Question: When Does The Statute Of Limitations Run On An Insurance Negligence Claim?
Answer: It begins To Run NO Later Than First Policy Renewal After Agent’s Alleged Representation.
In 1997, the Groces purchased a home and obtained a homeowners insurance from American Family. In 2007, the home sustained substantial fire damage. A dispute arose regarding the amount of insurance claim benefits payable under the policy, and the Groces filed their complaint against the insurance company and agent. They contend that agent negligently failed to obtain a fire insurance policy … which would have paid the entire cost of reconstructing their residence if it was damaged or destroyed by fire, and that the insurance company is vicariously liable for agent’s negligence. Normally, these types of actions are governed by the Indiana Code which requires that they be commenced within 2 years after the cause of action accrues. The statute of limitations begins to run when a plaintiff knew or, in the exercise of ordinary diligence, could have discovered that an injury had been sustained as a result of the tortious act of another. In the present case, the payment from American Family to the Groces was not based on actual cash value but rather on a replacement cost calculation, without any deduction for depreciation. After the loss, the company calculated that the actual cash value of the damaged residence was $156,527.82 after depreciation, and that the estimates to rebuild and repair the home totaled $225,245.90. Because payment based on the policy’s replacement cost provision was limited to the amount of insurance coverage limits, American Family paid the Groces the full policy limits, $191,500. The Groces thus received “replacement cost” coverage, but in an amount capped by the policy limits. The Groces claim they were entitled to payment of the full costs to rebuild and repair their home, without any limitation due to policy limits. The Daily Show Groces do not dispute that they were aware of their policy dwelling damage limits of $191,500. Various additional increases in dwelling loss coverage limits occurred in the ensuing years, often associated with changes in the mortgage. When the fire occurred, the dwelling coverage policy limits were $191,500. During the ten years from 1997 to 2007, the Groces received at least 14 notices when the policy was renewed or changed, advising them of the amount of their dwelling loss coverage limits, and each reminding them to “Please Read Your Policy.”
On appeal, the question of, “whether their cause of action was barred by the statute of limitations is an issue of law to be decided by the court.” In this case, the alleged 2003 failure of the agent to obtain 100% replacement cost coverage presents a claimed result (that policy loss limits are inapplicable to replacement cost coverage) easily ascertainable from the policy itself. In fact, each American Family homeowners policy issued to the Groces from 1997 to 2007 expressly limited its dwelling loss replacement cost liability to the applicable policy limits. Without question, the Groces could have discovered that their dwelling loss replacement coverage did not exceed the applicable policy limits. Assessing when the policyholders discovered, or reasonably should have discovered their agent’s negligent failure to procure the insurance coverage they desired is the correct inquiry to resolve the limitations period for a claim of negligent failure to procure the proper coverage. the Groces’ factual claim here is not that Meek made a representation of existing coverage but rather that, perceiving that they wanted 100% replacement coverage, Meek assured them that he would “get this written up.” Agent’s alleged comments dealt with his promise of future activity, and did not constitute any representation about existing provisions related to coverages or limits in the homeowners policy.
In conclusion, we find from the undisputed facts that the Groces, in the exercise of ordinary diligence in reviewing their homeowners insurance policy, could have timely discovered that the company’s replacement cost liability was capped at the dwelling loss coverage limit, contrary to their claim for negligent procurement of inadequate or wrong coverage. For this reason, the statute of limitations in this case began to run no later than the first policy renewal after the alleged statements of the agent. 5 N.E.3d 1154