SDV Insights

Despite best intentions, sometimes policyholders encounter challenges adhering to the applicable statute of limitations or their policy’s limitation of suit deadline. In complex insurance claims, identifying, comprehending, and accurately quantifying significant and long-term losses may take several years. Even when all losses are readily apparent, the insurer may invest months or years in scrutinizing the claim and finalizing the adjustment of losses, requesting policyholders to furnish extensive supplemental information related to their claim and/or sit for interviews or examinations under oath. If the insurer is investing significant time into verifying a loss, the insured may not even realize a lawsuit could be necessary and fail to consider the applicable limitation period is running and could expire prior to a formal decision on coverage from the insurer. In fact, unscrupulous insurers can sometimes use a lengthy claim investigation to their advantage to run out any applicable deadline to file suit and then deny coverage.

To level the playing field, courts in many jurisdictions throughout the country have adopted the Equitable Tolling Doctrine to remedy the injustice to policyholders unable to file suit in a timely manner due to their insurance carrier’s delay in determining coverage. The Equitable Tolling Doctrine tolls the limitation of suit provision in a policy from the time the insured tenders a claim to its insurer until the insurer completes the adjustment process and formally denies coverage. This means that as soon as the policyholder tenders a claim within the limitation of suit provision in their policy, in a timely manner, the clock is stopped until the carrier responds with a prompt and thorough determination of coverage for the claim.

Courts that embrace the Equitable Tolling Doctrine do not diminish the statutory purpose of implementing a limitations period; instead, they reinforce it. Since the limitation of the suit period is only tolled when the claim has been submitted to the insurer, the insured is motivated to promptly notify the insurer of the claim. Similarly, as the limitations period resumes upon the insurer's formal denial of liability, the insurer is incentivized to diligently investigate and adjust the claim on its merits, providing a timely decision to the insured on coverage. Equitable tolling, therefore, promotes timeliness and efficiency in submitting and adjusting claims, ensuring fairness to both insurers and insureds alike.

Based on this rationale, numerous courts have adopted the Equitable Tolling Doctrine.¹  The ease of application of this Doctrine has resulted in a collection of courts affirmatively expressing admiration for it, describing it as "a sound result that reconciles" conflicting policy provisions,²  "particularly persuasive,"³  and "logically sound."⁴  Additionally, the primary treatise on insurance law characterizes the Equitable Tolling Doctrine as "pragmatic," for recognizing the lack of justification for filing a lawsuit until the insurer has either officially denied the claim or delayed the coverage determination to such extent that the delay itself becomes the basis for legal action.⁵

While not all states have adopted equitable tolling, many have alternative legal doctrines available to accomplish the same result, such as the principles of waiver and estoppel.⁶  In New York, for example, an insurer can forfeit the right to deny a claim if it fails to do so in a timely manner.⁷  Similarly, in Oregon, insurance companies may be estopped from using a suit limitation provision as a defense to liability if their actions amount to an affirmative inducement causing the plaintiff to delay filing the action.⁸  However, notwithstanding the availability of these alternative legal doctrines, it is an undeniable reality that claims of waiver and estoppel often lead to costly evidentiary disputes over whether the insurer's actions rise to the level of the insurer having waived, or being estopped from raising, the limitations period to defeat the suit. Consequently, various courts have recognized that "equitable tolling" is a more satisfactory and easily applied approach compared to navigating the intricacies of waiver and estoppel in the myriad factual scenarios that may arise.⁹

Notably, Florida takes its own approach to the Equitable Tolling Doctrine. “Under certain circumstances,” Florida’s Equitable Tolling Doctrine permits “the filing of a lawsuit that otherwise would be barred by a limitations period.”¹⁰  The Doctrine permits “a type of equitable modification which ‘focuses on the plaintiff's excusable ignorance of the limitations period and on [the] lack of prejudice to the defendant.’”¹¹  The Doctrine has generally “been applied when the plaintiff has been misled or lulled into inaction, has in some extraordinary way been prevented from asserting [its] rights, or has timely asserted [its] rights mistakenly in the wrong forum.”¹²

Florida policyholders not only enjoy the benefit of equitable tolling in most circumstances but can also rely on the legal principle of equitable estoppel, which bars a defendant carrier from asserting an affirmative defense that a policyholder’s suit against the carrier is barred simply because the statute of limitations expired before suit was filed.¹³  The doctrine “is based on principles of fair play and essential justice and arises when one party lulls another party into a disadvantageous legal position.”¹⁴  In other words, it “presupposes a legal shortcoming in a party's case that is directly attributable to the opposing party's misconduct.”¹⁵  The Supreme Court of Florida has upheld this doctrine, explaining:

The doctrine of estoppel is applicable in all cases where one, by word, act, or conduct, willfully caused another to believe in the existence of a particular state of things and thereby induces him to act on this belief injuriously to himself or to alter his own previous condition to his injury.¹⁶

This principle of equitable estoppel applies in certain situations to allow a policyholder to move forward with legal action against their carrier despite the expiration of the limitations period deadline to file suit. For example, when a carrier’s actions in “running out the clock” or “dragging their feet” in their claim investigation induces action or inaction by the insured to their detriment—such as waiting until the conclusion of the adjustment process to file suit against the insurer for coverage, even though the statute of limitations has already expired on such suit—the equitable estoppel doctrine can save the lawsuit from being deemed untimely. This was found to be the case recently in Herman v. Philadelphia American Life Insurance Company,¹⁷  where the court emphatically agreed with the insured’s argument that “[i]t is disingenuous for the Defendant to wrongfully inform the [Decedent] that the claim would be paid at the conclusion of all treatments [but] then deny payment and allege wrongful delay caused by plaintiff.”¹⁸  As a result, the court concluded that the defendant carrier was “‘estopped’ from arguing that the plaintiff’s suit is untimely.”¹⁹

Conclusion:

While failing to file suit prior to the expiration of the contractual limitation of suit provision or applicable statute of limitations can bar the insured from coverage, that is not always the case. Equitable tolling allows for an insured to wait for their carrier to make a final determination of coverage without fear of having to file suit before knowing whether the carrier contests coverage of the claim. Equitable estoppel is similarly a valuable tool to enable an insured to file suit past the limitation of the suit deadline when the insured perceives that their carrier has acted in bad faith in the form of misrepresentations and delay tactics that prevented the insured from timely filing. Policyholders should be aware of these doctrines; even if you missed the filing deadline, it does not necessarily mean you don’t have a case.

For more infomation, please contact Stephanie A. Giagnorio (SGiagnorio@sdvlaw.com) or Kelly A. Johnson (KJohnson@sdvlaw.com).

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¹ See, e.g., Fed. Sav. & Loan Ins. Corp. v. Aetna Cas & Sur. Co., 701 F. Supp. 1357, 1362 (E.D. Tenn. 1988) [hereinafter F.S.L.I.C.] (concluding that, under Tennessee law, equitable tolling was the best approach because it “is the most analytically sound, and it’s the most compatible with the contract limitations language in question, yet does not deal harshly with either party as could be true if tolling were not permitted”); Nicholson v. Nationwide Mut. Fire Ins. Co., 517 F. Supp. 1046, 1051 (N.D. Ga. 1981) (concluding that, under Georgia law, equitable tolling was the approach most consistent with rules of construction for insurance contracts, that it avoided forfeitures of policy benefits, and that it was the most equitable to the parties); Christiansen v. First Ins. Co. of Hawaii, Ltd., 967 P.2d 639, 651 (Haw. Ct. App. 1998) (adopting equitable tolling because it is consistent with the purpose of the limitations period, avoids premature lawsuits, and assures that the insurer has an incentive to complete a prompt and thorough investigation); Ford Motor Co. v. Lumbermens Mut. Cas. Co., 319 N.W.2d 320, 322-25 (Mich. 1982) (adopting equitable tolling because it is consistent with the statutory scheme, gives the insured the full benefit of the limitations period, and “places no untoward burden upon insurers”); Clark v. Truck Ins. Exch., 598 P.2d 628, 629-30 (Nev. 1979) (adopting equitable tolling on the ground that the policy language is ambiguous and should be construed against the insurer to avoid penalizing the insured for the time the insurer spends investigating and adjusting the claim).
² Ford Motor, 319 N.W.2d at 321-22.
³ Christiansen, 967 P.2d at 650-51.
⁴ F.S.L.I.C., 701 F. Supp. at 1361.
⁵ 17 COUCH ON INSURANCE § 237:39 (3d ed. 2003).
⁶ Guam House & Urban Renewal v. Dongbu Ins. Co., 2001 Guam 24, 2001 WL 1555206, at *3 (Guam 2001).
⁷ See N.Y. Cent. Mut. Fire Ins. Co. v. Markowitz, 537 N.Y.S.2d 571, 572 (App. Div. 1989).
⁸ Lyden v. Goldberg, 490 P.2d 181, 182 (Or. 1971); See also Kimball v, Horticultural Fire Relief, 154 P. 578, 581 (Or. 1916) (quoting Ins. Co. v. Eggleston, 96 U.S. 572, 577 (1879)) (noting that actions taken by “an insurance company, which lead a part insured honestly to believe that by conforming thereto a forfeiture of his policy will not be incurred, followed by due conformity on his party, will and ought to estop the company from insisting upon the forfeiture, though it might be claimed under the express letter of the contract’”).
⁹ Peloso v. Hartford Fire Ins. Co., 267 A.2d 498, 502 (N.J. 1970).
¹⁰ Oceania III Condo. Ass'n, Inc. v. Westchester Surplus Lines Ins. Co., 658 F. Supp. 3d 1177, 1186 (S.D. Fla. 2023) (citing Machules v. Dep't of Admin., 523 So. 2d 1132, 1133-34 (Fla. 1988)).
¹¹ Id. (quoting Cocke v. Merrill Lynch & Co., 817 F.2d 1559, 1561 (11th Cir. 1987)).
¹² Id.
¹³ United States Life Ins. Co. v. Logus Mfg. Corp., 845 F. Supp. 2d 1303, 1318 (S.D. Fla. 2012); see also State v. Harris, 881 So. 2d 1079, 1084 (Fla. 2004).
¹⁴ Fla. Dep't of Health & Rehab. Servs. v. S.A.P., 835 So. 2d 1091, 1096 (Fla. 2002).
¹⁵ Major League Baseball v. Morsani, 790 So. 2d 1071, 1077 (Fla. 2001).
¹⁶ Herman v. Philadelphia Am. Life Ins. Co., 2022 WL 19914510, at *3 (M.D. Fla. May 10, 2022) (quoting Major League Baseball v. Morsani, 790 So. 2d 1071, 1076 (Fla. 2001)).
¹⁷ 2022 WL 19914510, at *2 (M.D. Fla. May 10, 2022).
¹⁸ Id. at *2.
¹⁹ Id. at *3.