The Kentucky Supreme Court has reviewed numerous attempts by insurance companies to limit the time in which insureds have to bring UM and UIM claims. As a result of these prior considerations, the Kentucky Supreme Court has emphasized that insurance companies are not inhibited from contracting with their insureds for a shorter period of time to file a contractual claim which is less than Kentucky’s 15-year statute of limitations on contract actions. Gordon v. Kentucky Farm Bureau Ins. Co., 914 S.W.2d 331, 333 (Ky. 1995). The Court has found that requiring insureds to bring a UM or UIM claim within one year from the date of the accident was unreasonable. Elkins v. Kentucky Farm Bureau Mut. Ins. Co., 844 S.W.2d 423 (Ky. App. 1992); Belcher v. Travelers Indem. Co., 740 S.W.2d 952 (Ky. 1987).
Under Kentucky law, UM and UIM claims are grounded in contract so that the absence of a policy limitation provision, by omission or invalidation, means that Kentucky’s 15-year statute of limitations for general actions on a written contract is applicable to UM and UIM claims which are not limited by the policy. Gordon v. Kentucky Farm Bureau Ins. Co., 914 S.W.2d 331, 332-33 (Ky. 1995). The Court also noted that insureds who seek UM or UIM benefits should have the same rights as they would have had against an insured third-party. Elkins v. Kentucky Farm Bureau Mut. Ins. Co., 844 S.W.2d 423, 425 (Ky. App. 1992).
The issue considered by the Supreme Court in State Farm Mutual Auto. Ins. Co. v. Riggs, 484 S.W.3d 724 (Ky. 2016) was what limitation period would be reasonable beyond the one year period that the Court had already found to be unreasonable. State Farm had placed within its UIM policy a two year limitation and, therefore, linked its’ UIM coverage to the tort claim time limitation found in Kentucky Motor Vehicle Reparations Act. See KRS 304.39-230(6). That statute required a tort action to be commenced no later than two years after the injury or death or the last basic or added reparation payment made by any reparation obligor, whichever later occurred. The statutory language was the exact language used by State Farm in the UIM portion of its policy.
The Kentucky Supreme Court refused to find that State Farm’s policy limitation was unreasonable. The policy limitation provided the insured with the same time as a tort claim to bring the UIM claim. It did not require an insured to sue its own insurer before filing suit against the tortfeasor. It did not require a plaintiff to sue his own insurer before discovering whether or not the tortfeasor was in fact an underinsured motorist. Rather, State Farm’s policy brought together all insurance claims stemming from a particular auto accident and placed them on equal footing. The Court found that two years was enough time for the insured to discover the extent of automobile liability insurance coverage the tortfeasor had and whether that coverage would be sufficient for the suffered injuries. Therefore, on its face, the Court held that State Farm’s limitation provision was reasonable.
The Court noted that the insured could file a lawsuit asserting entitlement to UIM benefits and request the trial court to stay the proceedings under the tort lawsuit was completed and the tortfeasor’s policy limits were known or the insured could seek a tolling agreement from the insurer so that the clock would be stopped until the tort lawsuit was completed.
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