Sexton v. Bankers Standard Insurance Company

1
In the United States District Court
for the District of Kansas
_____________
Case No. 24-cv-02388-TC
_____________
RONALD E. SEXTON,
Plaintiff
v.
BANKERS STANDARD INSURANCE COMPANY,
Defendant
_____________
MEMORANDUM AND ORDER
Plaintiff Ronald E. Sexton brought this suit against his insurer,
Bankers Standard Insurance Company, to recover expenses he in-
curred after a rainstorm damaged his residence and contents within it.
Doc. 1. Bankers moved to dismiss. Doc. 6. For the following reasons,
its motion is denied.
I
A
A federal district court may grant a motion to dismiss for “failure
to state a claim upon which relief can be granted.” Fed. R. Civ. P.
12(b)(6). To survive a motion to dismiss for failure to state a claim, the
complaint need only contain “a short and plain statement . . . showing
that the pleader is entitled to relief” from each named defendant. Fed.
R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
Two “working principles” underlie this standard. Kan. Penn Gaming,
LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011); see also Ashcroft v.
Iqbal, 556 U.S. 662, 678–79 (2009). First, a court ignores legal conclu-
sions, labels, and any formulaic recitation of the elements. Penn Gaming,
656 F.3d at 1214. Second, a court accepts as true all remaining allega-
tions and logical inferences and asks whether the claimant has alleged
facts that make his or her claim plausible. Id.
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A claim need not be probable to be considered plausible. Iqbal, 556
U.S. at 678. But the facts, viewed in the light most favorable to the
claimant, must move the claim from conceivable to plausible. Id. at
678–80. The “mere metaphysical possibility that some plaintiff could
prove some set of facts in support of the pleaded claims is insufficient;
the complaint must give the court reason to believe that this plaintiff
has a reasonable likelihood of mustering factual support for these
claims.” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177
(10th Cir. 2007).
Plausibility is context specific. The requisite showing depends on
the claims alleged, and the inquiry usually starts with determining what
the plaintiff must prove at trial. See Comcast Corp. v. Nat’l Assoc. of African
Am.-Owned Media, 589 U.S. 327, 332 (2020). In other words, the nature
and complexity of the claim(s) define what plaintiffs must plead. Cf.
Robbins v. Oklahoma, 519 F.3d 1242, 1248–49 (10th Cir. 2008) (compar-
ing the factual allegations required to show a plausible personal injury
claim versus a plausible constitutional violation).
B
This insurance dispute arises from a homeowner’s policy that the
Plaintiff, Ronald Sexton, purchased from Bankers Standard Insurance
Company for a one-year period starting in February 2018. See Doc. 1
at ¶ 6.1 In particular, Sexton claims that Bankers breached promises
contained in the insurance policy by failing to cover water damage to
Sexton’s property and expenses related to the necessary repairs, such
as temporary living costs and the installation of prevention measures
to prevent future water damage to the residence. See id. at ¶¶ 24–33.
Bankers, however, seeks dismissal on timeliness grounds, so only one
provision of the policy is relevant to the current dispute. See generally
Doc. 6. That provision, which limits the amount of time in which Sex-
ton may sue Bankers under the policy, states: “No action can be
brought against us unless . . . the action is started within five years after
the date of loss.” Doc. 1-1 at 78. Accordingly, the facts described in
this section are limited to those relevant to whether Sexton timely filed
his claim and/or whether an exception to Bankers’ timeliness defense
applies.
1 All references to the parties’ briefs are to the page numbers assigned by
CM/ECF.
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On October 7, 2018, a severe rainstorm substantially damaged the
interior of Sexton’s residence. Doc. 1 at ¶¶ 8, 16. Water entered
through the roof, which was in the process of being constructed by the
company Alpha Roofing. Id. at ¶ 16. Sexton initially attempted to seek
compensation for the water damage to his residence from Alpha Roof-
ing, but the company declined to pay. Id. at ¶¶ 17–19. Accordingly,
Sexton sued Alpha Roofing, id. at ¶ 19, and he filed an insurance claim
with Bankers, seeking coverage for the water damage in his residence.
Id. at ¶ 18. Bankers joined Sexton in suing Alpha Roofing, and Bankers
covered some of Sexton’s costs related to the water damage. Id. at ¶ 20.
Sexton claims that the policy required Bankers to cover more ex-
penses than what it paid him. See, e.g., Doc. 1 at ¶ 35. For example,
Sexton alleges that Bankers should have covered the expenses neces-
sary to repair his residence and the contents within it with “material of
like kind and quality.” Id. at ¶¶ 24–31. He also states that he was unable
to live in his residence while certain repairs were conducted, and that
Bankers was required to pay for the expenses Sexton incurred during
that time. Id. at ¶ 38. And Sexton alleges that his insurance policy re-
quired Bankers to compensate him for actions he took to prevent the
same or similar damage in the future—e.g., expenses related to pur-
chasing and installing mold-mitigation and leak-detection systems for
the residence. Id. at ¶¶ 40–46.
Bankers disagreed. It denied Sexton’s claim and refused to cover
any more expenses related to the rainstorm damage than what it had
already paid. Doc. 1 at ¶ 63. Sexton received the denial letter from
Bankers on February 9, 2024—five years and four months after the
rainstorm occurred, which meant Sexton’s five-year time period to
bring legal action against Bankers had passed. See id.
Sexton identifies reasons why Bankers should not be able to insist
on its limitation provision. For at least three years leading up to Bank-
ers’ denial of Sexton’s claim, Sexton and Bankers frequently commu-
nicated regarding the water damage to Sexton’s residence. See Doc. 1
at 6–8. In particular, Bankers’ agents made several statements to Sex-
ton indicating that Bankers intended to cover additional expenses re-
lated to the water damage in Sexton’s residence. See id. For example,
when Bankers filed suit against Alpha Roofing, it stated that it “has
paid, and will pay, money to and on behalf of Sexton for damage to
Sexton’s Residence and his personal property.” Id. at ¶ 21 (emphasis in
original). And four years after the rainstorm, in April 2022, Bankers
sent a letter to Sexton that stated: “Your policy is providing coverage for
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the sudden and accidental interior water damages which occurred on
October 7, 2018.” Id. at ¶ 23 (emphasis in original). Sexton also points
to letters or emails that Bankers sent him in January 2022, April 2022,
and May 2023, stating that it planned to provide coverage for the ex-
penses Sexton incurred while he was unable to live in his residence. Id.
at ¶¶ 35–37.
Bankers also took various steps to determine the extent and cost
of the water damage to Sexton’s residence. See, e.g., Doc. 1 at ¶ 49. For
example, Bankers asked Sexton to obtain five separate inspections of
his residence to determine what repairs needed to be completed as a
result of the water damage. Id. at ¶ 66. Those inspections occurred in
2021, 2022, and 2023. Id. at ¶ 52. Sexton paid out-of-pocket for at least
two of Bankers’ requests for additional inspections or reports, which
Bankers’ agent informed him would be reimbursed. Id. at ¶ 49. Bankers
did not ultimately reimburse Sexton for those costs. Id. Throughout
this time, Sexton also provided various documentation to Bankers
upon request. See, e.g., id. at ¶ 54. Bankers would often respond to Sex-
ton informing him that it had not yet accepted or rejected his claim but
that it needed more information to determine what expenses it could
cover. Doc. 1 at ¶¶ 57–59. Specifically, Bankers communicated to Sex-
ton that its processing of his claim was ongoing on at least three occa-
sions: in February, June, and July of 2023. Id.
A few weeks before the five-year deadline for Sexton to bring legal
action against Bankers under the policy, Bankers updated Sexton on
the status of his claim. Specifically, Bankers informed Sexton that it
had “completed [its] review of all pertinent information.” Doc. 1 at
¶ 60. And Bankers asked Sexton to submit to an examination under
oath. Id. Bankers delayed the scheduling of Sexton’s examination, so it
did not occur before the five-year deadline for Sexton to sue Bankers,
which was October 7, 2023. Id. at ¶ 62. Instead, it occurred in Decem-
ber 2023. Id. In February 2024, two months after Sexton’s examina-
tion, Bankers denied his claim. Id. at ¶ 63. The letter further stated:
We would also like to invite you, should you have any
other information you would like us to consider or
which you otherwise believe might bear on our cover-
age determination, to please bring it to our attention at
your earliest convenience. We are happy to consider
any further information in support of your claim.
Id.
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In August 2024, Sexton filed this breach-of-contract action against
Bankers. Doc. 1. Sexton asserts that Bankers breached its promise to
cover certain damages and expenses related to the water damage in
Sexton’s residence. Id. Bankers moved to dismiss, arguing that the con-
tract’s five-year limitation period bars Sexton’s claim. Doc. 7.
II
Sexton’s Complaint, on its face, shows that he filed his breach-of-
contract claim against Bankers more than five years after the date of
the water damage. But Sexton has alleged facts suggesting that Bank-
ers, through its statements and conduct, led Sexton to believe that his
claim would be resolved without the need to file a lawsuit. As a result,
Bankers’ motion to dismiss is denied.
A
Bankers contends that Sexton’s breach-of-contract claim is time-
barred by the policy’s five-year limitation period. Doc. 7 at 4–5. Under
Kansas law, parties to an insurance contract may agree to the appro-
priate time in which to bring an action, regardless of the applicable
statute of limitations. Pfeifer v. Fed. Express Corp., 304 P.3d 1226, 1230
(Kan. 2013).2 The Complaint, on its face, makes clear that Sexton did
not file his suit until August 2024, six years after the damage related to
the rainstorm occurred. Doc. 1; Fernandez v. Clean House, LLC, 883 F.3d
1296, 1299 (10th Cir. 2018) (explaining that a claim should only be
dismissed as untimely on a Rule 12(b)(6) motion when it is clear on the
face of the complaint that the claims are time barred). All parties agree
that the suit was beyond the time limit imposed by the insurance con-
tract. Doc. 7 at 3; Doc. 13 at 4. As a result, Sexton’s suit was untimely
unless he plausibly alleged facts supporting an exception to the general
rule under Kansas law that a contractual limitation period, like the one
2 The parties agree that Kansas law governs this dispute. A federal court sit-
ting in diversity must “apply the substantive law of the forum state.” Macon
v. United Parcel Serv., Inc., 743 F.3d 708, 713 (10th Cir. 2014). That law arises
from state statute and decisions of a state’s highest court. Erie R. Co. v. Tomp-
kins, 304 U.S. 64, 78 (1938).
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Bankers invokes, is enforceable.3 See Pfeifer, 304 P.3d at 1234 (holding
that the contractual limitation period was invalid on public policy
grounds because it impermissibly infringed on Pfeifer’s right to bring
a retaliatory discharge claim under the Workers Compensation Act).
Sexton attempts to overcome Bankers’ timeliness defense through
the doctrine of equitable estoppel. Doc. 13 at 4. In Kansas, a party
attempting to invoke equitable estoppel typically “must show that an-
other party, ‘by its acts, representations, admissions, or silence when it
had a duty to speak, induced [the first party] to believe certain facts
existed,’ and also that the first party ‘rightfully relied and acted upon
such belief.’” Liberty Mut. Fire Ins. Co. v. Woolman, 913 F.3d 977, 994
(10th Cir. 2019) (quoting Mut. Life Ins. Co. of N.Y. v. Bernasek, 682 P.2d
667, 730 (Kan. 1984)) (alterations in original). In the context of a stat-
ute of limitations defense, equitable estoppel serves to preclude a de-
fendant from relying on the defense when the defendant “has acted in
such a fashion that his conduct is sufficient to lull his adversary into a
false sense of security forestalling the filing of suit until after the statute
[of limitations] has run.” Bell v. City of Topeka, Kan., 279 F. App’x 689,
693 (10th Cir. 2008) (quoting Coffey v. Stephens, 599 P.2d 310, 312 (Kan.
Ct. App. 1979)).
The Kansas Supreme Court has never considered whether equita-
ble estoppel, which it frequently applies in the statute of limitations
context, also applies to contractual limitation periods like the one in
Sexton’s insurance policy. That means it is necessary to predict
whether the Kansas Supreme Court would recognize Sexton’s theory
of equitable estoppel in this circumstance. Wade v. EMCASCO Ins. Co.,
483 F.3d 657, 665–66 (10th Cir. 2007) (noting that federal courts faced
with an unanswered question of state law must predict what the state
3 There are Kansas Supreme Court cases holding that parties cannot contrac-
tually shorten the generally applicable statute of limitations for an action. See,
e.g., Erickson v. Ord. of United Com. Travelers of Am., 176 P. 989 (Kan. 1918);
Kan. Free Fair Ass’n v. Ga. Cas. Co., 190 P. 592 (Kan. 1920). But the law has
changed: Those decisions are based on a now-repealed 1897 statute that pro-
hibited the contractual shortening of statutory limitations periods. See Pfeifer,
304 P.3d at 1230. As a result, the Kansas Supreme Court now recognizes that
parties may contractually restricting their limitations periods and that free-
dom-of-contract principles favor enforcing such agreements. Pfeifer, 304 P.3d
at 1230–31; accord Frost v. ADT, LLC, 947 F.3d 1261, 1269–71 (10th Cir.
2020).
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supreme court would do). This process requires a federal court pre-
dicting what the state supreme court would do to “seek guidance from
decisions rendered by lower courts in the relevant state, appellate de-
cisions in other states with similar legal principles, district court deci-
sions interpreting the law of the state in question, and ‘the general
weight and trend of authority’ in the relevant area of law.” Wade v. EM-
CASCO Ins. Co., 483 F.3d 657, 666 (10th Cir. 2007) (internal citations
omitted); see also Cornhusker Cas. Co. v. Skaj, 786 F.3d 842, 851 (10th
Cir. 2015) (examining persuasive authorities to predict whether a state
supreme court would recognize an estoppel theory that it had not yet
applied).
There are several reasons to believe that the Kansas Supreme
Court would extend its estoppel doctrine to contractual limitation pe-
riods. Perhaps the strongest is that the general weight and trend of
authority suggest that a defendant insurer may be precluded from re-
lying on a contractual limitation period where the insurer’s statements
or conduct evidence either an admission or recognition of liability or
an intention to reach a settlement without suit. See, e.g., Thompson v. Phe-
nix Ins. Co., 136 U.S. 287, 299 (1890); Reynolds v. Detroit Fid. & Sur. Co.,
19 F.2d 110, 113 (6th Cir. 1927) (collecting cases); Prudential Ins. Co. of
Am. v. Hummer, 84 P. 61, 63 (Colo. 1906); Brocato v. Sun Underwriters Ins.
Co. of N.Y., 53 So. 2d 246, 249 (La. 1951); Sherwood Jewelers-Newark, Inc.
v. Philadelphia Nat’l Ins. Co., 102 F. Supp. 103, 104 (D.N.J. 1952) (col-
lecting cases).
Reflective of this trend, the Tenth Circuit has recognized the rule
applying estoppel to contractual limitation periods in insurance agree-
ments on four occasions. First, in Insurance Co. of North America v. Board
of Education of Independent School Dist. No. 12, Texas County, Okla. et al.,
196 F.2d 901, 904 (10th Cir. 1952), the Tenth Circuit interpreted Ok-
lahoma law, noting that in a statutory fire insurance policy, the insur-
ance company’s acts which deprive the insured of the right to bring an
action within the statute of limitations “operate[] to suspend the run-
ning of the statute of limitation until a denial of liability, after which
the insured is given a reasonable time to commence suit.” Next, in
Aimonetto v. National Union Fire Insurance Co. of Pittsburgh, Pa., 365 F.2d
599, 600 (10th Cir. 1966), the Tenth Circuit interpreted Wyoming law,
noting that estoppel may apply where the insurer has “lull[ed] the in-
sured into a sense of security by prolonged negotiations beyond the
period of limitation.” And in Platis v. American Casualty Co., 466 F.2d
35, 38 (10th Cir. 1972), the Tenth Circuit interpreted Utah law,
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concluding that the insurance company was not estopped from relying
on its contractual limitation period because it gave the insured ample
time to bring his action within the contractual limitation period and
the applicable statute. Finally, in Saddletree Holding, LLC v. Evanston In-
surance Co., No. 23-8024, 2024 WL 1883901, at *3 (10th Cir. Apr. 30,
2024), the Tenth Circuit interpreted Wyoming’s estoppel doctrine,
holding that the insurer was not estopped from relying on the insur-
ance policy’s limitation period because it did not have an affirmative
duty to provide the information sought by the insured.
In addition, several cases in the District of Kansas have recognized
the principle that Sexton promotes when interpreting Kansas law. For
example, in Coates v. Metropolitan Life Insurance Co., 515 F. Supp. 647,
651 (D. Kan. 1981), the district court applied equitable estoppel to find
that the defendant insurer could not rely on a contractual limitation
period where the insurer failed to provide a copy containing the limi-
tation period to the insured upon request. And in Boardwalk Apartments,
L.C. v. State Auto Property and Casualty Insurance Co., No. 11-2714, 2012
WL 4523113, at *4 (D. Kan. Oct. 2, 2012), the district court found that
an insurer could not rely on a contractual limitation period where the
insurer’s actions were the reason for the plaintiff’s delay in bringing
suit.
On the other hand, there are no compelling reasons to believe the
Kansas Supreme Court would reach a contrary conclusion. Bankers
disagrees, arguing that Sexton has not “present[ed] a recognized public
policy exception to Kansas’s longstanding enforcement of contractual
limitations provisions,” and cites two cases where the court enforced
the contractual limitation provision. Doc. 7 at 5–6 (citing Shree Kuber,
LLC v. Steadfast Ins. Co., No. 23-4020, 2023 WL 3995664, at *1 (D.
Kan. June 14, 2023), and then citing Ernst v. Nationwide Mut. Ins. Co.,
No. 20-CV-2340, 2022 WL 1193886, at *3 (D. Kan. Apr. 21, 2022)).
That argument is a non sequitur. And the cases are inapposite. In Shree
Kuber, for example, the district court enforced a contractual limitations
period because the insured failed to establish that the Kansas Supreme
Court’s COVID-19 emergency order concerning statutory rights ex-
tended to private contractual limitations. Shree Kuber, LLC, 2023 WL
3995664, at *3–4. And in Ernst, the district court concluded the insured
failed to allege facts showing that the insurer “acted to induce a specific
belief in him.” Ernst v. Nationwide Mut. Ins. Co., 2022 WL 1193886, at
*7 (emphasis in original). Neither the argument proffered nor the cases
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cited suggest the Kansas Supreme Court would reject equitable estop-
pel as a defense to a contractual limitation.
B
That equitable estoppel is available to avoid a contractual limitation
provision answers only half of the question. To survive Bankers’ mo-
tion to dismiss, there must be a basis to believe it application is plausi-
ble in this dispute.
Under Kansas law, “[e]quitable estoppel is the effect of the volun-
tary conduct of a person whereby he is precluded, both at law and in
equity, from asserting rights against another person relying on such
conduct.” Steckline Commc’ns, Inc. v. J. Broad. Grp. of Kan., Inc., 388 P.3d
84, 91 (Kan. 2017). A party attempting to invoke equitable estoppel
typically “must show that another party, by its acts, representations,
admissions, or silence when it had a duty to speak, induced it to believe
certain facts existed.” Id. “It must also show it rightfully relied and
acted upon such belief and would now be prejudiced if the other party
were permitted to deny the existence of such facts.” Id. In the similar
context of a statute of limitations defense, “a defendant, who has acted
in such a fashion that his conduct is sufficient to lull his adversary into
a false sense of security forestalling the filing of suit until after the stat-
ute has run, will be precluded from relying on the bar of the statute.”
Coffey v. Stephens, 599 P.2d 310, 312 (Kan. Ct. App. 1979).
When equitable estoppel is asserted as the basis for denying a mo-
tion to dismiss, the focus is on the allegations in a complaint. Generally
speaking, a party invoking equitable estoppel must establish that the
other party—through its acts, representations, and admissions—lulled
it into a false sense of security that it did not need to file suit before
the contractual limitation period, and that the party invoking equitable
estoppel reasonably relied on the other party’s representations. L. Ruth
Fawcett Tr. v. Oil Producers Inc. of Kan., 507 P.3d 1124, 1144–45 (Kan.
2022) (articulating the estoppel standard in the statute of limitations
context). When equitable estoppel is invoked in response to a motion
to dismiss, the party invoking equitable estoppel does not have the
burden to have anticipated the assertion of the affirmative defense and
plead facts establishing equitable estoppel applies. Cf. Bistline v. Parker,
918 F.3d 849, 876 (10th Cir. 2019) (citing Fernandez v. Clean House,
LLC, 883 F.3d 1296, 1299 (10th Cir. 2018), and then citing Fed. R.
Civ. P. 8(c)(1)) (applying federal pleading standards to state-based
claim subject to Utah’s statutes of limitations and Utah’s tolling rules);
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see also Kan. Stat. Ann. § 60-208(c)(1)(P) (listing statute of limitations
as an affirmative defense). Instead, a complaint can only be dismissed
on the basis of an affirmative defense like contractual limitations if the
plaintiff alleged facts that plainly admit both that it filed suit outside of
the limitation period and that the facts cannot give rise to estoppel
under Kansas law. See Bistline, 918 F.3d at 876 (citing Elm Ridge Expl.
Co., LLC v. Engle, 721 F.3d 1199, 1210 (10th Cir. 2013) (holding that a
federal court sitting in diversity applies the state’s statutes of limitations
and tolling rules)).
The facts Sexton alleged preclude Bankers’ request for dismissal
based on the contractual provision concerning the timeliness of Sex-
ton’s suit. Nothing is pled in the Complaint that would preclude the
application of estoppel. And Bankers’ arguments do not contest that:
they only alleged such an exception should not be recognized under
Kansas law. That alone warrants rejecting Bankers’ motion. Cf. Hanh
Ho Tran v. Trs. of the State Colls. in Colo., 355 F.3d 1263, 1266 (10th Cir.
2004) (“[A] litigant who fails to press a point by supporting it with per-
tinent authority, or by showing why it is sound despite a lack of sup-
porting authority or in the face of contrary authority, forfeits the
point.” (quoting Phillips v. Calhoun, 956 F.2d 949, 953–54 (10th Cir.
1992))).
Not only is there no reason to believe equitable estoppel does not
apply, the facts pled in the Complaint suggest equitable estoppel may
preclude Bankers’ from relying on its contractual limitation in this case.
First, the Complaint alleges that Bankers repeatedly indicated to Sexton
that it intended to accept liability for the water damage in his residence.
Doc. 1 at ¶¶ 21, 23, 35–37, 46, 50. Admittedly, some of the represen-
tations to Sexton were general—like when Bankers sued Alpha Roof-
ing to recover costs it had paid to Sexton for the water damage and
Bankers stated in a filing that it “has paid, and will pay, money to and
on behalf of Sexton for damage to Sexton’s Residence and his personal
property.” Id. at ¶ 21 (emphasis in original). But others related to spe-
cific costs it would cover. For example, one agent sent multiple letters
to Sexton stating that Bankers would cover Sexton’s living expenses
while his kitchen was being restored to its pre-loss condition. Id. at
¶¶ 35–36. Another time, an agent approved that Bankers would cover
the expenses necessary to purchase and install a leak-detection system.
Id. at ¶ 46. In fact, Sexton incurred some of these expenses at Bankers’
request. Specifically, one of Banker’s agents asked Sexton to obtain an
independent inspection to determine what repairs his kitchen needed.
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Id. at ¶ 49. Sexton did so, and another agent told him he would be
reimbursed for the inspection, which cost almost $10,000. Id. at ¶ 49.
Yet despite these representations, Bankers did not reimburse Sexton.
See, e.g., Doc. 1 at ¶¶ 46, 49, 53, 58. This is enough to suggest that
Bankers might have participated in the type of conduct that would lull
Sexton into a false sense of security that he did not need to file suit
before the contract limitation period expired. See Hall v. S. River Resto-
ration, Inc., 270 F. Supp. 3d 117, 121–22 (D.D.C. 2017) (finding that an
insurer defendant was estopped from asserting a timeliness defense
because it had repeatedly told the plaintiffs that it would restore their
home to its pre-damage state); cf. Lucero v. Travelers Com. Ins. Co., 647 F.
Supp. 3d 1115, 1123–24 (D.N.M. 2022) (declining to find estoppel
where the insurer had undisputedly denied the plaintiff’s claim before
the contractual limitation period expired and never suggested it would
cover the plaintiff’s expenses).
Second, the timing of Bankers’ representations to Sexton suggests
estoppel is warranted. Bankers and Sexton were frequently communi-
cating about Sexton’s claim over the course of at least three years. See,
e.g., Doc. 1 at ¶¶ 52, 66. During that time, Bankers arranged for five
inspections of Sexton’s of Sexton’s residences and adjusted Sexton’s
claim eight times. Id. at ¶ 66. Then, just weeks before the five-year con-
tractual limitation period expired, Bankers told Sexton that the last step
would be for Sexton to submit to an examination under oath. Id. at
¶ 60. Yet Bankers delayed scheduling this examination until two
months after the contractual period. Id. at ¶ 62. A couple months later,
Bankers ultimately denied Sexton’s claim. Id. at ¶ 63. This timeline fur-
ther supports a finding of estoppel. See Presbyterian Healthcare Servs. v.
Factory Mut. Ins. Co., 512 F. Supp. 3d 1169, 1178 (D.N.M. 2021) (estop-
ping an insurer from asserting a timeliness defense because the insurer
continued negotiating with the plaintiff up to and after the limitation
period expired and had asked the plaintiff to provide more information
less than two weeks before the time period expired).
Third, Sexton has alleged facts suggesting that Bankers was respon-
sible for the delays that led to his claim being denied after the five-year
limitation period had passed. Sexton timely complied with Bankers’
repeated requests for documentation, inspections, and other proof to
support his claimed losses from the rainstorm. See, e.g., Doc. 1 at ¶ 55.
But, as previously noted, Bankers delayed scheduling Sexton’s exami-
nation under oath, a prerequisite to denying his claim, until after the
five-year limitation period had expired. See Dunaway v. Allstate Ins. Co.,
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813 N.E.2d 376, 384 (Ind. Ct. App. 2004) (finding estoppel where the
insurer’s actions caused the plaintiffs to wait until after the limitation
period passed to file suit, rather than the plaintiffs’ own actions).
There are decisions from other jurisdictions that have declined to
apply equitable estoppel when invoked in situations materially distin-
guishable from the circumstances that Sexton identifies. For example,
the Sixth Circuit affirmed the entry of summary judgment in favor of
the insurer where there was no evidence that it lulled the insured “into
inaction by promising to pay their claim” by waiting until after the lim-
itation period to deny the claim because the lengthy investigation sug-
gested a possibility that the claim would be denied. Smith v. Allstate Ins.
Co., 403 F.3d 401, 407 (6th Cir. 2005). A trial judge in New York also
granted the insurer summary judgment and refused to apply estoppel
where the insurer simply engaged in ordinary negotiation processes
that happened to extend beyond the contractual limitation period but
repeatedly asserted its claims processing investigation was not intended
to constitute a waiver of any contractual limitation. Penna v. Peerless Ins.
Co., 510 F. Supp. 2d 199, 207 (W.D.N.Y. 2007). And, more recently, a
Pennsylvania court granted the insurer judgment as a matter of law
where there was no evidence that the insurer lulled the insured into
inaction and, instead, the insured’s own actions caused the delay in re-
solving the claim. Long v. Farmers New Cent. Ins. Co., 267 F. Supp. 3d
530, 535 (E.D. Pa. 2017).
Discovery may ultimately undermine Sexton’s claim. Indeed,
Bankers makes several arguments in its moving papers to suggest that
estoppel should not apply. Doc. 7 at 3–4. But Bankers’ factual allega-
tions cannot be considered, much less credited, at this stage. Brokers’
Choice of Am., Inc. v. NBC Universal, Inc., 861 F.3d 1081, 1103 (10th Cir.
2017) (noting that matters outside the complaint may not be consider-
ing when evaluating whether a claim has been stated unless that mate-
rial is incorporated by reference or attached to the complaint and is
indisputably authentic); United States v. Leffler, 942 F.3d 1192, 1197–98
(10th Cir. 2019) (noting arguments made for the first time in a reply
brief undermine the adversarial process). As a result, Bankers’ motion
to dismiss must be denied.
III
For the foregoing reasons, Bankers’ Motion to Dismiss, Doc. 6, is
DENIED.
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It is so ordered.
Date: January 28, 2026 s/ Toby Crouse
Toby Crouse
United States District Judge
Case 2:24-cv-02388-TC-BGS Document 152 Filed 01/28/26 Page 13 of 13