Opinion ID: 852499
Heading Depth: 3
Heading Rank: 1

Heading: Claims for Obtaining Inadequate Coverage

Text: The candidates for dates starting the limitations period are the date of coverage, the date of the loss, the date of denial of the claim, and the date the insured learns or should in the exercise of reasonable care have learned of coverage problems. Other jurisdictions have split on the start of the statute of limitations for negligence claims against an insurance agent. See, e.g., Commonwealth Ins. Co. v. Stone Container Corp., 323 F.3d 507, 511 (7th Cir.2003) (collecting cases); Broadnax v. Morrow, 326 Ill.App.3d 1074, 261 Ill.Dec. 225, 762 N.E.2d 1152, 1157 (2002) (holding that the statute of limitations against agent began to run at time of insurance denial because injury discoverable); Cunningham v. Ins. Co. of N. Am., 2006 WL 2568464, at  (N.Y.App.Div. 2006) (holding that the statute of limitations against agent begins at time of injury); Toy v. Metro. Life Ins. Co., 863 A.2d 1, 7-9 (Pa.Super.Ct.2004) (holding that the statute of limitations against agent started when insured received insurance policy because injury discoverable). The alleged negligence here was in failing to advise the Filips of the availability of some types of insurance, and in failing to secure adequate limits. We agree with the trial court that a claim against an agent for negligent procurement of the wrong coverage begins at the start of coverage if the breach was discoverable at that time through ordinary diligence. The Court of Appeals held that under Butler v. Williams, 527 N.E.2d 231, 234 (Ind.Ct.App.1988), and its progeny, the Filips' claim was not foreclosed by the statute of limitations because they filed within two years of the fire, which was necessarily earlier than the date of denial of the claim, which is not in the record. Filip v. Block, 858 N.E.2d 143, 152 (Ind.Ct.App. 2006). We do not find Butler to be on point. In that case, the Williamses were injured by a drunk driver and sued the owners of the tavern that served the driver. 527 N.E.2d at 232-33. The tavern's insurer denied coverage based on an exclusion for liability resulting from serving alcoholic beverages. Id. The tavern assigned to the Williamses any claims against their insurer for failing to recommend dram shop coverage. Id. at 233. Five years after the accident, and three years after coverage was denied, the Williamses sued the tavern's insurer and insurance agent. Id. The Court of Appeals noted that the statute of limitations began to run against the Williamses at the same time it ran against the tavern. Id. at 234. The Court of Appeals stated the latest date on which the [tavern's] cause of action against their insurer and insurance company could have accrued was the date when the tavern was told that it had no coverage. Id. Butler held only that all critical dates had passed, not that the critical date was denial of coverage. The Court of Appeals adopted the same language in Strauser v. Westfield Ins. Co., 827 N.E.2d 1181, 1185 (Ind.Ct.App.2005). In Strauser, horses on Yoder's land broke loose and injured Strauser on September 18, 1991. Id. at 1182. Strauser sued Yoder on August 6, 1992. Id. Yoder's insurer denied coverage and in 1995 Yoder assigned any claim he might have against his insurance agent to Strauser. Id. Strauser sued the agent in 2002. Id. The court cited Butler and found the claim barred by the two-year limitation because Strauser's cause of action accrued on June 4, 1992, when Westfield denied Yoder's claim. Id. at 1185. As in Butler, the claim was barred whether the date of coverage or the date of the loss triggered the limitation period, so this too was no holding on the point in issue here. The trial court relied on Page v. Hines, 594 N.E.2d 485 (Ind.Ct.App.1992), in determining that in this case the statute of limitations began to run at the time of coverage. The Pages asked Hines, their insurance agent, to procure a three-year policy for them with the same coverage as their last policy. Id. at 486. Although their prior policy contained employer liability coverage, their new policy did not. Id. The Pages sued Hines for negligent procurement of insurance. Id. The court explained, [t]he question to be resolved is when the Pages discovered, or reasonably should have discovered, Hines's negligent failure to procure the insurance coverage they desired from the start of coverage. Id. at 487. We agree that this is the correct inquiry to resolve the limitations period for a claim of negligent failure to procure the proper coverage. The Filips argue that their negligence claim accrued when the fire occurred. The Filips claim that [i]t is strange logic to believe that the Filips could have filed a lawsuit against Block in the year 2000 or 2001. . . . Clearly, a cause of action filed prior to a loss is not ripe. But insurance is about the shifting of risk. The Filips bore the risk of loss from the date the policy was issued, so their injury from the alleged negligence occurred at this point. Although the extent of damages was unknown within the statute of limitations, the full extent of damages need not be known to give rise to a cause of action. See Shideler v. Dwyer, 275 Ind. 270, 282, 417 N.E.2d 281, 289 (1981) (For a wrongful act to give rise to a cause of action and thus to commence the running of the statute of limitations, it is not necessary that the extent of the damage be known or ascertainable but only that damage has occurred.). Presumably, no litigation would have been necessary to correct their policy and pay the adjusted premium for the desired coverage before the fire, but if for any reason the coverage was no longer available the Filips could have asserted their negligence claim if they felt that necessary. Further, if we accept the Filips' argument, then insureds become free riders, paying lower premiums, perhaps for many years, and then retaining the ability to claim the benefit of higher coverage if a loss is incurred. We do not hold, however, that the date of coverage is necessarily controlling in every case. The question in this case is at what point the Filips, in the exercise of ordinary diligence, could have discovered that they were underinsured. The Filips claim that their policy lacked coverage of nonbusiness personal property and business interruption, and that the building and business personal property coverage had inadequate limits. All of these alleged problems were ascertainable simply by reading the policy. [2] As a result, the limitations period in this case began to run on or shortly after the activation of the policy with the exception discussed below for nonbusiness personal property.