Statute of Limitations on Insurance Claims

Insurance is often unavoidable for businesses and many consumers. In an ideal world, insurance wouldn't be necessary, but accidents happen and insurance claims help cover the losses. Filing an insurance claim is rarely stress-free; if the claim is not filed properly or within the applicable limitations period, the insurance company may be able to deny the policyholder’s claim.

Purpose of Statutes of Limitations

Statutes of limitations prevent a party from waiting too long to bring a claim or lawsuit against another party. For insurance companies, statutes of limitations are very helpful in spurring the policyholders to act after events occur that might trigger potential insurance claims. If the policyholder waits too long to bring a claim, the insurance company may not be able to investigate the matter fully because evidence could be lost. The limitations period may vary depending on the type of policy at issue and by the individual terms of the insurance policy.

Terms of the Policy Control

The terms of the individual insurance contract govern the time period to bring a claim for benefits and also a limitations period to bring a claim against the insurance company for a denial of benefits or a breach of contract. Often, the limitations period for bringing a claim is relatively short; according to, auto-accident claims must typically be brought within 30 days after the accident. The limitations period to sue for breach of contract or to dispute a denial of coverage are longer.

State Law Affects the Limitations Period

While the individual insurance contract may control items such as the limitations period for bringing a claim, state laws control the limitations period for bringing a breach of contract action against the insurance company. In Maryland, for example, a breach of contract claim must be filed within three years after the date giving rise to the cause of action occurs. If the insurance contract states a shorter period, it is void as against public policy. Each state has a similar provision, though the limitations period may differ.

Limitations Period Is Defensive

While courts will uphold a limitations period to bring a claim for benefits, the limitations period for bringing a claim against the company for breach can be brought after the limitations period and the court will allow the claim, unless the insurance company raises a statutes of limitations defense. In this way, the limitations period is defensive; it only applies if the defense raises the claim.