The Suit Limitation Clause is Enforceable
Welcome to the first in our series of legal updates focused on property insurance and property loss adjusting. This inaugural entry addresses the enforceability of the one year Suit Limitation.
One common Suit Limitation provision reads:
No suit, action or proceeding for the recovery of any claim will be sustained in any court of law or equity unless the legal action is started within 12 months after inception of the loss.
Pennsylvania recognizes the vitality of the one year Suit Limitation provision. In fact, our research has yielded no fewer than 11 reported decisions – in the state and federal courts alike – enforcing a one year suit limitation. So, if the law is so clear, why are there so many questions from experienced adjusters and practitioners about this provision?
Adjusters and lawyers unfamiliar with first party property coverages/issues simply don’t realize that there is a one year suit limitation. Additionally, the case law does recognize both waiver and estoppel exceptions to the enforceability of the Suit Limitation provision. Unintended waiver or an estoppel is an exceptional event; it may, however, happen.
The law varies amongst the states regarding enforceability. While Pennsylvania courts enforce the limitation, other states – including New Jersey – will toll the suit limitation under certain circumstances. Commercial policies have suit limitations of two years or longer. Some states, in fact, mandate longer suit limitations in personal lines policies as well.
Overall too, there’s an initial reluctance to put a policyholder out of court. In Pennsylvania though, the clear import of the case law is that courts will enforce the one year suit limitation provision.
Our next installment will address the recent evolution of the law applicable to the Appraisal provision and why the courts in the Eastern District of Pennsylvania have been – with all due respect – getting it wrong.