Closing the Statute of Limitations Loop in Uninsured Motorist Arbitrations
Charles F. Forer, Esq. on 8/14/2016
About The Author
Eckert Seamans Cherin & Mellott, LLC. Mr. Forer practices all types of Alternative Dispute Resolution. He is a former co-chair of both the Philadelphia Bar Association’s Alternative Dispute Resolution Committee and the Fee Disputes Committee.
Author's note: This article describes a hypothetical situation.
When it comes to protecting clients, Bob does not let his guard down. He knows the value of being prompt. For instance, he takes lots of steps to avoid the running of the statute of limitations.
So when it came time to represent long-time and now seriously injured client Karen in an uninsured motorist ("UM") arbitration, Bob did it all by the book.
On April 5, 2011, Karen was injured in a hit and run accident. She had excellent coverage – her insurance policy included an endorsement for UM coverage of $1,000,000 per incident. An endorsement had an arbitration clause requiring Karen and the insurer to arbitrate any disputes over liability and damages.
Bob knew a four-year statute of limitations, 42 PA. CONS. STAT. ANN. § 5525(a)(8), applies to claims for uninsured motorist benefits. He knew he had to file the arbitration demand within four years of the April 5, 2011 accident date. Even a first grader could figure that out.
Bob moved quickly after meeting with Karen. By letter dated June 2, 2011, he notified Karen's insurer of her UM claim; the notification included a lengthy summary of Karen's medical records and a detailed analysis of her lost earnings. The letter sought the entire policy limits of $1 million. After all, Karen had suffered through three major operations. She faced a recovery of more than one year. She probably would never work again. Two months post-accident, she was in constant pain.
The insurer's counsel on August 1, 2011 sent a reservation-of-rights letter to Bob. On November 5, 2011, the insurer took a statement under oath from Karen. On December 8, 2011, Bob – upset with the several-month delay – informed the insurer's lawyer he was going to appoint an arbitrator. Two weeks later, Bob designated Karen's arbitrator. In January 2012, the insurer designated its arbitrator.
Then things sat, seemingly for good reason. The insurer made a settlement offer that was close to Bob's bottom range of settlement. Bob naturally believed he would be able to settle the UM claim without going through the costs and delays of an arbitration. In fact, the additional time since his initial June 2, 2011 letter allowed Bob to buttress his settlement position due to Karen's additional operations and her continued absence from work with no return date in sight.
Bob was not the only one moving forward. The two party-arbitrators exchanged e-mails regarding the appointment of the neutral arbitrator. They were close to agreement.
However, this "progress" led nowhere. Bob reduced his settlement demand, but the insurer refused to raise its offer. The two party-arbitrators continued to exchange e-mails, but they could not agree on the neutral arbitrator.
Days led to weeks. Weeks led to months. And months led to years. Still no movement. More letters, more e-mails, more medical records.
Then, on August 13, 2015, more than four years after the accident, the insurer filed a declaratory judgment action. The complaint sought a determination that the statute of limitations time barred Karen's UM claim. How could the claim be time barred when Bob put the insurer on notice a mere two months post-accident, when Bob formally sought arbitration eight months post-accident, and when the insurer did not claim it was prejudiced by any delay?
A few months later, the insurer sought summary judgment. Bob restrained himself. He did not seek sanctions in response to the motion. Instead, he laid out the undisputed facts of record that unquestionably illustrated how he had expeditiously acted. Bob's brief pointed out the "obvious problems" (Bob's language) with the insurer's approach – that it would require insureds to bring premature lawsuits to protect their rights even when there is not a present controversy. This approach would burden insureds, tortfeasors, insurers, and courts. Talk about "hurry up and wait."
The one catch with Bob's response to the insurer's summary judgment motion: the trial court granted the motion and determined the statute of limitations barred Karen's UM claim. Where did Bob go wrong?
First the basics:
A UM claim is subject to the same four-year statute of limitations that applies to contract actions. 42 PA. CONS. STAT. ANN. § 5525(a)(8); Hopkins v. Erie Ins. Co.¸ 65 A.3d 452, 456 (Pa. Super. 2013).
The statute of limitations on a UM claim begins to run when "(1) the insured was in a motor vehicle accident, and (2) the insured sustained bodily injury as a result of that accident, and (3) the insured knows of the uninsured status of the owner or operator." Boyle v. State Farm Automobile Ins. Co., 456 A.2d 156, 162 (Pa. Super. 1983).
When a hit-and-run driver whom the insured cannot identify injures the insured, the insured "presumptively" knows, as of the accident date, the hit-and-run vehicle was uninsured. Seay v. Prudential Property&Casualty Ins. Co., 543 A.2d 1166, 1169 (Pa. Super. 1988) ("Using the objective standard, a reasonable person would have known as of the day of the accident that the vehicles were unidentified and therefore presumptively uninsured.").
However, these principles do not complete the picture, because an insured seeking UM benefits tolls the running of the statute of limitations only by filing a petition to appoint arbitrators or to compel arbitration. Sending letters and e-mails as part of an attempt to settle the UM claim, providing medical records and authorizations to obtain other medical records, seeking arbitration, appointing the insured's arbitrator, discussing the ground rules of the arbitration proceeding – none of these actions tolls the statute of limitations.
What should Bob have done? Here is what the Superior Court recently said:
[I]n accordance with Hopkins, the statute of limitations … was not tolled merely because the parties were engaged in correspondence, in an attempt to resolve the uninsured motorist benefits claim. Rather, pursuant to Hopkins, [plaintiff] was at all times required to commence his "action" within the required time-period, by filing a praecipe for a writ of summons, a complaint, a petition to appoint arbitrator, or a petition to compel arbitration, with the prothonotary.
Erie Ins. Exchange v. Bristol, 2016 Pa. Super. Unpub. LEXIS 1886, at *15 (Pa. Super. May 27, 2016).
Hurry up, Bob – file your papers in court even if you then have to wait. Otherwise, you let your guard down and your client's UM case goes "kaput." A first grader knows what that means.
Charles F. Forer is a member in the Philadelphia office of Eckert Seamans Cherin & Mellott, LLC, where he practices all types of Alternative Dispute Resolution, both as a neutral and as counsel to parties engaged in ADR. He is a former co-chair of both the Philadelphia Bar Association’s Alternative Dispute Resolution Committee and the Fee Disputes Committee. He is a frequent lecturer and writer on the use of ADR in a variety of settings. You can reach him at (215) 851-8406 and email@example.com.
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