Policy Time Limits on Placing Claims and Legal Actions
THE CONCERN: Many people find out they have damage to their property and the first concern they have is whether or not they can place a claim for the damages. In most cases you can, even if it’s been two or more years. Many policies just require the insured to timely report their claim. Timely reporting of a claim usually is interpreted to mean that, once you learn of damages to your property, you report those damages soon after. Soon might be an hour, a week, or maybe even a month or more after the discovery of said damages. Soon would likely not mean that you find out about the damage and wait 10 years to report it.
SUMMARY: An insured can usually report a claim for years after the damaging event occurred so long as the insured is reporting said damages within a timely period after they learn of the loss.
VERY IMPORTANT NOTE: While the insured typically can claim damages long after they have happened, almost every insurance policy has a built-in time limitation that applies to lawsuits the insured might bring against them! The specific clause we are talking about here is usually called the “Legal Action Against Us Clause”.
SAMPLE LEGAL ACTION AGAINST US CLAUSE:
The typical policy language reads something like this…
Legal Action Against Us:
No one may bring legal action against us under this insurance unless:
There has been full compliance with all of the terms of this insurance; and
The action is brought within 1 year after the date on which the direct physical loss or damage occurred.
CLARIFICATION: For the purposes of this article, we are focused on the time limitations related to a law suit. It is important to know that each policy is unique. Some policies will give 1 year, 2 years, and, in rare cases, 3 years, after a loss event has occurred to bring a suit against the insurer. If the noted time limit has run, the insured can still typically place an insurance claim and the insurer will still typically review the claim and pay what they feel to be the accurate sum owed to the insured, but the insured will typically NOT be able to bring a lawsuit against the insurer if the insurer acts inappropriately or refuses to pay what is owed for the loss.
WHY IS THIS IMPORTANT: What can happen in a bad scenario is an insured places a claim, before or after the “legal action against us” time limit has run. The claim proceeds and the time limit for a law suit passes. The insured needs 500k to fix their covered damages and has enough coverage for this. The insurer offers 100k and refuses to budge from their number. The insured now is likely without the ability to go to court and legally compel the insurer to pay what they should and is stuck with the 100k offered (at least based on what the policy allows). If the time limit hadn’t been passed, the insured could hypothetically take the insurer to mediation and receive a settlement (often higher than what the insurer originally offered) or the insured could go to court and make the case to receive what they are owed, and, if successful, additional damages based upon what they and/or their lawyer can prove.
TOOLS IN DEALING WITH TIME LIMITS TO FILE A LEGAL ACTION AGAINS THE INSURER:
-If you are past the time limit: You are very likely without any options BUT the you could request that the insurer sign a tolling agreement designed to all the insurer will extend your policy’s legal action against us limits to still allow you to file suit if needed. It is NOT likely that an insurer will agree to this (typically tolling agreements are sent to the insurer before the time limit has run).
-If you have placed your claim, the time limit hasn’t run but is nearing, and the Insurer is amenable: You or your representative will provide a signed Tolling Agreement to the insurer, requesting a period of additional time to extend your “Legal Action Against Us” rights. Most insurers will agree to this and will send the dually signed tolling agreement back, thereby extending the insureds “Legal Action Against Us” rights and allowing everything to proceed similar to a standard claim.
-If you have placed your claim, the time limit hasn’t run but is nearing, and the Insurer refuses to sign a tolling agreement: Your only real option to preserve your “Legal Action Against Us” rights is to have a qualified attorney file a lawsuit against the insurer. This doesn’t necessarily mean that you must fight the Insurer in court but the action of filing a lawsuit means they you have filed a legal action against the insurer within the time limits of the policy and that the time limits are no longer running.
TAKEAWAY: As soon as covered damages are known to exist, it is best to review the terms of the policy and ensure that there has been full compliance with the terms of the policy. If the “Legal Action Against Us” timeline is close (within 6-9 months), and a claim has not been resolved, then it may be time to seek advice on how to best protect the insured’s rights.
Article written by Peter Obrien, President and Founder of Solutia Adjusters.
DISCLOSURE: Please note that this is not legal advice. We are not lawyers. We are simply reviewing legal actions as they relate to/are governed by insurance policies and common practices that we note in our field.