Endless Statute of Limitations for Uninsured Motorist Claims in Pennsylvania?

In its recent decision in Erie Ins. Exch. v. Bristol, 174 A.3d 578 (Pa. 2017), the Pennsylvania Supreme Court found that claims for uninsured motorist claims are based in contract. Therefore, as per the court, the statute of limitations will not begin to run on UM claims until the contract has been breached.

Michael Bristol, while in the course and scope of his employment with RCC, Inc., was involved in a hit-and-run accident on July 22, 2005. Erie Insurance Exchange was the relevant carrier for RCC, Inc., which had a policy affording uninsured motorist/underinsured motorist coverage. The policy also contained an arbitration clause.

Bristol put Erie on notice of his UM claim on June 19, 2007. Arbitrators were selected and correspondence exchanged, but no other action was taken to resolve Bristol’s claim. On May 29, 2013, almost eight years after Bristol’s accident, Erie commenced an action seeking declaratory judgment because the statute of limitations had run.

The trial court granted summary judgment to Erie, and the Superior Court affirmed. In particular, the Superior Court held that the statute of limitations for UM claims begins to run when a claimant first learns that the other driver is uninsured. The Superior Court further found that the correspondence between the parties and selection of arbitrators did not serve to toll the statute because these actions were extrajudicial.

The Pennsylvania Supreme Court reversed the lower courts, finding no cause of action had yet accrued. Initially, the court found that the case should be decided with regard to contractual claims because UM claims are based in contract. Therefore, a four-year statute was applicable under 42 Pa.C.S. § 5525(a)(8).

The court then found that “[t]he proper circumstance to start the running of the limitation period is an alleged breach of the insurance contract.” That is, the statute of limitations for a UM case does not begin to run until the contract has been breached, i.e., when the claim is denied. In the Bristol case, that meant that the statute of limitations would not have begun to run until there was a denial of the claim or a refusal to arbitrate. In reaching its conclusion, the court cited public policy and a change in the Commonwealth’s motor vehicle laws.

The court distinguished prior Pennsylvania case law as being dependent upon the no-fault motor vehicle law. That is, Section 106(c)(1) of the No-Fault Act provided that one seeking to recover for a loss must commence an action “[n]ot later than two years after the victim suffers the loss and either knows, or in the exercise of reasonable diligence should have known, that the loss was caused by the accident, or not later than four years after the accident, whichever is earlier.” 40 P.S. § 1009.106(c)(1). See Murphy v. Prudential Prop. & Cas. Ins. Co., 469 A.2d 1378, 1379 (Pa. 1983) (finding that the time period to file claims under the no-fault policy began to run when appellee was aware that claims existed).

The court reasoned that these prior decisions as to the statute of limitations for UM cases deviated from normal contract principles due to the manner in which the No-Fault Act was drafted. In the case before it, however, the court did not have to so deviate because the Motor Vehicle Financial Responsibility Law (MVFRL) was in effect. Even so, the court held that the construction of the MVFRL was not at issue.

The result was a case in which one injured by an uninsured motorist was found to be within the statute of limitations over twelve years after his accident. No cause of action had yet accrued at the time of the court’s decision in November 2017. A consequent concern, of course, is that claims could extend over many years without the statute running. The court addressed this issue by opining that the risk of an insured or an insurer delaying a cause of action are minimal and not a reason to deviate from the court’s decision:

We note that an insured would rarely be advantaged by delay in the submission of a claim and insurers are charged with acting in good faith. Deviations from these norms may be addressed on equitable grounds or in other ways based on particular facts.

While this may be true, these concerns must nevertheless be understood in terms of risk analysis. The possibility for claims with seemingly never-ending statutes of limitations are concerning.

A further point to emphasize is that the court wrote this opinion specifically regarding UM claims under actual insurance policies, although the policy itself was not at issue. UIM claims were not involved, nor were self-insured entities implicated. Given the broad-based nature of the court’s analysis, though, it is likely that it would apply this same rationale to claims for UIM benefits as well as to UM/UIM claims against self-insureds. This is concerning indeed.

*Melanie is an associate in our Philadelphia, Pennsylvania office. She can be reached at 215.575.2694 or mjforeman@mdwcg.com.

_{Defense Digest, Vol. 24, No. 1, March 2018. Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2018 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}