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UIM Denial Triggers Statute of Limitations (PA)

December 20, 2017

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The Pennsylvania Supreme Court has recently decided that, when it comes to an uninsured motorist claim, the statute of limitations only begins to run upon an alleged breach of a contractual duty.  In <a href="">Erie Insurance Exchange v. Bristol</a>, a commercial automobile insurer brought declaratory judgment action seeking determination that an uninsured motorist claim filed by an injured employee of the insured was barred by the statute of limitations.
This lawsuit was initiated when Michael Bristol  reported a hit-and-run accident that occurred within the scope of his employment on July 22, 2005.  Bristol was employed by RCC, Inc. as a lineman, and RCC, Inc. was insured through Erie Insurance Exchange.  This policy contained an Uninsured/Underinsured Motorist Coverage Endorsement, which provided coverage of $500,000.00 per accident.  The Endorsement also included an arbitration clause which provided for binding resolution of liability disputes and the amount of damages under the Endorsement, reserving other disputes, including the applicability of any statute of limitations, to the courts.
On June 19, 2007, Bristol sent a letter to Erie regarding his claim.  On July 9, 2007, Erie reserved its rights.  Each party selected arbitrators and Erie obtained a statement under oath from Bristol.  Mire than seven years post accident, in September 2012, the parties exchanged correspondence surrounding Bristol’s unrelated incarceration and the qualified delay this would cause.  On May 29, 2013, Erie filed an action for declaratory judgment stating that Bristol’s claim was now barred by the statute of limitations.  Specifically, Erie claimed that the statute of limitations began to run on the date of the accident when Bristol was unable to identify the vehicle involved in the hit-in-run, thereby qualifying it as an uninsured motorist claim.  Bristol’s position was that Erie’s reservation of rights and agreement to arbitrate precluded application of the statute of limitations because there was no contractual requirement to file a court action.
The Pennsylvania Superior Court held that, for purposes of uninsured motorist claims, the statute of limitation begins to run when a claimant injured in an automobile accident initially learns that the other driver is uninsured.  The Pennsylvania Supreme Court disagreed and found that this conclusion was not based in the pertinent statutory text, prevailing statute of limitations doctrine, or significant public policy concerns.
The Pennsylvania Supreme Court relied on the general rule for computing periods of limitation under Section 5502 of the Judicial Code.  That rule states that “the statute of limitations begins to run at the time when a complete cause or right of action accrues or arises, and only at such a time, that is, as soon as the right to institute and maintain a suit arises, or when there is a demand capable of present enforcement.”  Therefore, the statute of limitations would begin to run when the insurer is alleged to have breached its duty under the insurance contract.
Additionally, the Pennsylvania Supreme Court looked to public policy issues to determine if this circumstance required a special rule for determining when the statute of limitations begins in uninsured motorist cases.  The Court concluded that although uninsured motorist coverage serves the purpose of protecting innocent victims from uninsured motorists, that purpose does not rise to the level of a public policy overriding every other consideration of statutory construction.  Additionally, the Court noted that any concerns about an insured delaying submission of a claim or an insurer delaying action on a claim do not justify departing from breach of contract principles attendant to triggering the statute of limitations.    The Court concluded that the proper circumstance to begin the running of the limitation period is an alleged breach of the insurance contract, which will be occasioned by a denial of a claim or the refusal to arbitrate.
Thanks to Zhanna Dubinsky for her contribution.
For more information, contact Denise Fontana Ricci at <a href=""></a>.


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