09 Oct Claim Handling Essentials Part 2 – Track the Statute of Limitations
As a follow up to part 1, in which I discussed the importance of getting a copy of your insured policy, in this post I will discuss what to do with one of the most critical pieces of information in it the suit limitation provision.
It goes without saying that there is little an attorney can do to assist a policyholder without the ability to file a lawsuit. In the context of a property insurance claim, the amount of time an insured has to file a complaint (commonly referred to as the statute of limitations) against their respective carrier is typically set out in the insurance policys legal action/suit against us provision. The provision usually reads as follows:
Suit Against Us. No action can be brought against us unless there has been full compliance with all of the terms under Section 1 of this policy and the action is started within one/two years after the date of the loss.
Generally, commercial policies provide two years and residential policies one year from the date of the loss to file. While courts around the country have set varying standards as to how this time-period is calculated,((Some states, like California, allow the time-period to be tolled from the time that the insured makes a claim up until the time that the insurer makes its final claim determination. In Illinois, the time between when an insured submits a proof of loss and when the insurer makes its final claim determination is tacked on to the end of the limitations period. )) one thing remains the same once it has expired, there is absolutely no legal recourse left for a policyholder. While the carrier will still have to give off the appearance of handling the claim in good faith, the policyholder will have almost no leverage to make sure that their claim is properly paid. For instance, while the policyholder is technically allowed to invoke the appraisal clause after the statute of limitations has run, the carrier can easily refuse to go to appraisal for almost any reason because they know they cannot be sued.
That being the case, I am consistently surprised by how often I am referred a claim where the statute has either already expired or is in imminent danger of doing so. In the latter situation,, I am hamstrung in that the only option I have is to file suit. As I discussed in my first post of this series this can certainly be the best strategy for a particular claim. However, often-times an opportunity exists to create more value for the insured prior to filing a lawsuit. For instance, perhaps there are undisputed amounts of money that for one reason or another have not yet been recovered for the insured. If my only option is to file suit, the ability to collect this easy money is significantly reduced. Furthermore, if for whatever reason I am unable to take the claim on, the insured will be left with very little time to find other counsel to get their lawsuit filed.
Having to explain to one of your clients that their claim has been underpaid but there is nothing they can do about it is a situation no contractor or public adjuster wants to find themselves in. Thus, it is imperative that you get the insurance policy, find out what the suit limitation provision is, and then diary and track this date in your calendaring system. At a minimum, I would set alerts for 90, 60, and 30 days before the statute is set to run so you can plan accordingly. Should you find yourself in the position where you get a claim where the statute is about to run, you should reach out to an attorney immediately to assist you in either filing suit or getting a tolling agreement in place.
Blowing a statute of limitations, while fatal, is completely avoidable with a little bit of due diligence and planning. Make sure you track the date.