A public adjuster I work with in California recently sent me a statute of limitations question for a loss and I wanted to share some important highlights of California’s statute of limitations laws.
First, the limitations period to bring an action over a first-party coverage dispute in California is four years.1 California does allow a carrier to contractually reduce the statute of limitations period to one year; however, an insurer can waive its right to enforce the statute of limitations by its conduct.
The court in Elliano v. Assurance Co. of America,2 ruled that an insurer could not enforce a policy provision setting a twelve month time limit for bringing an action on the policy because by its words and conduct the insurer induced the insured to delay filing suit until the twelve month period had lapsed. A common example I see in the field is an insurer’s adjuster agreeing to negotiate the claim with the policyholder for several weeks. As soon as the period runs, the insurer’s adjuster ends the settlement communication and tries to play the "gotcha” game and argue the claim is barred.
It is important to note, however, that just because a carrier investigates a claim after the limitations period has run, it has not waived its right to enforce the statute of limitations.3 Hence, public adjusters and policyholders cannot bait an insurer to investigate the claim after the period of limitations has expired and claim that the carrier waived its right to enforce the statute of limitations.
In summary, policyholders or their advocates must start with the policy. The very first step in any adjustment is to verify the period that suit may be filed within the policy’s Suit Against Us provision. If the limitations period is approaching, you need to consult an attorney and preserve your contractual rights.
Next week, I am going to discuss whether an arson investigation tolls the statute of limitations period in California.