{"id":365,"date":"2013-08-11T02:03:28","date_gmt":"2013-08-11T02:03:28","guid":{"rendered":"https:\/\/www.apslaw.com\/on-appeal\/?p=365"},"modified":"2023-07-31T15:52:51","modified_gmt":"2023-07-31T19:52:51","slug":"special-edition-rhode-island-supreme-court-voids-contractual-limitations-period-in-insurance-policy-as-against-public-policy","status":"publish","type":"post","link":"https:\/\/www.apslaw.com\/on-appeal\/limitations-periods\/special-edition-rhode-island-supreme-court-voids-contractual-limitations-period-in-insurance-policy-as-against-public-policy\/","title":{"rendered":"SPECIAL EDITION: Supreme Court Voids Contractual Limitations Period in Insurance Policy as Against Public Policy."},"content":{"rendered":"

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In a case of first impression that has important ramifications for insurers, the Rhode Island Supreme Court held this term that a contractual limitations period contained in an uninsured\/underinsured (\u201cUM\/UIM\u201d) provision of an insurance contract was void as against public policy.\u00a0 <\/span>American States Insurance Company v. LaFlam, No. 2012-80-M.P.<\/span><\/span> at 21.\u00a0 <\/span><\/span><\/p>\n

The clause in the policy at issue (1) shortened the period in which a UM\/UIM claim could be asserted to three years and (2) provided that the three-year period began to run on the date of the accident for which coverage is sought.\u00a0 <\/span>The clause provided:\u00a0 <\/span><\/span><\/p>\n

\u00a0<\/span><\/p>\n

Any legal action against us under this Coverage Form must be brought within three years after the date of the \u201caccident.\u201d\u00a0 <\/span>However, this [p]aragraph * * * does not apply to an \u201cinsured\u201d if, within three years after the date of the \u201caccident,\u201d we or the \u201cinsured\u201d have made a written demand for arbitration in accordance with the provisions of this Coverage Form.<\/span><\/p>\n

Id<\/span><\/i>. at 3.\u00a0 <\/span><\/span><\/p>\n

Setting the stage for its analysis, the Supreme Court detailed the history of Rhode Island\u2019s UM\/UIM statute, which, since 1962, has required \u201c\u2018insurance carriers to provide protection for those claimants who voluntarily contract with licensed carriers for liability coverage as against uninsured operators.\u2019\u201d\u00a0 <\/span>Id<\/i>. at 5 (quoting Henderson v. Nationwide Insurance Co<\/i>, 35 A.3d 902, 906 (R.I. 2012) (interpreting R.I. Gen. Laws \u00a7 27-7-2.1)).\u00a0 <\/span>The statute is premised on the notion that \u201cresponsible <\/a>motorists who carry liability insurance should not be uncompensated when they are without recourse against an uninsured tortfeasor.\u201d\u00a0 <\/span>Id<\/i>.\u00a0 <\/span><\/span><\/p>\n

Under Rhode Island law, insurers cannot restrict the coverage that is afforded by the UM\/UIM statute and any provisions that attempt to do so are void as a matter of public policy.\u00a0 <\/span>Id<\/i>. at 7 (citing Nationwide Mutual Ins. Co. v. Viti<\/i>, 850 A.2d 104, 107 (R.I. 2004)).\u00a0 <\/span>Likewise, provisions that purport to deny UM\/UIM coverage on impermissible grounds are void as a matter of public policy.\u00a0 <\/span>Id<\/i>. at 8.\u00a0 <\/span>Insurers are, however, permitted to place reasonable restrictions on UM\/UIM coverage and such reasonable restrictions will not be void.\u00a0 <\/span>Id<\/i>.\u00a0 <\/span><\/span><\/p>\n

Thus, in considering the propriety of the contractual limitations period at issue, the Supreme Court examined whether such restriction constituted a reasonable restriction in light of the state\u2019s UM\/UIM statute and the limitations period that would apply absent a contractual limitations provision.\u00a0\u00a0 <\/span><\/span><\/p>\n

R.I. Gen. Laws \u00a7 27-7-2.1 does not include a limitations period for UM\/UIM claims and it does not specify when a UM\/UIM claim begins to accrue.\u00a0 <\/span>Id<\/i>. at 10-11.\u00a0 <\/span>However, the Rhode Island Supreme Court previously held that because an insured\u2019s suit against his insurer over a policy contract is akin to a contract action, the statute of limitations applicable to contract actions governs.\u00a0 <\/span>Id<\/i>. at 11 (citing Pickering v. American Employers Insurance Co<\/i>., 282 A.2d 584, 588 (R.I. 1971)).\u00a0 <\/span><\/span><\/p>\n

The contractual limitations period in the policy at issue shortened the ten-year limitations period otherwise applicable to UM\/UIM claims to three years.\u00a0 <\/span>In addition, the policy specified that the three-year period begins to run on the date of the accident.\u00a0 <\/span>Both the Supreme Court and the First Circuit noted that such a provision runs the risk of barring claims before the insured had an opportunity to learn that he or she had a UM\/UIM claim.\u00a0 <\/span>Id<\/i>. at 12.\u00a0 <\/span>Indeed, in some cases the insured might not learn that he or she has a UM\/UIM claim until after he or she has attempted to obtain compensation from the tortfeasor.\u00a0 <\/span>Id<\/i>. <\/span><\/p>\n

After considering case law from other jurisdictions, the public policy behind UM\/UIM claims and the manner in which UM\/UIM claims arise, the Rhode Island Supreme Court joined \u201cthe overwhelming majority of [its] sister states and [held] that a UM\/UIM cause of action . . . accrues on the date that the UM\/UIM contract allegedly is breached, which . . . is the date on which the UM\/UIM insurer denies the claim or clearly rejects a demand for payment or arbitration under the UM\/UIM policy.\u201d\u00a0 <\/span>Id<\/i>. at 21. <\/span><\/p>\n

Having determined that a UM\/UIM cause of action does not accrue until the date on which the UM\/UIM insurer denies the claim, the Court deemed it illogical and unreasonable for an insurance policy to contractually provide that the limitations period for a UM\/UIM claim begins to run before<\/i> the insured has a justiciable cause of action against the insurer.\u00a0 <\/span>Id<\/i>. at 22 (relying on McDonnell v. State Farm Mutual Automobile Ins. Co.<\/i>, 299 P.3d 715, 733 (Alaska 2013)).\u00a0 <\/span><\/span><\/p>\n

Thus, the Court concluded the provision at issue was problematic because the combined effect of the shortened limitations period and the triggering date for that limitations period \u201cattempted to force insureds . . . to file suit or make a written demand for arbitration before a justiciable cause of action may even exist.\u201d\u00a0 <\/span>Id<\/i>. at 22.\u00a0 <\/span>In the Supreme Court\u2019s opinion, the combined effect of the provision impermissibly restricted UM\/UIM coverage and frustrated the state\u2019s public policy with respect to UM\/UIM claims.\u00a0 <\/span>Id<\/i>.\u00a0 <\/span><\/span><\/p>\n

In so concluding, the Supreme Court made clear that its holding was limited to the contractual limitations period in the policy at issue.\u00a0 <\/span>The Court did not express any opinion with respect to whether an insurance policy may contain a contractual limitations period for an UM\/UIM claim after the UM\/UIM claim accrues.\u00a0 <\/span>Id<\/i>. at 23.\u00a0 <\/span>However, the Court reiterated its prior explanation that \u201c\u2018reasonable limitations will be imposed on the construction of the uninsured-motorist statute to afford insurers some financial protection from unwarranted claims.\u2019\u201d\u00a0 <\/span>Id<\/i>. (quoting Henderson v. Nationwide Insurance Co<\/i>., 35 A.3d 902, 906 (R.I. 2012)).\u00a0 <\/span><\/span>Although the Supreme Court did not pass judgment on the permissibility of a three-year limitations period for UM\/UIM claims, it emphasized in its decision that it was \u201cmost trouble[d]\u201d by \u201cthe selection of the triggering date.\u201d\u00a0 <\/span>Id<\/i>. at 12.\u00a0 <\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

In a case of first impression that has important ramifications for insurers, the Rhode Island Supreme Court held this term that a contractual limitations period contained in an uninsured\/underinsured (\u201cUM\/UIM\u201d) provision of an insurance contract was void as against public policy.\u00a0 American…<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[60],"tags":[58,59,14],"class_list":["post-365","post","type-post","status-publish","format-standard","hentry","category-limitations-periods","tag-contractual-limitations-period","tag-insurance","tag-rhode-island-supreme-court"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.apslaw.com\/on-appeal\/wp-json\/wp\/v2\/posts\/365","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.apslaw.com\/on-appeal\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.apslaw.com\/on-appeal\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.apslaw.com\/on-appeal\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.apslaw.com\/on-appeal\/wp-json\/wp\/v2\/comments?post=365"}],"version-history":[{"count":0,"href":"https:\/\/www.apslaw.com\/on-appeal\/wp-json\/wp\/v2\/posts\/365\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.apslaw.com\/on-appeal\/wp-json\/wp\/v2\/media?parent=365"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.apslaw.com\/on-appeal\/wp-json\/wp\/v2\/categories?post=365"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.apslaw.com\/on-appeal\/wp-json\/wp\/v2\/tags?post=365"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}