## Facts

- Owners of an apartment building held successive first-party property policies from multiple insurers over many years, including Prudential-LMI Commercial Insurance.
- The building sustained progressive, latent property damage that developed over time and was discovered years after it began, including significant foundation cracking.
- Prudential’s policy incorporated the standard one-year suit limitation required for “fire” policies by Insurance Code § 2071 and contained notice and proof-of-loss conditions and certain exclusions (including earth-movement-related damage).
- After the damage was discovered, the insureds submitted a claim; Prudential denied coverage based on an earth-movement/expansive-soil theory and related exclusion.
- The insureds sued Prudential and other insurers that had insured the property during different periods.
- Prudential sought summary judgment, asserting the suit was barred by the one-year suit provision and by noncompliance with notice/proof requirements.
- The trial court denied summary judgment; the Court of Appeal granted writ relief directing summary judgment for Prudential; the California Supreme Court granted review.

## Issues

1. When does the Insurance Code § 2071 one-year suit limitation (“inception of the loss”) begin to run for progressive property damage?
2. Is the one-year suit limitation equitably tolled from the insured’s notice of loss until the insurer’s formal denial of coverage?
3. In progressive first-party property losses spanning successive policies, which insurer(s) must indemnify: the insurer at damage inception, at manifestation, or all insurers on an allocation/exposure basis?

## Decision

- The court held that, in progressive property damage cases, “inception of the loss” occurs when appreciable damage is or should be known to a reasonable insured, triggering the duty to notify the insurer.
- The court held the one-year suit limitation is equitably tolled from the time the insured gives notice of the loss under the policy until the insurer denies coverage.
- The court held that in first-party progressive property loss cases, coverage is triggered at manifestation, and the insurer on the risk at manifestation is responsible for the entire covered loss, subject to policy and loss limits.
- The court remanded for further proceedings under these standards, rather than enforcing summary judgment solely on the one-year limitations theory.

## Legal Principles

- For first-party “fire” policies governed by Insurance Code § 2071, the one-year suit provision runs from “inception of the loss,” defined in progressive loss cases as the point when appreciable damage occurs and is or should be known to the insured under an objective reasonable-insured standard.
- The one-year suit period is equitably tolled between timely notice of loss and the insurer’s denial of coverage, preventing limitations forfeiture during claim investigation and adjustment.
- In first-party progressive property damage involving successive insurers, the manifestation trigger applies: the insurer covering the property when appreciable damage becomes reasonably discoverable bears sole indemnity responsibility for the covered loss, subject to policy terms and limits.
- The manifestation trigger and related accrual/tolling rules were articulated for first-party property coverage and do not purport to govern third-party liability trigger doctrines.

## Conclusion

The court clarified that the § 2071 one-year suit limitation in progressive property damage cases accrues when appreciable, knowable damage triggers a reasonable insured’s notice duty, is tolled from notice until denial, and that indemnity for progressive first-party property loss is owed by the insurer on the risk at manifestation, subject to policy limits and terms.


Prudential-LMI Com. Ins. v. Superior Ct., 51 Cal. 3d 674 (Cal. 1990)