Waiver of the Statute of Limitations
Friday, December 21, 2012 | 0
Insurance companies often engage in settlement negotiations with claimants and/or tortfeasors, right up to the statute of limitations. When an adjuster is negotiating settlement of a claim with a third-party claimant or is attempting to negotiate recovery of a subrogation interest from a tortfeasor or their carrier, the subject of waiving the statute of limitations is often raised.
When the liability adjuster is negotiating with a third-party claimant, especially as time draws close to the end of the statute of limitations period, he or she wants to be careful not to inadvertently waive the statute of limitations defense.
Likewise, when the subrogation recovery negotiations move along successfully, but extend beyond the applicable statute of limitations period and no suit is filed to preserve the subrogation cause of action, it is good to know whether and when the argument that the statute of limitations has been waived by the actions or words of the third-party carrier is available.
Statutes of limitations are generally governed by state law, which makes anything other than a generic discussion of this subject beyond the scope of a newsletter article such as this. In Illinois, for example, most attorneys and claims handlers are familiar with the two-year statute of limitations for personal injury cases. 735 I.L.C.S. § 5/13-202.
However, there are many other statutes of limitations in Illinois. There are different deadlines for construction cases, warranty cases and property damage claims, among others. There are also statutes of repose which begin to run not from the date the cause of action accrued, but from when some event (e.g., substantial completion of construction of a house) occurs. Claims for minors in most states do not run until a number of years after they reach majority. Statutes of limitations can be tolled for members of the armed forces or during periods in which the defendant is out-of-state. Tex. Civ. Prac. & Rem. Code § 16.063 provides that “The absence from this state of a person against whom a cause of action may be maintained suspends the running of the applicable statute of limitations for the period of absence.” So, it is an understatement to say that any claims handler should be familiar with exactly which statute of limitations is involved for the type of claim being handled.
In order to avoid someone claiming your actions have tolled the statute of limitations, it is important to recognize the difference between estoppel and waiver. For example, in Illinois, a claim of “estoppel” is made when:
- The other person misrepresented or concealed material facts;
- The other person knew at the time he or she made the representations that they were untrue;
- The party claiming estoppel did not know that the representations were untrue when they were made and when that party decided to act, or not act, upon the representations;
- The other person intended or reasonably expected that the party claiming estoppel would determine whether to act, or not, based upon the representation;
- The party claiming estoppel reasonably relied upon the representations in good faith to his or her detriment; and
- The party claiming estoppel would be prejudiced by his or her reliance on the representations. DeLuna v. Burciaga, 223 Ill. 2d 49, 857 N.E.2d 229, 306 Ill. Dec. 136 (2006).
These elements must be proven by the party claiming estoppel. The conduct of the adjuster in dealing with the claimant is what matters here. If it becomes apparent that the claimant believes the statute of limitations is two years, when it is one, and the adjuster does or says nothing, estoppel may prevent a successful defense based on the statute of limitations.
In Elliott v. General Casualty Co., 2011 Wis. App. 155, 807 N.W.2d 33, 337 Wis.2d 737, negotiations by an insured with his insurance company resulted in a check for less than the insured wanted being sent after the statutory one-year period for action on a fire insurance policy. The Court said that assurances by the claims adjuster that the claim would be paid when the repairs were complete, combined with simultaneously telling the insured not to begin repairs until the estimate was approved, was sufficiently “unfair and misleading” as to outweigh the public interest in the statute of limitations being enforced.
Every state is different and the need to be familiar with a state’s laws regarding the statute of limitations is important. It is also challenging when a claims adjuster’s geographical responsibilities cover many states. The general rule is that any plaintiff, who delays filing a claim simply because he or she thinks the matter will settle, without obtaining an agreement tolling the statute of limitations runs the risk of being barred from recovery. However, if the defendant or defendant’s carrier intentionally lures the plaintiff into a false sense of security, estoppel may apply to a statute of limitations defense. Repeated promises to settle, dragging out the settlement process or delay in providing information to the claimant, all figure into the possible estoppel argument. The plaintiff must reasonably also rely on the representation by the defendant.
When you are negotiating with an unrepresented individual, it is always wise to simply advise them of the existence of the statute of limitations. There is usually no need to become their lawyer and specify the date on which the statute runs, only that there is one. There is just as big a risk of notifying them of an exact date which later turns out to be wrong. If you are dealing with an attorney, there is usually no need to warn or inform them of the statute of limitations.
Timothy L. Pagel is an attorney who practices in subrogation, insurance defense and insurance coverage for the Matthiesen, Wickert, Lehrer law firm in Hartford, Wisc. This column was reprinted with the firm's permission from its client newsletter.
Comments