Parks Chastain recently wrote here about trigger happy policyholders prematurely filing lawsuits against insurance companies before a denial ever occurs.  The reason for this is the provision in insurance policies that shortens the applicable statute of limitations to a period of usually one or two years from the date of the loss.  As Parks mentioned, however, Tennessee courts have held that these shortened periods for filing lawsuits don’t begin to run until a cause of action accrues, which is usually (but not always) when the insurer denies the claim.  

There are a few practical problems associated with figuring out when it is necessary to file a lawsuit "to protect the statute of limitations."  First, I have been involved in a couple of cases in which there were factual disputes about whether a claim had actually been denied.  For example, there have been many times when I have seen an insurance company deny a claim, but then agree to reconsider that denial for various reasons.  So is the statute of limitations running during that reconsideration period?  Another common scenario occurs when there is no formal denial, but the adjuster just ignores part of a claim or casually brushes it off in conversation.  Is that a denial that triggers the running of the statute of limitations? Probably not, but you can see the potential problems (and sleepless nights) that these situations can cause. 

In my view, the best way to handle this issue is just to be up front about it and get an agreement, in writing, with the insurance company.  Twice in the past year, I could foresee potential problems due to confusing facts (partial denials, etc.) and simply obtained written agreements with opposing counsel that the contractual limitations period had not began to run.  This doesn’t have to be anything fancy – just a short one or two paragraph letter from the insurance company or its lawyer will suffice.