The Tennessee Court of Appeals rendered another decision yesterday concerning the limitations period that is applicable to lawsuits to enforce an insurance policy.  The court upheld the dismissal of the lawsuit, ruling that the lawsuit was filed outside the time period allowed in the insurance policy.  A copy of the case, Gagne v. State Farm. can be downloaded here

Unfortunately, I see cases like this over and over again due to the common misunderstanding that the general 6 year statute of limitations is applicable to suits to enforce.  Generally speaking, here are the rules practitioners and public adjusters should know:

  • Tennessee courts will enforce contractual limitation periods.  Most policies contain language similar to the one in Gagne, which provided, "No action shall be brought unless there has been compliance with the policy provisions.  The action must be started within one year after the date of loss or damage."
  • Using the one year period as quoted above as an example, Tennessee cases have construed the start date of the one year period to be the first in time of the following:  (1) the date of denial; or (2) the date that payment is due.  
  • So, assuming a fire on Jan. 1, 2012 and a proof of loss is submitted on Feb. 1, 2012, most policies will require payment within 60 days of submission of proof of loss.  So in that case, the payment would be due, and the period of limitations would be triggered, sixty days from submission of the proof of loss (unless there is a denial before that time).