I recently talked with a potential client and his corporate counsel and they inquired about the law in Kansas regarding insurance policies containing limiting language on the time to file suit. There are a couple of cases on point in Kansas, and I chose to write about the Infinity1 case because it details the evolution of the law in Colorado.
This case involved two insurance companies potentially required to pay for damages sustained to an oil well after a lighting strike. Both St. Paul Insurance and Fireman’s Fund had policies containing fairly typical language regarding a suit limitation period of two years:
C. Legal Action Against Us
No one may bring] a legal action against us under this Coverage Part unless:
1. There has been full compliance with all the terms of this Coverage Part; and
2. The action is brought within 2 years after you first have knowledge of the direct loss or damage.
Lawsuits Against Us
If your policy provides property or other first-party protection. Any suit to recover on a loss under any property or other first-party protection provided by your policy must begin within two years after the date on which the direct physical loss or damage occurred to the property that’s required to sustain such loss or damage for the loss to be covered under that protection.
Applying choice of law provisions, the court applied Colorado law to one policy and Kansas law to another.2 On a breach of contract action, Colorado has a three year statute of limitation, while Kansas has a five year limitation period.3
Under Colorado law, “parties to a contract may require that actions founded on the contract be commenced within a shorter period of time than that prescribed by the applicable statute of limitations.” Grant Family Farms, Inc. v. Colorado Farm Bureau Mut. Ins. Co., 155 P.3d 537, 539 (Colo.App.2006) (finding that Colo. Rev. Stat. § 13–80–101(1)(a) (2003) “contains no language prohibiting contractually shortening the three-year limitations period,” therefore, a shorter contractual limitations period is not in conflict with the statute).
Under Kansas law, an action upon a contract “shall be brought within five (5) years.” Kan. Stat. Ann. § 60–511(1) (2012). However, absent other public policy considerations, Kansas law allows parties to contractually agree to limit the time in which to file suit. See Pfeifer v. Federal Exp. Corp., 297 Kan. 547 (2013) (holding that § 60–501 allows contractually limiting the time in which to sue, but that public policy invalidated the provision at issue because it impaired enforcement of workers compensation protections).
Infinity’s breach of contract claim was dismissed because the parties contractually agreed that any suit must be filed no later than two years from the date of the loss, and the lightning strike occurred more than two years before Infinity filed suit.
The Infinity case provides a nice history of the evolution of the suit limitations period in Kansas, as follows:
- McElroy v. Insurance Co., 29 P. 478 (Kan.1892) (holding an insurance contract valid even though it included a provision requiring action within a shorter period than provided by statute)
- Insurance Co. v. Stoffels, 29 P. 479 (Kan.1892) (determining a 6–month limitation in insurance policy eliminates all statutes of limitations and binds parties).
- In 1897, the legislature enacted a statute that voided provisions in any agreement that reduced a party’s time to file suit to less than that established by the statutes of limitations. Pfeifer v. Federal Exp. Corp., 297 Kan. 547 (2013).
- Erickson v. Commercial Travelers, 176 P. 989 (Kan.1918) (voiding insurance contract that required suit within 6 months of injury because statute provided for longer period).
- Fair Association v. Casualty Co., 190 P. 592 (Kan.1920) (invalidating stipulation as contrary to statute when casualty insurance contract required action to be filed within 90 days of loss)
- Hornick v. First Catholic Slovak Union of the United States of Am., 224 P. 486, 489 (Kan.1924) (noting that contractually shortened limitations had been invalidated by statute since 1897).
- Pfeifer v. Federal Exp. Corp., 297 Kan. 547 (2013). (Kansas Supreme Court held contractual limitations on the time to file a suit are generally valid, even if the applicable statute of limitations allows for a greater time period.)
- The U.S. District Court for the District of Kansas has previously determined that Kansas law does not prohibit parties from contractually limiting the timely filing of suits. Sibley v. Sprint Nextel Corp., 2008 WL 2949564 n.7 (D.Kan. July 30, 2008); Hahner, Foreman & Harness, Inc. v. AMCA Int’l Corp., 1995 WL 643814 at *2 (D.Kan. Oct. 27, 1995); Coates, 515 F.Supp. at 649.
Although statutes of limitation may not be the sexiest topic, it is one of the most important because missing a deadline can be fatal to your case. If you ever have a question about the language in your policy, make sure that you consult an experienced insurance professional.
1 Infinity Energy Resources v. St. Paul Fire & Marine Ins. Co., 2013 WL 3792899 (D. Kan. July 19, 2013).
2 The last act in obtaining an insurance policy is usually where the master policy is delivered. Simms v. Metro. Life Ins. Co., 685 P.2d 321, 325–26 (Kan.App.1984) (finding the majority rule to be that the interpretation of an insurance contract is governed by the law of the state where the policy is delivered). Infinity Energy Resources v. St. Paul Fire & Marine Ins. Co., 2013 WL 3792899 (D. Kan. July 19, 2013) at *4.
3 CRS § 13-80-101 (2003); KSA § 60-511 (2012).