Opinion ID: 1862130
Heading Depth: 1
Heading Rank: 4

Heading: Application of Law to Milwaukee Mutual Policy.

Text: Nicodemus contends that, when the contractual limitations provision is considered in context with the other requirements of the policy, the limitations provision is unreasonable. As noted earlier, the policy requires that the insured exhaust the tortfeasor's liability insurance by judgment or settlement in order to trigger coverage under the UIM section of the policy. The UIM coverage also prohibits any suit against the insurer until the insured has complied with all policy terms. The practical effect of these policy provisions is that an insured has no claim for UIM benefits and may not even institute suit against the insurance carrier until she has obtained a judgment against the tortfeasor or reached a settlement with the tortfeasor. [2] See Kuhner v. Erie Ins. Co., 98 Ohio App.3d 692, 649 N.E.2d 844, 848 (1994) (interpreting nearly identical policy provisions). As will be explained, these policy terms have a great impact on the ability of an insured to comply with the two-year contractual limitations provision. It is important at this juncture of our analysis to point out that the two-year limitations period provided in the policy does not commence on the date that the insured's claim under the policy accrues. Under general contract principles, the insured's claim typically accrues and the statute of limitations begins to run upon the insurer's denial of coverage or refusal to pay. See Hamm v. Allied Mut. Ins. Co., 612 N.W.2d 775, 783 (Iowa 2000). Under the contractual limitations period imposed by the Milwaukee Mutual policy, the limitations period commences at the time of the motor vehicle accident providing the basis for the UIM claim. Thus, the limitations period begins to run before the insured has ascertained the extent of her underinsured damages and before she is permitted, under the policy, to file suit against her insurer. The operative result of the policy terms, when considered together, is that the insured has two years from the date of the accident (1) to obtain a judgment against the tortfeasor, or alternatively to reach a settlement with the tortfeasor, and (2) to sue the UIM insurer. If the insured is unable to reach a prompt settlement with the tortfeasor, she is put to the difficult task of filing suit against the tortfeasor and taking her case to trial within two years. While this could certainly be done, we note that the legislature has deemed it appropriate to give an injured party two years simply to investigate her claim against a tortfeasor and get her lawsuit on file. See Iowa Code § 614.1(2) (1999). Here, the insurance company is requiring not only that the insured investigate her tort claim and file suit within two years, but also that she conclude her litigation against the tortfeasor and file an action against her insurer within that same two-year period. Thus, the policy makes exhaustion of the tort claim a condition precedent to suit against the insurer, yet starts the limitations period without regard to whether exhaustion has occurred. We conclude that this time frame for filing suit under the policy is unreasonable. See Kuhner, 649 N.E.2d at 848 (holding that nearly identical policy provisions as a practical matter deprived the insureds of coverage). We have not overlooked Milwaukee Mutual's argument that the insured could simply commence her action against the insurer at the same time she files suit against the underinsured motorist, thereby complying with the two-year limitations period governing both claims. While this course of action is certainly permissible under our UIM statute, see Leuchtenmacher v. Farm Bureau Mut. Ins. Co., 461 N.W.2d 291, 294 (Iowa 1990), it is not allowed by the terms of Milwaukee Mutual's policy. Under the policy at issue here, the insured has no claim for UIM benefits until she has exhausted her rights against the tortfeasor. Thus, any lawsuit against the insurer seeking UIM benefits before the insured has complied with the exhaustion requirement would be subject to summary judgment. Therefore, the plaintiff does not have the option of simultaneously suing the insurer and the underinsured motorist as suggested by Milwaukee Mutual.