A Video Explaining the Application of the Private Limitation of Action Provision

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The phrase, “inception of the loss” in the standard fire insurance policy has been interpreted to mean “the occurrence of the casualty or event insured against.” [ See e.g., Zuckerman v. Transamerica Ins. Co., 133 Ariz. 139, 650 P. 2d 441 (1982) (Arizona law); Closser v. Penn Mut. Fire Ins. Co., 457 A. 2d 1081 (Del Supr 1983) (Delaware law); Sager Glove Corp. v. Aetna Ins. Co., 317 F. 2d 439 (7th Cir) (Illinois law), cert den 375 U.S. 921 (1963); Gremillion v. Travelers Indemnity Co., 256 La. 974, 240 So. 2d 727 (1970) (Louisiana law); and General State Authority v. Planet Ins. Co., 464 Pa. 162, 346 A. 2d 265 (1975) (Pennsylvania law).]

The Sixth Circuit held that a one-year limitations period after the inception of loss or damage in an insurance contract did not conflict with Kentucky law and was reasonable. [Smith v. Allstate Ins. Co., 403 F.3d 401, 402-04 (6th Cir. 2005); Miller v. Seneca Specialty Ins. Co. (W.D. Ky., 2019)]

The inception of loss means “the time when the loss was first incurred or began to accrue.” [Tucker v. State Farm Mut. Auto Ins., 2002 UT 54, ¶¶ 13-14, 53 P.3d 947].

In 1885, the California Court of Appeal found the one year private limitation to be enforceable unless the plaintiff established that negotiations with the defendant insurer established a waiver or caused the insurer to be estopped from asserting the provision as a defense. [Garido v. American Cent. Ins. Co. of St. Louis, 2 Cal Unrep. 560, 8 P. 512 (1885).] Finding no evidence of waiver or evidence to support estoppel, the defense verdict was affirmed.

In Sarmiento v. Grange Mutual Casualty Company, 106 Ohio St.3d 403, 2005-Ohio-5410 (2005), the court found that a two-year contractual limitation period for filing uninsured- and underinsured-motorist claims is reasonable and enforceable, regardless of whether the foreign state in which the accident occurred provides a longer statute of limitations for the underlying tort claim.
ZALMA OPINION

Every person insured and every lawyer representing a policyholder must undertstand the fact that insurance policies contain private limitation of action provisions and, if there is a dispute, the suit must be filed before the expiration of the private limitation not the state’s statute of limitations.