When a client decides to meet with me, the client is usually having a problem with the insurance company. If litigation is a possibility, one of the first questions a client asks is, "How long do I have until I need to file my case in court?" Unfortunately, the answer is not exactly clear cut.

In California, the statute of limitations for filing a lawsuit for an insurance claim depends on:

  1. The type of actions/cause of action; and
  2. Whether the insured and insurer contracted out of statutory time limits.

The most common causes of action are: breach of contract, breach of the covenant of good faith and fair dealing, and Business and Professions Code 17200 for unfair business practices. If the insurer’s behavior is over the top, there may be actions for fraud or breach of fiduciary duty.

Generally, tort causes of action, such as breach of the implied covenant of good faith and fair dealing, has a shorter statute of limitations than the breach of contract cause of action. Breach of the covenant of good faith and fair dealing action is typically a two year limit, while a breach of contract statute of limitations is three years. If the time has run on the tort cause of action, it does not bar the insured from still filing a lawsuit for the breach of contract (if the time for breach of contract has not run). However, if the tort action statute is missed, the insured would be limited to contract damages. See Frazier v. Metropolitan Life Ins. Co.(1985) 169 Cal.App.3d 90, 100.

California allows insurance companies to contract out of the statute of limitations dictated by California law. Policies often dictate that "an action (lawsuit) must be brought against the insurance company within one year of the date of loss." Every so often, an insurance company may allow for a two year statute from the date of inception of the loss. There are also issues of tolling the time during the time a claim is being adjusted.

Determining time limitation and tolling issues can be puzzling. To be safe, if a claim is not resolved within 10 months from the date of loss, policyholders should seek advice.