Opinion ID: 1862787
Heading Depth: 1
Heading Rank: 5

Heading: The various theories concerning when the limitations period begins to run for bringing a claim for benefits under a UIM provision.

Text: Of the jurisdictions that have considered the issue and depending on the language of the insurance policies involved, three different events have been isolated as being the date when the policy limitations period begins to run for bringing a claim against the insurer for UIM benefits. See 3 Alan A. Widiss, Uninsured and Underinsured Motorist Insurance § 34.4, at 112 (2d ed.1995) [hereinafter Widiss]; Jeffrey A. Kelso & Matthew R. Drevlow, When Does the Clock Start Ticking? A Primer on Statutory and Contractual Time Limitation Issues Involved in Uninsured and Underinsured Motorist Claims, 47 Drake L.Rev. 689, 693 (1999) [hereinafter Kelso & Drevlow]. These three possible events include (1) the date that the insurance company allegedly breaches the insurance contract by denying the insured's UIM claim; (2) the date of the accident; and (3) the date that the insured settles with or obtains judgment against the tortfeasor, thereby exhausting the limits of the tortfeasor's liability coverage. See 3 Widiss § 34.4, at 112; Kelso & Drevlow, at 694.
Although not advanced by either party in this case, some courts have adopted the rule that absent express language in the policy terms, a claim for UIM benefits is based on contract and therefore the contract statute of limitations applies. See 1 Widiss § 7.7, at 349 (stating that absent specific language in the policy, appellate court decisions almost uniformly hold that a claim for uninsured motorist insurance benefits is a contractual right and contract statute of limitations therefore applies). The theory also holds that because the claim for uninsured or underinsured motorist benefits is contractual, the policy limitations period for bringing a UIM claim begins to run on the date that the insurance company breaches the insurance contract. [6] The reasoning behind this theory is that because a claim for UM or UIM benefits is based on contract, the limitations period begins to run on the date that the insurance contract is breached, generally, when the insurance company denies the insured's claim for benefits. See Vega v. Farmers Ins. Co., 323 Or. 291, 918 P.2d 95, 98 (1996), superseded by statute in Or.Rev.Stat. §§ 742.504(4)(A), 742.504(12) (1999) (allowing insurer to include language stating that no cause of action shall accrue to the insured under UM/UIM coverage unless insured has filed an action against insurer within two years from date of accident); Joel S. DeVore, Vega v. S.B. 645: Underinsured Motorist Coverage and the Exhaustion Clause, 34 Willamette L.Rev. 327, 344 (1998) (discussing how Vega has been overruled by legislation). Because the insurer's liability is contract-based, the relevant date is the date when the insurance company allegedly breaches its contract with its insured. See Vega, 918 P.2d at 98. This theory is considered the majority view. See Wille v. Geico Cas. Co., 2 P.3d 888, 890 (Okla.2000); accord Kelso & Drevlow, at 694.
A number of other jurisdictions have adopted the view that the limitations period for bringing a claim against the insurer for UIM benefits begins to run on the date of the accident. [7] The reasoning behind this theory is that the insured's claim for UIM benefits derives from the tort claim against the underinsured tortfeasor and that the insurer essentially stands in the shoes of the tortfeasor. See Shelton v. Country Mut. Ins. Co., 161 Ill.App.3d 652, 113 Ill.Dec. 426, 515 N.E.2d 235, 240 (1987); accord State Farm Mut. Auto. Ins. Co. v. Kilbreath, 419 So.2d 632, 634 (Fla. 1982) (cause of action for UM/UIM claim arises on date of accident because right of action stems from insured's right of action against tortfeasor). As a result, it would be inequitable to require an insurer to be exposed to liability for a longer period than that applicable to the tortfeasor and thus, the limitations period begins to run on the date of the accident. Shelton, 113 Ill.Dec. 426, 515 N.E.2d at 240. This theory is considered a minority view. See Wille, 2 P.3d at 890.
Courts from other jurisdictions have held that the limitations period does not begin to run until the date of settlement with or entry of judgment against the tortfeasor. [8] See 3 Widiss § 34.4, at 112-13; Kelso & Drevlow, at 695. This theory is based on a form of the discovery rule used in tort cases which is that the insured has no way of knowing what liability, if any, the UM/UIM carrier will have until the insured has exhausted the liability coverage of the tortfeasor by settlement or judgment. See 3 Widiss § 34.4, at 112-13; Kelso & Drevlow, at 695.