What Is the Statute of Limitations for Filing a Claim Against an Insurance Company?
A statute of limitations is a law that provides a window for filing a civil lawsuit or criminal charges. Once that window has closed, courts will dismiss any lawsuits or prosecutions which are filed late.
Different types of cases have different statutes of limitations set out in state or federal law, and determining the applicable statute of limitations can sometimes be a complicated matter. An insurance bad faith claim is one such instance. If you believe your insurer unfairly denied your claim in bad faith, how long you have to file a lawsuit depends on whether the policy is an individual policy or employer-sponsored plan and whether the law of the state you are in views insurance bad faith as a civil tort or a breach of contract. Let’s look at California, for example, which provides a window into the issues which can arise when analyzing the statute of limitations for a bad faith insurance denial claim.
The statutes of limitations in California only give you a limited time frame to sue an insurance company for wrongfully denying your claim. Other deadlines apply to other critical stages of a lawsuit as well, such as filing your claim or appealing a denial. These rules can be very complicated and can vary greatly depending on the type of case you have, what happened to you, when you filed your appeal, and when the insurance company denied your claim. If you fail to file your claim or lawsuit within the applicable deadline, you could lose your ability to claim your benefits and money damages, even if the insurer acted wrongfully in denying your claim. Time is of the essence when it comes to insurance claims; if you aren’t sure of the proper procedures to follow, act quickly and contact an experienced California insurance lawyer to protect your rights.
Internal appeals may be required before you’re allowed to sue.
Before you can sue an insurance company for denying your claim, you generally have to first exhaust the insurance company’s own administrative appeal provisions. Different insurance companies have different appeal provisions for different types of insurance policies. Under some policies, you have to go through the company’s internal appeal process before you can file a lawsuit. In other policies, you have to appeal twice before you can sue. Some policies require a so-called Independent Medical Review (IMR) as part of the process.
Most private health plans are governed by a federal law known as ERISA. ERISA requires insurers to have an internal appeals process and sets out a series of timelines for appeals, depending on the type of service that was denied. An experienced insurance law attorney can help you understand the applicable deadlines for filing claims and appeals.
Is insurance bad faith a breach of contract or a tort?
When it comes time to file a lawsuit in California, the statute of limitations is different depending on whether your claim is based on a breach of contract or a tort (civil wrong).
For breach of contract claims in California, the statute of limitations is four years. However, the insurance policy might have limited the time frame to file a lawsuit to as little as one year, so it’s crucial to know and understand the terms of your policy. If the insurer intentionally delays the process to keep you from filing a lawsuit until after their shorter time limit expires, the courts will allow you the full four years on a contract claim.
The California Code also provides a two-year statute of limitations for an injury caused by a negligent or wrongful act, known in the law as a tort. If the insurer unfairly denied coverage or otherwise acted in bad faith, is that a breach of contract or civil tort? In California, insurance bad faith is recognized as a tort. When your claim is denied, is the basis of your lawsuit that the insurer violated some term of the policy (a breach of contract) or that the insurer acted in bad faith (a tort)? The answer is critical to getting a lawsuit filed under the applicable statute of limitations.
When does the statute of limitations clock start ticking?
When dealing with a statute of limitations, it is vital to pick the correct date for when the statute began to run. In the case of a contract claim, the period starts on the date the contract was breached. In a tort claim, however, the clock starts at the point you knew or should have known that the harm occurred. The clock might start on the date you receive a notice from the insurer telling you your claim is denied, but only if you knew or should have known their denial was wrongful. It might take some time before you actually start to realize they are taking advantage of you, so even when you get a denial in writing or over the phone, it might still not be clear when the statute of limitations starts to run.
An Experienced California Insurance Lawyer can Help You Clear the Confusion Surrounding the Statute of Limitations on Your Claim
Statutes of limitations are just one more reason why it is so important to talk to an attorney as soon as you encounter a problem with your insurance company. With few exceptions, courts will not hear a case that was filed after the statute of limitations has expired. Contact an attorney as soon as you find yourself in a dispute with your insurer, so you can rest assured important deadlines like the statute of limitations will not be missed.
