Yesterday, the Court of Appeals issued yet another decision concerning when a lawsuit must be filed in order to be timely.  In a well-reasoned and fair opinion authored by Judge Gibson, the Court of Appeals made clear once again that the question of when a claim accrues is fact intensive and requires a knowledge and understanding of all of the subject insurance policy’s provisions, including the immunity clause.  Most importantly, the Court emphasized that in a case requiring submission of a “satisfactory proof of loss,” an insurer would be wise to let the insured know when it deems a proof of loss satisfactory in order to be sure the immunity period begins to run.

In Riggs v. Farmers Mutual of Tennessee, the insurance policy provided that payment would be due 45 days after submission of “a satisfactory proof of loss is received and the amount of the loss has been established by written agreement . . . or the filing of an appraisal award with us.”  The policy also provided that suit must be “commenced within 1 year after the loss.”   The facts reveal that the fire occurred on May 29, 2011, that Riggs provided an executed proof of loss form to the insurer on October 3, 2011, that the insurer conducted an examination under oath of Riggs on November 10, 2011, that the insurer denied the claim on September 24, 2012, and Riggs then filed suit on December 11, 2012.

As a prefatory matter, the Court noted the established rule that suit must be filed within the contractual limitations period following the accrual of the cause of action, not the date of the loss.  When the insurance policy provides a period of immunity in which the insurer cannot be sued, the accrual of the claim occurs upon expiration of the immunity period or when the claim is denied, whichever comes first.  In the Riggs case, the issue was when the immunity period began, which in this case was the 45 day period that the policy allowed the insurer to make payment after submission of a “satisfactory proof of loss.” Riggs claimed the immunity period did not begin until after she fully complied with the insurer’s investigation by examination under oath and re-submission of a completed contents inventory as requested.  On the other hand, the insurer argued that the immunity period began when Riggs sent in her proof of loss form on October 3, 2011.  This, in turn, led to a dispute about what the policy meant when it referred to a “satisfactory proof of loss.”

In a great opinion, the Court ultimately held that the insurer’s position was illogical because it did not stop requesting additional information from Riggs until November 10, 2011.  Accordingly, any “proof of loss” submitted before that time was necessarily not “satisfactory.”  Thus, because suit was filed within one year and 45 days after that date, the suit was timely.

But the Court did not stop there.  Focusing in further on the language requiring that payment be made “within 45 days after a satisfactory proof of loss is received,” the Court noted that because the insurer declined to pay then it necessarily did not consider Riggs’ proof of loss satisfactory.  This circumstance would leave an insurer “with no way of knowing when her proof of loss was satisfactory or when the immunity period began to run.”  So, the clear take-away from this opinion is that submission of a “proof of loss” form may not necessarily be considered submission of a “satisfactory proof of loss,” particularly when the insurer continues to investigate and request information after submission of the form.

You can view the opinion here.