The Statute of Limitations on Insurance Claims

A recent case in which the Civil District Court declined to hear the insurance claims of a New Orleans homeowner demonstrates some of the pitfalls associated with a failure to carefully inspect one’s insurance policy. In Halmekangas v. ANPAC, a homeowner claimed that his insurance agent failed to properly inspect his house prior to issuing the policy. As a result, his agent listed his three-story house as a two-story, resulting in inadequate coverage. He claimed to have been unaware of this deficiency until June of 2006; ten months after Hurricane Katrina had destroyed his home.

Louisiana law provides two different statutes of limitation with respect to insurance claims. Claims against the insurer must be brought within one year of injury or damage to the property. Claims against the agent, by contrast, must be brought within one year after the insured either knows or should have known of the agent’s negligence. Louisiana courts regard a suit against the insurer as a suit against the agent, for purposes of the statute of limitations, whenever the suit pertains to actions of the agent. Because Halmekangas predicated his suit upon the agent’s mistake, the court, accordingly, regarded the suit as having been filed against the agent.

In such a case, determining the date upon which the statute of limitations begins to run—the “peremptive period”—is not so easy. In recognition of the fact that evidence of when someone knew something—much less when he should have known something—is often difficult to come by, courts have developed a series of presumptions based upon more easily determinable factual guideposts. First, courts presume notice of the negligence upon delivery of the policy. This represents a long-standing rule of contract law—the “duty to read.” Because an insurance policy is a contract much like any other, the insured is presumed to have read and understand its terms when he receives the policy.

Second, courts presume that delivery follows mailing. Louisiana law specifies four means by which insurers may deliver the policy to the insured: hand delivery in person, by private courier, by certain forms of electronic transmission, and by US Postal Service. By specifying these four methods of delivery, the legislature deemed them reliable. Thus, once the insurer proves that he sent the policy in accordance with one of these methods, the statute of limitations begins to run unless the insured can specifically prove that delivery did not occur—a difficult task in most cases.

It is for this precise purpose that insurance companies keep meticulous records. In this case, Halmekangas’ insurer, ANPAC, proved that it had mailed the policy on January 3, 2005. Halmekangas admitted receiving the policy on January 5, but claimed that he did not receive the page containing coverage limits. In response to this claim, the court noted that the insurer mailed policy declarations and revisions six times between January 5 and June 6, 2005, all over a year before Halmekangas filed suit on June 21, 2006. In light of this overwhelming evidence, Halmekangas failed to prove that he lacked the opportunity to know about the agent’s mistake.

Statutes of limitation provide economic actors with “repose.” They enhance economic efficiency by reducing transaction costs. They do so by eliminating the need for parties to retain records in perpetuity and by providing certainty. Despite this laudable purpose, however, statutes of limitation have their drawbacks. They impose an arbitrary date upon contracting parties, and often seem unjust when one discovers he has rights just soon enough to find out that he cannot pursue them. The benefits of statutes of limitation can only be achieved, however, by establishing a bright line. Courts, therefore, are unable or unwilling to bend the rules for a sympathetic plaintiff.

These considerations underscore the importance of reading and understanding your insurance policy as soon as you receive it. Do not sit on your rights. If your insurer has made a mistake on your policy and is denying you coverage, get legal representation immediately.

Contact the Berniard Law Office Toll-Free at 1-866-574-8005 for help with your insurance claim.

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