Why Policyholders Should Seek Legal Advice Promptly: Statute of Limitations Complexities

While policyholders are struggling to obtain payment of their insurance claim, they often presume that their insurance company will fully pay their claim when their home is damaged.  If you are a homeowner who has reliably met your obligation to make premium payments for years, you have every reason to expect your insurance company to fulfill its obligations under your homeowner’s policy.  When your insurance company fails to fulfill its duties to investigate, adjust and pay your claim, your attempts to use the legal process to force your insurance carrier to comply with the terms of the policy can be derailed by procedural errors.

One of the most important procedural issues that policyholders need to understand is the statute of limitations.  In Medical Data Systems, Inc. v. Coastal Ins. Group, Inc., Florida’s Fourth District Court of Appeals considered the issue of calculation of the statute of limitations against an insurance agent for negligence in procuring liability coverage.  The policyholder, Medical Data Systems (“MDS”), was a medical debt collector, but no liability insurance was secured by the insurance broker.

After MDS was sued under the Fair Debt Collections Act, the insured retained an attorney and paid an initial retainer fee.  The insurance company denied coverage because the policy purchased did not include liability coverage.  The policyholder eventually settled the liability claims brought by the debtors. 

MDS subsequently filed an agent negligence lawsuit against Coastal and its agent for failing to procure appropriate coverage for the insured.  MDS subsequently amended its complaint to add American Professional Liability Underwriters (APLU) as a defendant, which was a broker that Coastal allegedly hired to obtain the policy.  The claim of negligence was based on the failure to secure appropriate levels of liability coverage.

The APLU filed for summary judgment based on the statute of limitations.  The applicable statute of limitations was four years.  However, the issue turned on when the cause of action accrued.  Accrual of a cause of action refers to when the statute of limitations period begins to run.  The insured contended that the cause of action for negligence did not accrue until the settlement with the debtors who sued the insured.  APLU contended that the statute of limitations began to run when the insured retained counsel and paid a retainer fee two years earlier.  If the APLU’s argument was determined to be correct, the statute of limitations would have already run (expired).

The appellate court sided with the insured in finding that the cause of action for negligence did not accrue until the lawsuits against the insured were settled.  The court reasoned that a cause of action accrues when the plaintiff suffers injury.  In this context, the court found that the action accrued when the underlying lawsuits were settled.  Alternatively, the court noted the negligence cause of action would have accrued when the right to sue the policyholder expired if there were no pending litigation.

While the policyholder prevailed, an insured will be barred from any recovery when a lawsuit is not initiated before the statute of limitations expires.  Because calculation of the statute of limitations can be complicated, an insured should obtain prompt legal advice when an insurance company fails to fulfill its obligations or an insured learns that his or her insurance agent was negligent.  My law firm represents policyholders in claims disputes in Miami and throughout Florida.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations.  No Recovery, No Lawyer Fees.  Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

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