Of UIM, Statutes of Limitation and Gordian Knots. Riggs v. State Farm Holds Contractual limitation for Underinsured Motorist Claim Matching Up with Tort Claim is Unreasonable.

Alexander Cuts the Gordian Knot

Alexander Cuts the Gordian Knot

Court of Appeals held that State Farm’s contractual limitation in the automobile insurance policy requiring any action for underinsured motorist (UIM) benefits be brought within two years of the date of the injury or the last reparation benefits paid, whichever is later,  was unreasonable.  Thus, the contractual limitation period fell back to fifteen years.

This is an interesting decision, and a must read for all personal injury lawyers.  It highlights a problem I have noted for years that inherent nature of underinsured claims being married to the underlying tort claim not only creates a hybrid cause of action, but worse produces an unfair and unreasonable result.

The key problem for me is the accrual date of the cause of action.  This applies with equal logic to claims for uninsured motorist benefits.

The underlying tort’s statute of limitations based upon two years from MVA or last PIP payment, whichever is later, is already an artificial condition if the purpose of a limitations of action bar is to let tortfeasors know when they are no longer subject to being hauled into court.  The statute of limitations removes this dark cloud.  However, when the statute of limitations is placed under the microscope in car accident cases which ties the accrual date to date of the collision which the tortfeasor would/should know, but then has the plan B move of hitching it to the last pip payment, then the tortfeasor has no clue when it’s over.

Worse  yet, the injured person has no clue either for several reasons.

One – they clearly do not know the limitation under the no fault act.

Two – figuring out the last pip payment is now becoming a journey into Dante’s inferno with each circle never ending, never stopping, never starting.

Three – reading the PIP ledger or explanation of benefits is difficult for those who know.  Imagine for those who are not legally inclined?  Plus, getting the PIP ledger is proving a difficult task where some carriers require you to go on-line, mix the payments up between med-pay and PIP.  Add the burden that many PIP carriers do not provide logs but just an endless stream of  EOB’s (explanation of benefits) with payments, dates, and reasons for payment or nonpayment obscuring the critical information.

Now, flip it over for the tortfeasor who does not even have access to the injured claimant’s PIP information.

The statute of limitations in car accident cases is truly a mystery wrapped up in an enigma hidden in plain sight by those who have no incentive to update their insured.  In fact, the PIP carrier has an incentive to keep it buried since the same statute of limitations period applies to the PIP claims!  Remember, a closed file is a happy file, or so says many of the adjusters I have dealt with over the years.

The above rambling discourse should highlight the difficulties encountered in calculating the statute of limitations for just the tort claim.

Now, multiply that by ten for the underinsured motorist claim.

The key to any statute of limitations is the bright line start date.  Well, this does not work for UIM claims.

First.  The tort claim is in tort, and the UIM claim is in contract.  Just because you are hurt in a collision and have a rather clear starting point for filing an action against the tortfeasor even when  you don’t know the last PIP payment, that date has no applicability for when you know or have reason to know of your UIM claim.

Second.  When do you know or should know you have a UIM claim?  a.  The liability insurer resists telling the injured person the policy limits which is by most reckoning a condition precedent for knowing the tortfeasor’s liability limits are inadequate.  b.  When do you know your injuries and damages exceed those liability limits even when you are told of those limits?  It’s not unusual for the true understanding of the value of the claim is not revealed but for the passage of time, treatment, and temperment.

Now, I will share something with you that you might find irritating.  I read the ruling in this decision, but have not read anything after that holding.  My analysis above reflects views I have had for years.

A UIM claim is a hybrid.  Ditto for the uninsured claim.  It is one thing to measure the damages based upon the underlying tort case as it follows negligence, liability, causation, and winds up at damages.  And since an underinsured motorist claim does not accrue until there is reason to believe your damages exceed the heretofore unknown liability limits, then there is absolutely no reason to permit a contractual limitation on this claim since any artificial limitation for filing an action is inherently unreasonable.

Of course, the uninsured motorist claim has an entirely different condition precedent for kicking in the UM claim.  Not damages, but an uninsured motorist.  However, the complexity of this situation is evident in the fact of owners versus operators with potentially different liability policies in play;  business owners and scope of employment issues;  coverage questions; lapsed policies; new policies; incomplete information on the police report; and the list goes on and one.

The UIM claim does have a potential detour, to wit: liability settlement and the Coots procedures.  However, this is no saving grace for UM policies.

The UIM and UM statute of limitations is an insurance Gordian knot, and the legislature or the courts with their inherent common law powers and the application of jural rights serving as Alexander’s sword cutting through this knotty situation and providing a clear ruling.  Methinks, we have found our Alexander in guise of Court of Appeals Judge Acree.

Now might be a good time to parse this ruling with three opinions.

BTW.  This is my first draft, no re-read, and it’s late;  but, I think you can follow my points through all this meandering.

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