Some insurance policies will contain a clause within the conditions section entitled “Conformity to State Law.” This provision contains language similar to:
“Conformity to State Law. When a policy provision is in conflict with the applicable state law of the State in which this policy is issued, the law of the state will apply.”
This small provision can have a big impact on the terms and conditions of the policy and should not be glossed over. This issue was addressed by the Court of Appeals of Indiana in State Farm Fire & Casualty Company v. Riddell National Bank.1 Riddell was the mortgagee of a property under a property insurance policy issued by State Farm to the homeowners. Riddell learned that the homeowners had moved out and that the property was damaged by water and mold.
Riddell filed a claim with State Farm. Following State Farm’s denial, Riddell sued. State Farm moved to dismiss, arguing that Riddell’s claim was time barred based on the policy’s “Suit Against Us” limitation, which stated that the action be commenced within one year from the date of loss or damage.
Indiana Code section 27-1-13-17, provides that a policy of insurance covering a first-party loss to property in Indiana may not be issued, renewed or delivered to any person in Indiana if the policy limits a policyholder’s right to bring an action against an insurer to a period of less than two years from the date of loss.
State Farm conceded that the policy condition requiring suit to be brought within one year was unenforceable pursuant to Indiana Code section 27-1-13-17(b), but argued that the express intent of the policy was to limit the time period to the two-year limitation within the Code. The Indiana Court of Appeals concluded that Indiana Code section 27-1-13-17 did not provide a two-year default statute of limitations, but section 34-11-2-11 provided such a default which required such actions on written contract actions be commenced within ten years. The court held that pursuant to the policy’s conformity to state law provision, the ten-year statute of limitations applied and the claim was timely filed.
The court highlighted that an alternative result may have been reached had State Farm drafted its policy language to state something such as “the claim must be filed within one year or within the applicable minimum time requirement allowed by state law.” An important reminder that a policy should be reviewed in its entirety, considering all language, terms and conditions.
1 State Farm Fire & Cas. Co. v. Riddell Nat’l Bank, 984 N.E.2d 655 (Ind. App. 2013).