Presented by the Insurance Agents & Brokers Liability Practice Group

Ohio Supreme Court Clarifies Start of Statute of Limitations in Insurance Agent & Agency Negligence Actions

April 4, 2018

By David J. Oberly, Esquire

The Ohio Supreme Court has issued a significant decision that is extremely pertinent to all insurance agents and agencies who do business in the state of Ohio.

In LGR Realty, Inc. v. Frank and London Ins. Agency, 2018-Ohio-334, Ohio's highest court was tasked with answering the question of when insurance agent/agency negligent procurement and negligent procurement claims accrue for purpose of triggering R.C. § 2305.09(D)'s four-year statute of limitations for professional liability claims. LGR Realty stemmed from an insurance agent's procurement of an E&O liability policy for a real estate agency client. After the real estate agency's claim for defense and indemnity was denied on the basis of an exclusion contained in the policy, the real estate agency filed suit against its insurance agent for allegedly failing to procure an appropriate professional liability insurance policy and negligently misrepresenting the coverage contained in the policy.

On appeal, the real estate agency argued that the delayed-damages rule—which delays the accrual of a cause of action where the wrongful conduct is not immediately harmful until the actual injury or damage occurs—applied to the insured's cause of action alleging negligence related to the procurement of the professional liability insurance policy. The Ohio Supreme Court rejected the insured's argument, finding instead that the delayed-damages rule did not apply and that such a cause of action accrues on the date the policy is issued. As such, the court held that the delayed damages rule does not apply to a cause of action alleging negligent procurement of a professional liability insurance policy or negligent misrepresentation of the terms of the policy when the policy at issue contains a provision specifically excluding the type of claim that the insured alleges it believed was covered by the policy. Therefore, the four-year statute of limitations period began to run when the insurance agency issued the insurance policy, not when the insured's claim for a defense and indemnity was denied.

The LGR Realty decision appears to be a significant win for Ohio insurance agents and agencies, as the earlier commencement date significantly limits the scope of potential liability that agents and agencies will face moving forward as it relates to the procurement of insurance coverage for their customers. With that said, in its opinion, the court did not explicitly overrule its prior decision in Kunz v. Buckeye Union Ins. Co., 1 Ohio St.3d 79, 437 N.E.2d 1194 (1982), which approved the delayed-damages rule in certain insurance agent negligence cases, most particularly where the insured's right to recovery would be barred before the insured even became aware that it had been harmed. Thus, while the proper commencement date of an insurance agency negligence claim is now much clearer in the wake of LGR Realty, a certain amount of uncertainty still exists as to when the statute of limitations is triggered for purposes of insurance negligent procurement and negligent misrepresentation claims in Ohio.

David Oberly is an associate in the firm's Cincinnati office. He may be reached at djoberly@mdwcg.com.

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