A Michigan court just handed down a split ruling that property insurers will want to read carefully – a vague denial letter may not stop the limitations clock on all claims at once.
The case started with a broken pipe. Water from the second-floor bathroom of the plaintiffs' home accumulated under the bathroom floor and broke through the kitchen ceiling below, damaging their property. Auto-Owners promptly inspected the home, noting water damage to the kitchen ceiling and a section of the upper kitchen cabinets, and got to work reviewing the claim.
Then things got complicated.
On August 18, 2022, the insurer wrote to the Maksyms confirming coverage for the water damage from the leaking pipe. But in the same letter, it said no to a couple of things: it would not cover the plumbing repairs or upgrades the Maksyms had since made to their home – the policy covered accidental direct damage from the leak, not fixing the pipe that caused it, and not preventive plumbing improvements. It also declined to pay additional living expenses because the Maksyms themselves had told the insurer the water damage had not made their home unlivable. The policy only triggered that benefit if the covered loss rendered the home unfit to live in.
So far, a fairly routine partial denial. But what happened next is where the case gets instructive.
In February 2023, the insurer followed up in writing, reiterating that there was no coverage for plumbing improvements, the second-floor bathroom, or the remaining main floor kitchen interior, while acknowledging liability for damage to a section of the kitchen walls, ceiling, upper and lower cabinets near the leak, and a granite countertop and backsplash. It made two payments to the Maksyms totaling about $10,000.
Over the next six months, the Maksyms remodeled their home and submitted a proof of loss seeking roughly $135,000. Their list included additional living expenses, renovations to the second-floor bathroom and tile shower, recarpeting of the stairs, refinishing the hardwood floors, painting services, new kitchen appliances, plumbing upgrades, and a range of other items listed simply as "to be determined." Auto-Owners rejected the proof of loss, saying the Maksyms had not provided photographic documentation to support the "to be determined" claims, the second-floor claims, and claims regarding additional cabinetry and appliances in the kitchen.
The Maksyms then demanded an appraisal of all their claims. The insurer responded that appraisal was premature – there were still coverage questions to resolve – and gave the Maksyms until June 12, 2023 to supply sufficient documentation, warning that failure to do so could jeopardize their coverage. When that deadline passed without the required proofs, the insurer formally denied liability for all the unproven claims and agreed to an independent appraisal only for the specific items it had already acknowledged covering.
The Maksyms filed suit on October 25, 2023, and later moved the trial court to compel the insurer to participate in a full appraisal of all their claims, including those that had been denied.
At the trial court level, they ran into a wall. The judge found that Auto-Owners had denied the claim all the way back on August 18, 2022, which is when the policy's one-year clock to file suit started ticking. Under the policy's "Action Against Us" provision, any lawsuit had to be brought within one year after the loss or damage occurs. Critically, the policy also said the clock is paused from the time the insured notifies the insurer of the loss until the insurer formally denies liability – a provision that mirrors Michigan statute MCL 500.2833(1)(q). The trial court ruled the clock ran out on August 18, 2023, making the Maksyms' October 2023 lawsuit too late. It dismissed all their claims and denied their motion to compel a full appraisal.
The Michigan Court of Appeals, in its February 24, 2026 decision, saw things differently — at least in part.
The appellate court noted that the August 2022 letter denied coverage for the plumbing repairs and additional living expenses. But for everything else – the second-floor bathroom, the other kitchen items, and the broader list of disputed damages – the court found the letter did not amount to a formal denial. It had noted the Maksyms' own statement that damage was limited to the kitchen area, but it never explicitly said it was denying liability for the second-floor bathroom or other areas.
Just as importantly, after sending that letter, the insurer continued asking the Maksyms to provide more documentation to support those very claims – behavior the court read as a sign that liability for those items remained unresolved.
Michigan courts have previously held, in Smitham v. State Farm Fire & Casualty Co., that a formal denial sufficient to stop the clock must be explicit and must unequivocally impress upon the insured the need to pursue further relief in court. The August 2022 letter simply did not meet that bar for the disputed additional claims. Whether it constituted a real denial – or even one that was later revoked – was a question of fact for the lower court to sort out on remand.
On the appraisal question, however, the appellate court sided with the insurer. Under Michigan law, either party to an insurance dispute can demand that a disagreement over the amount of a loss be resolved through appraisal — essentially a streamlined alternative to fighting it out in court over the dollar figure. But there is an important prerequisite: the insurer must have already admitted that the loss is covered. Appraisal is a tool for settling how much is owed, not whether anything is owed at all.
The Maksyms pointed to the Court of Appeals' own 2024 decision in Cantina Enterprises II Inc v. Prop-Owners Ins Co, arguing that Auto-Owners' partial payments amounted to an admission of liability across all their claims. The court disagreed. In Cantina, the insurer had never formally denied the disputed claim, had continued paying parts of it, and had kept encouraging the insured to submit more proofs – all of which the court read as effectively conceding that coverage applied. Here, by contrast, Auto-Owners had paid for specific items it determined were covered, while explicitly disputing others. Paying for what you admit you owe, the court explained, is not the same as admitting you owe everything on the table. Because the coverage question on the remaining claims was still unresolved, appraisal was not yet the right tool.
For claims professionals, the ruling carries a straightforward but important message. How a denial letter is written – and precisely what it addresses – can determine when the limitations clock starts running on each individual claim. A letter that clearly closes the door on one item but leaves others ambiguous may not be the clean, all-encompassing denial that stops the tolling period across the board. And continuing to request documentation on disputed items after sending what was thought to be a denial letter, the court made clear, can muddy those waters considerably.
