STATUTE OF LIMITATIONS: CONSENT-TO-SETTLEMENT PROVISIONS AND UNDERINSURANCE
In a case involving an insurer’s attempt to avoid payment of a claim under an underinsured motorist policy after a car accident on statute of limitations grounds, the Eastern District of Pennsylvania resorted to the basics of contract law in denying the insurer’s motion for summary judgment and granting the policyowner’s petition to compel arbitration. Although the parties agreed that Pennsylvania has a four-year statute of limitations for contractual actions, they disagreed as to when the limitations period begins to run in an underinsurance case. Sitting in diversity, and absent any rulings on point by the state’s highest court, the court determined that, based on relevant state and Third Circuit precedent, the Pennsylvania Supreme Court likely would rule that the statute of limitations begins to run on an underinsurance claim when the insured actually settles with the underinsured driver. Thus, consistent with both the purpose of consent-to-settlement provisions, which give insurers an opportunity to exercise their subrogation rights prior to the formation of binding settlement agreements, and contract law, the statute of limitations began to run on the date the policyowner accepted the tortfeasor’s settlement offer by signing the release absolving the tortfeasor from further liability. Wilson v. Great American Insurance Group, Case No. 12-5700 (E.D. Pa. Oct. 25, 2013).
This post written by Kyle Whitehead.
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