What is the statute of limitations under a property insurance policy in Vermont? What do policyholders, restoration contractors, and public adjusters have to be concerned about when faced with statute of limitations, but no denial has occurred or the property is not fully repaired? What happens if additional damage is found after the statute of limitations?

The Vermont statute of limitations for property damage is three years, but a property insurance policy may have it contractually reduced so long as it is not less than one-year from the date of the loss:

A policy of fire, life, accident, liability, or burglary insurance, or an indemnity, surety, or fidelity contract or bond issued or delivered in this State by an insurance company doing business herein shall not contain a condition or clause limiting the time of commencement of an action on such policy or contract to a period less than 12 months from the occurrence of the loss.1

A recent Vermont case involved a situation where the insurance company allegedly agreed to pay a windstorm loss, but later denied coverage after additional damages were found. The property insurance policy had a two-year statute of limitation to file suit. Despite this suit limitation, the policyholder argued in its motion:

Instead, [the insurer] told the insured that the wind storm was a covered loss. In addition, the damage in this case was latent. The insured had no idea that it needed to submit a claim to the insured because it could not detect the damage. The insured could not have filed suit because it had no idea that it needed to file suit. This is the quintessential case of where enforcement of the suit limitations clause would be unreasonable. Meakins v. Aetna Ins. Co., 213 N.C. 452, 457 (1950)(‘We think where an insurance company issues its policy, accepts the premium or premiums therefor, and the insured suffers a loss which the policy purports to cover, the insurance company will not be permitted to enforce the stipulation as to the time for instituting an action thereon, if it promises the insured his claim will be paid or satisfactorily adjusted, when the insurer completes its investigation and receives the necessary or required data, and the claim for loss is not denied nor demand made for additional proof of loss until too late for the suit to be brought within the stipulated time of twelve months next after the fire.’)2

The court held that:

Generally, insurance contracts may contain provisions shortening the period for filing suit if the shorter period is consistent with any applicable statute, is reasonable, is clear and unambiguous, and provides adequate notice of the reduction….

Although the statute of limitations for property damage under Vermont law is three years after the cause of action accrues, no Vermont court has found a two-year suit limitation provision in an insurance contract offering coverage for property damage unreasonable or contrary to public policy….

Plaintiff contends that application of the suit limitation provision is unreasonable in the circumstances of this case because Defendant initially confirmed coverage for the damage caused by the windstorm and because Plaintiff could not immediately detect the later-discovered damage. Were this court to adopt this approach, it would materially amend the Policy provision in question…. An insured, in tum, could extend a suit limitation provision indefinitely by claiming later-discovered damages. Although such coverage may be available pursuant to a different type of insurance policy, it is clearly not offered by the Policy which unambiguously sets forth a time limit for filing suit of two years.

The court cannot interpret the Policy so as to afford Plaintiff a better bargain than it made…. Plaintiffs contention that the Policy is unreasonable and unenforceable is thus without merit.3

So, what are the practical lessons from the case? First, determine what the statute of limitation rule is for the particular loss. Second, if the claim is open and not completely resolved, the only safe things to do are to either have a lawsuit filed or obtain a written and legally enforceable extension of a statute of limitations when that date arrives. An extension should be done by an attorney because it involves the practice of law.

Thought For The Day

Deadlines are meant to be broken. And I just keep breaking them.
—Sarah McLachlan
1 8 V.S.A. § 3663
2 JLD Properties of St. Albans v. Patriot Ins. Co., [Opposition to Motion to Dismiss] 2020 WL 9075117 (D. Vt.).
3 JLD Properties of St. Albans v. Patriot Ins. Co., No. 2:20-cv-00134, 2021 WL 5988674 (D. Vt. Dec. 17, 2021).