Over the last few weeks, I have written about agent negligence cases. This week, I will continue, looking at a New York decision, Lewiarz v. Travco Ins. Co., 2011 NY Slip OP 002094, N.Y. Sup., App. Div., 3rd Dept.; 2011 N.Y. App. Div. LEXIS 2069 ( March 24, 2011). Lewiarz tells the story of insureds who nearly ran into a statute of limitations problem.

In 2001, the Lewiarz’s house burned down. Their insurance company at the time paid their claim, but refused to insure their house beyond the then-current policy. Left to find new homeowner’s insurance, the Lewiarz’s called a broker who submitted applications and found an insurance company to provide coverage beginning in 2003. That insurance company denied coverage for a second fire loss that occurred in 2006. The insurer based the denial on the application’s failure to disclose that the house had been damaged by fire previously.

The homeowners filed suit alleging the broker was negligent in preparing the application for insurance. The broker filed a motion to dismiss, claiming the action was barred by the statute of limitations. The broker contended that the statute of limitations began to run on the date the insurance policy was issued. The court disagreed, explaining:

The [s]tatute of [l]imitations does not run until there is a legal right to relief. Stated another way, accrual occurs when the claim becomes enforceable, i.e., when all elements of the tort can be truthfully alleged in a complaint. Inasmuch as "[d]amages are a necessary element of a negligence claim which must be pleaded and proven," plaintiffs could not have established any harm until their claim was denied by [their insurance company]. Thus, where, as here, a claim against an insurance agent or broker relating to the failure of insurance coverage sounds in tort, the injury occurred and the plaintiffs were damaged when coverage was denied. [citations omitted]

Applying this rule, the court held that the suit was timely and shouldn’t be dismissed on those grounds.

The statute of limitations is a fairly easy concept: It limits the time you have to bring a claim. The tricky part, however, can be determining when the clock starts ticking on the limitations period. Calculating the dates accurately is critical, as an insured will likely be precluded from any recovery if the limitations period ends before an insured files suit.

Keep in mind that this case applied New York law and other states may apply different standards.