South-Western Legal Studies in Business

Clock Runs from Date Policy Coverage Could Have Begun
Description Appeals court held that in a claim for underinsured motorist coverage, the clock on the four year statute of limitations began to run when the other motoristís insurer resolved the matter and the driverís insurance could then become relevant.
Topic Insurance
Key Words

Underinsured Motorist Coverage; Statute of Limitations

C A S E   S U M M A R Y
Facts Rosenthal, insured by State Farm, was struck from behind by another driver on June 8, 1998. In August 1999, he met with a vocational specialist who determined that he sustained a loss of earning capacity in excess of $2 million as a result of the 1998 accident and another one he was involved in before that. An economist estimated that Rosenthalís lost wages from the accidents was $1 million. On June 9, 2003, Rosenthal settled his claim with the driver who hit him on June 8, 1998, for $85,000. That driver had a policy with a limit of $100,000. Rosenthal notified State Farm of the settlement and stated that he was filing a underinsured motorist (UIM) claim. A year later, Rosenthal demanded UIM arbitration. State Farm filed a complaint in court seeking a declaration that the UIM claim was time barred because of Pennsylvaniaís four-year statute of limitations on contract claims. The district court held for Rosenthal, ruling that the statute of limitations began to run when State Farm refused to arbitrate and filed its suit. State Farm appealed.

Affirmed. The four-year limitation period on claims for UIM coverage began to run when the insured settled with the other driver on June 9, 2003, for less than the value of the insuredís damage. The clock did not begin to run when the accident occurred or when the insurer refused to arbitrate and filed suit.

Citation State Farm Mutual Automobile Insurance v. Rosenthal, 484 F.3d 251 (3rd Cir., 2007)

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