Georgia Association of Public Insurance Adjusters
(GAPIA)

Know Your Contract Limitations

Posted by John D. Hipes, Esq., Hipes & Belle Isle
Insurance claims come with an expiration date. Once the claim reaches its expiration date, the insured loses his right to recover. The contract of limitations provision in the policy identifies the expiration date which is the last date the insured can sue the insurer to enforce the recovery under the policy. A lawsuit filed after the suit deadline is subject to dismissal and the insured is effectively barred from recovery. A public adjuster should know when the contract of limitations expires and seek to resolve the claim prior to the expiration date. If the claim has not been resolved, the only way for the insured to preserve his rights against the insurer is to file suit before expiration of the contract of limitations.
 
Policy Language:
 
Contract of limitations provisions vary from policy to policy. Always review the specific policy language to understand the insured’s rights. The contract of limitations provision is usually found in the policy Conditions. Here are a few examples:
 
Allstate Property and Casualty Insurance Deluxe Plus HO Policy (APC154 2013):
 
“Suit Against Us.  No suit or action may be brought against us unless there has been full compliance with all policy terms. Any suit or action must be brought within one year after the inception of loss or damage.”
 
State Farm HO Policy (FP-7955 1996):
 
“Suit Against Us. No action shall be brought unless there has been compliance with the policy provisions. The action must be started within one year after the date of loss or damage.”
 
Travelers Homeowners-3 Policy (HO-3 06-91):
 
“Suit Against Us. No action shall be brought against us unless there has been compliance with the policy provisions.
 
No one shall have any right to join us as a party to any action against any insured. Also, no action with respect to Coverage E can be brought against us until the obligation of the insured has been determined by final judgment or agreement
signed by us.”
 
Maryland Casualty Company Precision Portfolio Policy (9S1001 4-99):
 
“Legal Action against Us - No one may bring a legal action against us under this Coverage Part unless:
 
1. There has been full compliance with all of the terms of this Coverage Part; and
2. The action is brought within 2 years after the date on which the direct physical
loss or damage occurred.”
 
Standard Fire Policy:
 
“No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within two (2) years next after inception of the loss.”
 
Although not all contract of limitation provisions read the same, they have certain features in common. 
 
1. Calculating the Deadline:  Contract of limitation provisions require that suit be filed “within” the applicable number of years. The expiration date will be the last business day prior to the applicable anniversary of the date of loss.  For example, if a claim was subject to a two year contract of limitation, and the date of loss was on July 17, 2015, the contract of limitations would expire on Friday July 14, 2017 (not July 17, 2015). 
 
2. Prerequisites:  An insured must comply with the policy conditions prior to bringing suit. For example, if the insurer requires a proof of loss, and the policy provides the claim is not payable until sixty days after the POL is received by the insurer, then the insured needs to submit the POL at least sixty days before the contract of limitations expires. Filing the POL within 60 days of expiration of the contract of limitations will not toll the suit deadline. If the insurer requests an examination under oath, the EUO must be completed and the errata sheet signed and returned to the insurer before the contract of limitations expires. It is a good practice for a public adjuster to calendar claims by determining when the contract of limitations will expire, and then count backwards to identify deadlines by which certain policy conditions can be satisfied.
 
Legal Standard:
 
Fire Losses:
 
In Georgia, the Standard Fire Policy states the contract of limitations for fire losses is within two years from the date of loss. Policies issued in Georgia are required to conform to the Standard Fire Policy and include language at least as favorable as the Standard Fire Policy. If a fire policy includes a contract of limitations of less than the two years for a fire loss, the contract of limitations will conform by law to the minimum two years.
 
Non-Fire Losses:
 
While Georgia law and the Standard Fire Policy control the minimum contract of limitations for fire losses, non-fire losses are governed by the terms of the policy. Non-fire losses such as those caused by wind, water, vandalism, etc. are not required to conform to the two year contract of limitations provision in the Standard Fire Policy. Many policies include a two year statute of limitations for all losses, including fire and non-fire losses. There are, however, policies that still include a one year contract of limitations that remains enforceable as to non-fire losses. If the insured has a non-fire loss and the contract of limitations is for less than two years (example: one year suit deadline) then the claim must be calendared and resolved accordingly.
 
Exceptions:
 
Tolling:
 
In certain instances, the contract of limitations can be tolled in which case the clock stops on the suit deadline. For example, an agreement to appraise claims can toll the contract of limitations. The contract of limitations will be extended by the number of days the claim is in appraisal. To eliminate confusion, the insured and insurer should enter into a written tolling agreement stating date when they agreed to appraise and that the contract of limitations will tolled during the appraisal as to all of the insured’s claims even if less than all of the claims are being appraised. For example, if the parties agree to appraise the dwelling claim, the tolling agreement should state that the contract of limitations is tolled during the dwelling appraisal as to all claims, including the contents and/or ALE claims.
 
Another instance where the contract of limitations may be tolled is where the insurer elects to make repairs to the insured’s property. As with appraisal, the insured should obtain a written tolling agreement from the insurer stating the insurer has elected to repair or replace the damaged property and the contract of limitations will be tolled during the repair process.
 
Waiver:
 
If the contract of limitations has expired, the insured may nevertheless have the right to enforce payment of the claim if the insurer has waived the contract of limitations or is estopped to enforce the provision. If an insured finds himself in a position where the contract of limitations has expired because the insurer has caused the insured to believe the contract of limitations would not be enforced, the insured should consult legal counsel to evaluate whether waiver or estoppel has occurred.  To avoid being in this position, a public adjuster and an insured should not rely on the acts, omissions, or verbal statements of the insurer that the contract of limitations has been extended or will not be enforced; instead, if a public adjuster and insured believe the insurer has extended the contract of limitations or does not intend to enforce the suit deadline, they should always obtain a written extension or tolling agreement from the insurer.
 
Conclusion:
 
Failing to resolve to resolve an insured’s claim prior to expiration of the contract of limitations can have dire consequences. A public adjuster representing an insured should obtain the policy, review the contract of limitations provision, determine when the contract of limitations expires based on the type of loss and policy provision, and then calendar the claim accordingly. The above information is not intended to address all situations or any specific claim.  If an insured has any questions or concerns regarding the scope or applicability of the contract of limitations, the insured should consult legal counsel for guidance.
 
 
John D. Hipes
Hipes & Belle Isle, LLC
178 S. Main Street, Suite 250
Alpharetta, GA 30009
(770) 664-6699
June 19, 2017