How Does Indiana Treat the Twelve-Month Limitation Period to File Suit? | Property Insurance Coverage Law Blog

All insurers contend that Indiana GRQ’s contract action is time-barred by the insurance policy’s twelve-month limitation period. The policy prohibits any suit ‘for the recovery of any claim’ unless the insured “has fully complied” with all the policy’s provisions The policy requires any suit to commence within twelve months ‘after the date of direct physical loss or damage to Covered Property or to other property as set forth herein’ The loss here occurred on August 15, 2016. Indiana GRQ filed suit on June 18, 2020—approximately forty-six months later.

No one disputes that the suit began outside the twelve-month period. Indiana GRQ instead argues that the insurers waived this defense, or the law should estop the insurers from exercising it. Indiana GRQ insists that these doctrines—waiver and estoppel—present factual questions properly reserved for the jury on this record.

Though disfavored, Indiana enforces contractual provisions that shorten the time to commence an action if ‘reasonable time is afforded, except [when] there is fraud, duress, and the like,’ … or when it contravenes a statute or public policy… ‘Provisions limiting actions on an insurance policy to twelve months have been upheld as valid and enforceable; consequently, actions on a policy that are brought after the expiration of such limitation periods will be barred.’ … Such a provision prevents undue delay in pursuing a claim of loss.…

An insurer may waive such a provision or be estopped from asserting it… either expressly or impliedly… Waiver or estoppel may ‘result from acts of [an] insurer causing [the] insured or claimant under the policy to delay bringing suit until after the time provided for in the policy.’ If the insurer’s conduct causes the insured to ‘reasonably believe’ that the company won’t insist on the suit’s timeliness, the insurer ‘may no longer raise the limitation period as a defense.’… To permit otherwise would ‘allow the insurer to lull an insured into not pressing his rights and then deny liability on the basis of the limitation period.’ Whether an insurer has waived the limitations period is usually a question of fact….

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Generally, an insurer need not inform an insured of his responsibilities under the policy. … The insured can read the contract—not least a sophisticated party like Indiana GRQ…

But one must keep reading the law. Summers says an exception exists when ‘an insurance carrier does not deny coverage or liability, and proceeds to negotiate with the insured toward settlement of the claim.’ Summers, 719 N.E.2d at 416. In these circumstances, ‘the law will imply a waiver of the contractual limitation for the bringing of suit, unless and until the insurer puts the insured on notice that litigation is necessary if he desires to pursue the claim further.’ Id. Several Indiana cases after Reibly also apply this exception, including one just nine months after Reibly, see Schafer v. Buckeye Union Ins. Co., 381 N.E.2d 519, 523 (Ind. Ct. App. 1978), and one from the Indiana Supreme Court, see Huff, 363 N.E.2d at 992 (‘Once notice was given and no objection was raised to the mode of documentation and liability was not denied until long after the twelve-month period, then the insurer has waived his right to insist on [the] provision’). See also Cox, 731 N.E.2d at 468 (‘unless the insurer otherwise places the insured on notice that suit must be brought to pursue the claim further,’ a lack of denied coverage and ongoing settlement negotiations constitute waiver…

Through this lens, Indiana GRQ points out that the insurers made payments, continued to adjust the claim, and engaged in settlement negotiations—both within and after the contractual limitation period (which would have otherwise run on August 15, 2017). For instance, in late 2016, Mr. Thoman retained experts to assist with the adjustment of the loss and worked with Indiana GRQ’s environmental consultant (Burns & McDonnell). Around this time, he recommended two advance payments, and at least one was made on this record within the initial year after the loss. In February 2017, Indiana GRQ provided a ‘substantial amount of cost documentation’ and requested ‘assistance once again in funding a portion of [its] loss to date.’ This precipitated McLarens’ recommendation for a second advance. In June 2017, Mr. Thoman reported to be in ‘essentially daily discussions’ and ‘working closely with’ Indiana GRQ regarding the loss, proposed work plans, and outstanding claim documentation and costs.

By October 2017, Indiana GRQ had submitted expenditures in excess of $3.8 million and three additional quotes about outstanding loss. Mr. Thoman reported that they agreed with Indiana GRQ that the loss ‘can and will drag on due to its very nature’ of seepage, pollution, and clean-up. A reasonable juror could conclude that the insurers had not denied the claim and continued to negotiate a settlement; indeed, a reasonable juror could find that the parties understood that adjusting this claim would necessarily exceed the one year that the policy anticipated for suits, just given the nature of the flood damage and remediation. Following the first year after the loss, additional partial payments were made. The insurers’ independent adjuster still was in ‘weekly if not daily’ discussions with Indiana GRQ about the claim in late 2017 and 2018. Settlement negotiations were ongoing into 2019. Coverage wasn’t denied until August 2019. To a reasonable jury, that could effectuate a waiver, unless the insurers put Indiana GRQ on notice of their intention to insist on the timing requirement. But that didn’t seem to happen.

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From the date of loss until May 2019, there was no mention of the contractual limitation period. For instance, in the November 2016 reservation of rights letter, the insurers listed numerous policy provisions—the limitation period wasn’t one of them. Not until May 2019 did the insurers cite the limitations period from the policy in a letter. Even then, the insurers never expressed an intention to enforce that provision given the ongoing negotiations. One might jump to think that a reasonable jury could read the May 2019 letter as expressing such an intention, but then the letter invites yet more discussion: ‘Once you have fully presented your claim and the Insurers have had an opportunity to complete their review, the Insurers will be in a better position to evaluate the scope of coverage.’ The insurers asked Indiana GRQ to forward additional information for ‘further evaluation’ on a ‘without prejudice’ basis. By this time, the insurers had not denied coverage and continued to negotiate with the insured toward settlement; and, by law, the insurers still had not put Indiana GRQ ‘on notice that litigation is necessary if [it] desire[d] to pursue the claim further.’ Summers, 719 N.E.2d at 416. Even the August 2019 letter denying coverage didn’t seem to view the May 2019 letter as starting the clock.

Indeed, even in July 2019, Indiana GRQ continued to correspond and offer claim information. On this record, every letter issued by the insurers to Indiana GRQ (November 2016, September 2018, November 2018, March 2019, May 2019, and August 2019) included a general statement reserving their rights under the policy. The insurers argue they should not be foreclosed from asserting their rights under the policy. They might not be but for their conduct. Merely because they have once and again reserved a right doesn’t mean that through their affirmative conduct that they cannot then waive it. A blanket reservation of rights wasn’t express notice that the insurers now intended to rely on a limitations period in the policy and put Indiana GRQ on the clock, and Indiana law says so. See id.; see also Schafer, 381 N.E.2d at 521, 523; 28th St. Superior Hosp., Inc. v. Cincinnati Ins. Co., 2022 U.S. Dist. LEXIS 26854, 13-14 (N.D. Ind. Feb. 15, 2022) (‘Not until this denial [of coverage] did [insured] have reason to believe that its claim would not be paid’ after more than three years of negotiations.).

Here, adjusting and settlement negotiations started within the first year and continued years past the expiration date with no denial of coverage, or a communication that litigation was necessary. On this record, denial of coverage didn’t occur until August 2019—over two years after the contractual limitation expired….Based on the insurers’ conduct before their denial, Indiana GRQ had no reason to file suit until this point and reasonably believed that the limitation provision wouldn’t be enforced years after its expiration, so a reasonable jury could say. Indiana GRQ filed suit on June 18, 2020—within the twelve months after the insurers had denied coverage and put the company on notice.

Based on this record, the court must deny the insurers’ motion on timeliness. A reasonable jury could find that the insurers, through their conduct, created a reasonable belief by Indiana GRQ that the limitation provision would not be enforced. The insurers made payments, continued to adjust the claim, and engaged in settlement negotiations within and after the original contractual limitation period ran; and, with that, coverage wasn’t denied until August 2019. Under such circumstances, a reasonable juror could say they waived the contractual limitation period, ‘unless and until [they put] the insured on notice that litigation [was] necessary’ in August 2019.