a viable contract claim, the derivative claims for bad faith and punitive damages also failed.

For professionals in the property claims industry, this case provides several important lessons. First, suit limitation clauses in insurance policies may be enforceable in many jurisdictions and can be strictly applied. Public adjusters, policyholder attorneys and policyholders must understand that the countdown begins on the date of loss and only pauses during the claims investigation. Once a claim is denied, the clock restarts and it is critical to act promptly to preserve legal rights. Failure to track this timeline can eliminate recovery regardless of the merits of the claim.

Second, cooperation is not merely a courteous gesture. Instead, it is a contractual obligation. Policyholders must respond thoroughly and promptly to insurer requests, including document production or inspection and participation in examinations under oath. Public adjusters have a vital role in facilitating this cooperation by helping organize documentation, guiding clients through the process, and ensuring that all formal requirements, such as signing EUO transcripts, are fulfilled. Any material failure to cooperate that prevents the insurer from assessing the claim can justify a denial of coverage if the insurer suffers prejudice.

Third, this case illustrates the difficulty of succeeding on bad faith claims when coverage is legitimately denied due to procedural missteps. Courts are reluctant to impose punitive consequences on insurers when the policyholder fails to meet their own obligations. Adjusters and counsel should be cautious when pursuing such claims and ensure that all foundational policy conditions are satisfied before alleging misconduct by the insurer.

Lennox Carwash v. AMCO Insurance reaffirms the importance of claims process discipline in property claims handling. It highlights how claims can be defeated not because they lack merit, but because critical post-loss steps were missed or delayed. Policyholders and public adjusters must be diligent, responsive, and meticulous in meeting all policy conditions to protect coverage and avoid the harsh outcome that befell Lennox.

California Merlin Law Group attorney Dan Veroff wrote an excellent article about California suit limitation clauses in Not Following California’s Intricate Suit Limitations Rules Dooms Yet Another Unsophisticated Insured. He also made note of the limitations actions for the recent wildfire losses in Reminder on Time Limitations to File Suit for California Wildfire Claims.

Thought For The Day

“Take time to deliberate; but when the time for action comes, stop thinking and go in.”
—Napoleon Bonaparte

¹ Lennox Carwash v. AMCO Ins. Co., No. 24-1975, 2025 WL 1513774 (9^th Cir. May 21, 2025).

² Lennox Carwash v. AMCO Ins. Co., No. 2:23-cv-03746, 2024 WL 1483814 (C.D. Cal. Feb. 26, 2024).