OHIO SUPREME COURT - Agrees to Hear New Insurance Dispute

**NOTE: THE OHIO SUPREME COURT HAS RULED ON THIS MATTER - SEE BLOG UPDATE OF JANUARY 3, 2009

WHEN DOES THE TIME START RUNNING UNDER THE TWO-YEAR NOTICE LIMITATION IN AN INSURANCE POLICY?

THE ISSUE:
Does the two-year limitation period contained in a policy for Uninsured/Underinsured Motorist Coverage start on the day of the accident or does the "Discovery Rule" apply to delay starting the two-year period until after the insured receives notice of the fact that the other driver was uninsured?

The Ohio Supreme Court has agreed to hear an appeal of the case: Angel v. Reed (March 9, 2007), Geauga App. No. 2005-G-2669.

FACTS ON APPEAL:
On June 14, 2001, appellee Theresa Angel was injured while riding in a vehicle driven by Eric Reed. At the time, Mr. Reed indicated that he was insured by Nationwide. On May 16, 2003, appellee filed suit against Mr. Reed. She voluntarily dismissed the suit on March 4, and on May 2, Mr. Reed’s attorney informed appellee’s attorney that Mr. Reed’s policy had been canceled three months before the accident.

On July 30, 2004, appellee made a claim for uninsured/underinsured motorist (“UM/UIM”) coverage. When her claim was denied, she filed this suit against Mr. Reed and appellant Allstate Insurance Company.

The trial court granted summary judgment to Allstate, because appellee’s suit was filed beyond the two-year limitation period contained in the policy: “Any legal action against Allstate must be brought within two years of the date of the accident.” The court of appeals reversed, adopting a discovery rule for the contractual limitations period.

Here are the stated positions of the parties before the Ohio Supreme Court.

Appellant (Insurance Company)Position:
A cause of action for UM/UIM benefits accrues on the date of the accident when the tortfeasor has no liability insurance on that date. The court of appeals effectively rewrote the contract language by holding that a cause of action does not “accrue” until the policy-holder becomes aware that the tortfeasor lacked coverage at the time of the accident. All a claimant needs to do to “discover” whether the tortfeasor is covered when the tortfeasor claims coverage, is to call that insurance company.

Where the facts giving rise to a cause of action are readily ascertainable, a court may not apply a “discovery rule” to extend a valid, contractual limitations period. A discovery rule may be applied where the elements of a cause of action cannot reasonably be uncovered or the injury does not appear until later. Here, there are no hidden or unforeseeable facts. A simple phone call or letter would have revealed the true facts.

Appellee (Insured) Position:
Where a policyholder cannot discover the tortfeasor’s true insurance status until after the two-year period has elapsed, a UM/UIM claim does not “accrue” until such discovery. When the claimant later learns that coverage does not exist, whether because the tortfeasor misled her or the insurer’s insolvency, the cause of action does not accrue until that notice. Until receiving the notice, appellee had no cause of action against Allstate.

There is no evidence that Mr. Reed’s insurance status was “readily ascertainable.” The court of appeals held that it was “essentially impossible” for appellee to discover that status within the two-year period.

Note: I will post futher on this issue once the Ohio Supreme Court rules.