Most insurance policies contain a contractual provision that sets forth the time frame in which the insured must commence suit should a dispute arise concerning the policy. In many instances, these limitation provisions provide that the insured must file suit no later than one year after the date of the loss.
A recent inquiry asked about the enforceability of a one-year limitation period in a Nevada property insurance policy. In that scenario, even though it took the carrier almost a year to investigate the claim and provide its calculation of the actual cash value of the covered loss, the carrier was seeking to strictly enforce the one-year provision. The carrier’s representative inferred that, if the insured did not accept the carrier’s numbers, the insured had only a few days to file suit or the claim would be forever barred. Understandably, the insured was concerned and, hence, the inquiry.
The enforceability of a limitation provision largely depends on state law. Here, Nevada has explicitly recognized that to allow the statute of limitations to run from the date of loss would not be just to the insured, given the natural delays associated with investigating a claim.
The Nevada Supreme Court has specifically addressed the effect of the following provision:1
No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within twelve months next after inception of the loss.
The Nevada Supreme Court explained that:
If the limitation period is construed to commence to run from the date of the fire, then the entire period could, as here, be consumed by the built-in delays of the policy and by the time in which the parties attempt to negotiate the claim. It would not be reasonable for the insured to anticipate such construction. The limitation clause in the policy is ambiguous and is construed against the insurer. We construe the clause to allow the period of limitations to run from the date of the casualty, but the period will be tolled from the time appellant gave notice of the loss until respondent formally denies liability. This construction preserves the literal language of the limitation provision by providing that the insured will have only 12 months to institute suit, but does not penalize the insured for the time consumed by the insurer while it pursues contractual rights to receive a proof of loss or negotiates payment with the insured.2
So, for example, if the loss was discovered and reported in January 2018, but the carrier does not conclude its investigation until June 2018, the one-year period for filing a lawsuit would not expire until June 2019, at the earlier, and not January. 2019. In other words, the six months from January 2018 to June 2018 would not be counted in the one-year calculation. Issues like this underscore the importance of consulting a knowledgeable insurance law professional if an insured has any concerns regarding their rights under an insurance policy.
Even after an insurer has formally denied liability and/or damages, the limitations period might still be tolled if the adjuster continues to engage in negotiations with the insured.3
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1 Clark v. Truck Ins. Exchange, 95 Nev. 544, 598 P.2d 628 (1979).
2 Id. at 95 Nev. 546–47, 598 P.2d at 629–30 (citations omitted, emphasis added).
3 See, e.g., Walker v. American Bankers Ins. Group, 108 Nev. 533, 836 P.2d 59 (1992) (homeowner’s policy provision, requiring insured to bring suit under policy within one year from date of loss, was tolled between time insured notified insurer of his loss and insurer formally denied its liability to insured; thus, although adjuster wrote to insured stating that payment for personal property loss would be declined, the continued negotiations between insured and insurer tolled limitations period until the date on which insurer filed its complaint for declaratory relief).