In my last blog, I discussed how the March 1998 decision of Christiansen v. First Insurance Company of Hawaii, Ltd., confirmed that a lawsuit in Hawaii against an insurer for breach of contract and the tort of bad faith is subject to the two year limitations period imposed by H.R.S. 657-7.
Hawaii cases show that plaintiffs can toll the 2 year time limit. But relying on equitable tolling to extend the two year statute from the date of loss can backfire. The doctrine of equitable tolling cannot be applied to expand the two-year statute of limitations period in HRS §3431:10C-315 based solely on an issuer’s failure to provide a formal notice of denial required pursuant to §431:10C-304(3) (1993) in conjunction with a reduced or partial payment. Jou v. Schmidt, 184 P.3d 817 (App. 2008).
In Wright v. State Farm Mut. Auto Ins. Co., 949 P.2d 197, 202 (App. 1997), the Court held that in the context of no-fault insurance, an insured may bring suit upon an unresolved claim after the applicable statute of limitations has expired, “provided the insured has made the claim for benefits before the running of the limitations period.” In Wright, an insured filed a claim with his insurer for no-fault benefits before the applicable two-year statute of limitations had run. Over a year later, the insurance company denied his claim. If the statute were not tolled, the insured’s later demand for arbitration would have been barred by the two-year limitations period. Rather than strictly apply the statute of limitations, the Court applied the doctrine of equitable tolling and held that “[i]n our view, . . . the two year period should be tolled by [the insured’s] filing of a claim[,]” and only re-activated upon the insured’s notice of the denial of his claim.”
In Jou v. Schmidt, 184 P.3d 817 (App. 2008), the insurer violated the notice requirement under HRS § 431:10C-304(3) when it failed to provide notice of denial after making a reduced or partial payment on Jou’s claim. The Court rejected Jou’s argument that his claim was timely because Island’s violation of the notice requirement under HRS §431:10C-304(3)(1993) tolled the applicable statute of limitations:
§ 431:10C-315 Statute of Limitations. (a) No suit shall be brought on any contract providing no-fault benefits or any contract providing optional additional coverage more than, the later of: (2) Two years after the last payment of no-fault benefits or optional additional benefits[.]
The facts indicate that Island made its final payment to Jou on March 3, 1996. Jou did not request an administrative hearing until September 16, 1998, six months after the statute of limitations expired. In contrast to the tolling cases relied upon by Jou, the record was devoid of evidence that Jou took any action with regard to his claim until months after the statute of limitations expired or that Island postponed or delayed its determination or otherwise lulled Jou into reasonably believing that his claim would be paid. Equitable relief from a statute of limitations is not available to a claimant who fails to exercise due diligence in pursuing a claim, absent conduct or representation(s) by the insurer that could reasonably lead a claimant to believe that further action would be forthcoming. The Court ultimately concluded that equitable tolling did not apply, and Jou’s claim was time-barred.
The Hawaiian Courts have indicated that relying on equitable tolling cannot be presumed when a plaintiff sits on his or her rights. Ultimately, filing a claim within the two year statutes of limitations or the specific time period given in a policy is the best way to ensure a case is not time barred.