Corporate policyholders that rely on large insurance brokers to design and place their coverage programs should take note of a recent federal court decision out of the Middle District of North Carolina.
In Teijin Automotive Technologies NA Holding Corp. v. Sompo America Insurance Co., No. 1:24cv159, 2026 WL 2797942 (M.D.N.C. Sept. 18, 2026), Judge Thomas D. Schroeder granted summary judgment for the insurer on all Teijin’s claims, including breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair and deceptive trade practices. The decision offers several important lessons for companies that purchase complex, manuscript insurance programs (i.e., custom-drafted rather than off-the-shelf policy forms that are created specifically for a particular insured’s unique needs).
The Dispute
Teijin, a vehicle parts manufacturer, purchased a manuscript property insurance policy from Sompo that included a Communicable Disease Coverage Endorsement. That endorsement provided coverage when a covered location had the “actual not suspected presence of communicable disease” and access to the location was limited by a governmental order or a corporate decision. After the COVID-19 pandemic disrupted operations at Teijin’s facilities across several states, Teijin filed a claim seeking up to $50 million in coverage. Sompo denied the claim, and litigation followed.
Your Broker’s Drafting Can Work Against You
One of the most consequential aspects of the opinion is the court’s treatment and resolution of policy ambiguity. The opinion reinforces that under North Carolina law, ambiguous insurance policy language is ordinarily construed against the insurer and in favor of the policyholder. The rationale is straightforward: insurers typically prepare the policies and choose the language, so they should bear the consequences of unclear drafting. At the risk of stating the obvious, “ordinarily” and “typically”, by definition, are not “always.”
In evaluating the key endorsement language, the court found that the language was “fairly and reasonably susceptible” to the construction the insurer, Sompo, advanced. Normally, that finding would trigger construction against the insurer. However, the record showed that Teijin’s broker provided the endorsement language to Sompo in 2017, requesting that Sompo include a communicable disease limit on the policy. Sompo accepted the language largely as written, substituting only a $50 million coverage limit at Teijin’s broker’s invitation. Sompo’s underwriter testified that the carrier lacked bargaining power and accepted the broker-provided language “in order to be commercially viable on an account where there were other carriers also vying for this business”.
Given the insured’s broker’s role in selecting the relevant language, the court declined to construe the ambiguity against Sompo and instead construed it against Teijin. The court cited North Carolina precedent holding that ambiguous language should not be construed against the insurer when the insurer was not the sole drafter of the policy. The court noted that this result was also consistent with broader authorities recognizing that the adhesion-contract rationale “has little application” where the insured is a “large, knowledgeable business firm” with manuscript policies “negotiated and drafted by the insured.”
The practical takeaway is significant. When a policyholder’s broker drafts or selects policy language, courts may treat any resulting ambiguity as the policyholder’s problem rather than the insurer’s. This represents a meaningful shift from what many corporate policyholders have historically had cause to presume: that ambiguity will always cut in their favor. Companies should work closely with their brokers to scrutinize the precise wording of manuscript endorsements before binding coverage and to understand when their broker is participating in drafting their policies, as they may own that language in a costly coverage dispute.
Contractual Suit Limitation Provisions Deserve Close Attention
The opinion also addresses the enforceability of the policy’s contractual suit limitation clause. Sompo had asserted a counterclaim arguing that Teijin’s lawsuit was untimely under the policy’s two-year-and-one-day limitation period that ran, by its terms, “from the date of the final coverage denial”. The court ruled in Teijin’s favor on this issue, finding that the limitation period accrued from the date of Sompo’s final denial letter on March 15, 2022, not its initial denial on February 12, 2021. The initial letter expressly stated Sompo’s willingness to reevaluate its coverage position in light of additional documentation. Because Teijin filed suit on February 28, 2024, the action was timely.
This holding is a useful reminder for policyholders. Contractual suit limitation provisions in insurance policies often impose shorter deadlines than the applicable statute of limitations, and in many contexts, these contractual provisions will be upheld and enforced against a policyholder. The accrual date matters enormously. Policyholders should document their claims correspondence carefully and identify which communication may trigger the clock on the suit limitation provisions in their policies.
Statutory Bad Faith Claims Are Not Immune from Policy Limitations
Finally, the opinion offers an important lesson about the interplay between contractual suit limitation provisions and statutory claims under the North Carolina Unfair and Deceptive Trade Practices Act (UDTPA). While the court applied North Carolina law to Teijin’s UDTPA claim under the most significant relationship test, it ultimately dismissed the claim on the merits, finding that Sompo’s denial of coverage amounted to nothing more than a reasonable disagreement over policy interpretation.
The broader concern for policyholders lies in a related development. On March 20, 2026, the North Carolina Supreme Court held in Warren v. Cielo Ventures, Inc., No. 203PA24 (N.C. Mar. 20, 2026), that parties may contractually shorten the four-year UDTPA limitations period, so long as no statute prohibits the shorter period and the agreed-upon period is reasonable. That decision reversed the Court of Appeals, which had found such clauses unenforceable as a matter of public policy. While this case involved a homeowner’s action against a water damage remediation company and not against its insurer, the court’s reasoning was based in its consideration of the legislature’s intent relative to limitations applicable to UDTPA claims generally, signaling its reasoning can and will be broadly applied when considering the timeliness of UDTPA claims. Together, Teijin and Warren signal that policyholders who wish to preserve the ability to bring UDTPA claims against their insurers should review the suit limitation provisions in their policies with care. A broadly worded contractual limitation clause may now restrict not only contract claims but statutory claims as well.
What Corporate Policyholders Should Do Now
These developments warrant a careful review of existing insurance programs, particularly manuscript policies placed by large brokers. Consider the following steps:
- Audit manuscript endorsement language. Understand which provisions your broker drafted, selected, or proposed. If a coverage dispute arises, a court may construe ambiguous language against you rather than the insurer.
- Track denial correspondence meticulously. Identify and calendar the contractual suit limitation deadline, taking a conservative reading and approach to identification.
- Examine suit limitation provisions for breadth. Determine whether your policy’s limitation clause applies only to breach of contract claims or extends to statutory claims, including UDTPA and bad faith theories. If it does, consider negotiating a carve-out or longer period.
- Engage coverage counsel early. The intersection of manuscript policy language, broker involvement, and contractual limitation provisions creates traps that after the fact are difficult to unwind, if they can be unwound at all.
Ultimately, the decision whether and how to adjust your insurance program is yours to make. But Teijin makes clear that corporate policyholders should not assume the traditional pro-policyholder rules of construction or traditional understanding of suit limitations will definitively apply to their claims.
