Deadlines loom for filing Covid-19 business interruption claims. Most policies feature a deadline to file claims. Individual deadlines depend on policy language and the unique facts of each case. But one fact applies to most cases: Missing a deadline to file a claim could end a business owner’s chance to be reimbursed for Covid-19 shutdown-related losses.
The last thing any business owner would want to do is miss a contractually mandated deadline and thereby forfeit coverage.
While many business owners are waiting to see how the law develops in Covid-19 business interruption cases, they might be wise to address any filing limitations which may apply to their coverage should they fail to act within the legal framework of their insurance contract(s).
Statutes of Limitations Issues Apply to Covid-19 Claims
Policy holders may not have as much time as they wish they had to file a Covid-19 related claim against an insurance carrier. Most property policies include lawsuit limitation provisions. These require business owners to file coverage lawsuits within a limited period of time. Failure to file a claim in a timely fashion could mean total forfeiture of a business owner’s rights.
Most insurance policies require a business owner to file a claim within one or two years. That’s a shorter time period than that which applies to filing many other types of civil lawsuits.
When does the Clock Start Running?
Lawsuit limitations vary concerning when the deadline clock starts to run. Many policies require that a lawsuit be filed within one or two years from the date of loss or property damage, or from the date of the discovery of any loss or damage. Other suit limitation provisions may require that a suit be filed within a specified time that follows the date of the insurance company’s written denial of a claim.
Ongoing Business Losses Challenge Legal Process
Because Covid-19 losses are ongoing in many cases, business interruption claims related to the lockdowns and government-mandated business closures can present unique challenges in determining when relevant events occurred. When, exactly, did the loss or damage to the property occur, or when, exactly (or in what time period) did the cause of action occur? Most lawyers will tell policyholders to err on the side of caution in determining lawsuit filing limitations and any other policy deadlines.
Depending on the jurisdiction, insurance lawsuit limitation deadlines may not be tolled during the claim adjustment process. Therefore, policyholders should not assume that an insurer’s continuing investigation of a claim relieves the policyholder from complying with any lawsuit limitation provision.
While lawsuit limitation provisions are common in property policies, they are rare in liability policies. As a result, they are more likely to impact Covid-19-related business interruption claims than related liability claims. As always, policyholders should diligently watch for lawsuit limitation provisions (or any other deadlines) connected with any insurance claim.
A checklist to help reduce the risk of missing a suit limitation deadline:
- Keep a copy of the policy. Don’t rely on an insurer’s representations of the policy terms.
- Read the whole policy carefully. Study the Declarations page, the main insuring document, and the endorsements. Note that suit limitation provisions, often added through endorsement, may conflict with provisions in the main insuring document.
- Locate any suit limitation deadline. Consider confirming any deadline with the insurer in writing.
- Does the applicable jurisdiction have any automatic tolling rules? Don’t assume any time period will automatically be tolled.
- Don’t make an assumption based on an insurer’s conduct that it doesn’t intend to enforce a suit-limitation provision.
- If a suit limitation deadline approaches, consider asking for an extension from the insurer. You might request a tolling agreement or plan to file a lawsuit before the deadline to preserve a claim.
- Always confirm in writing any conversations and/or agreements with insurers regarding suit limitation deadlines. Confirm these through actual letters or emails.
- If a contract claim is already barred by a suit limitation provision, consider whether you as the policyholder may still have any bad faith and/or Unfair Claims Practices Act claims. These may not be subject to the same suit limitation provision in the policy.