Velasquez

Anthony and Ampelia Velasquez (appellants) appeal from the judgment entered in favor of Truck Insurance Exchange, Farmers Insurance Exchange and the Farmers Insurance Group (collectively, Farmers) in their bad faith action. Judgment followed the granting of Farmers’s motion for summary judgment on the grounds that the action was barred by the one-year limitations clause contained in the insurance policy, breach of which formed the basis of appellants’ action.

In July 1985, appellants purchased an apartment building which they insured with Farmers under a property and multiperil policy. On March 24, 1986, a fire damaged a portion of the building. Two days later, on March 26, appellants filed a claim with Farmers. Appellants also retained the services of an independent claims adjustment service called Rainbow Claim Service.

On April 1, 1986, Farmers sent a reservation of rights letter to appellants indicating that the policy had been cancelled in September 1985, more than six months prior to the fire. The letter informed appellants that Farmers would investigate the occurrence “to determin[e] the facts of the loss and the coverage issue.” It stated it did so “with a full…