With the spread of COVID-19 to the U.S., many insurers are preparing for possible COVID-19 related first party property claims by reviewing what coverages and exclusions might be applicable to such claims. While any claim is dependent on the specific terms of the policy issued to each insured, insurance companies should consider certain coverages and exclusions as a checklist. Partners Karen Karabinos and Eric Mull will address a coverage provision or exclusion each edition of this series. Today, we focus on a general discussion of suit limitation clauses, their treatment under Georgia law, and the impact COVID-19 will have on suit limitation clauses
Under Georgia law, suit limitation clauses are valid and enforceable. Giles v. Nationwide Mutual Fire Ins. Co., 199 Ga. App. 483, 405 S.E.2d 112 (1991). The time period for suit limitation clauses in a policy of insurance is computed from the date of loss, not from the time of accrual of a right of action. SunTrust Mortgage, Inc. v. Georgia Farm Bureau Ins. Co., 203 Ga. App. 40, 416 S.E.2d 322 (1922) (suit limitation begins at the time of the loss, not after the insurer’s receipt of a proof of loss). In addressing the issue of damage discovered after expiration of the suit limitation period, the majority of jurisdictions conclude that the suit limitation period does not toll until after the damage is discovered. In fact, “the vast majority of courts that have considered this issue have held that the policy limitation runs from the date of the occurrence of the destructive event . . . these courts held that the insured’s failure to discover the loss until sometime after it occurred was immaterial and that an action on the policy was nevertheless required to be brought within twelve months from the date of the loss.” Brunner v. Econ. Preferred Ins. Co., 597 N.E.2d 1317, 1318-19 (Ind. Ct. App. 1992), citing Sager Glove Corp. v. Aetna Ins. Co. 317 F.2d 439 (7th Cir. 1963).
Occasionally, an insured will assert that a suit limitation clause was waived due to a carrier’s affirmative act of adjusting and attempting to negotiate the resolution of a claim. With regard to settlement negotiations serving as a waiver of the suit limitation period, Georgia law is clear that such negotiations must be continuous prior to expiration of the suit limitation period in order to lull the insured into believing that the limitation period is either enlarged or waived. See Bickerstaff Imports, Inc. v. Sentry Select Ins. Co., 299 Ga. App. 245 (2009) (even if the correspondence between Sentry and Southlake could be characterized as negotiations, “mere negotiation for settlement, unsuccessfully accomplished, is not that type of conduct designed to lull the claimant into a false sense of security so as to constitute a waiver of the limitation defense” . . . [and] even if its correspondence with Southlake could be regarded as such, its correspondence ended on December 29, 2003, almost a year before the contractual limitation period); Allstate Ins. Co. v. Sutton, 290 Ga.App. 154 (2008) (settlement negotiations do not always give rise to a jury question on whether the policyholder was led to believe that he need not file suit, even if they continue throughout the policy’s limitation period. “[M]ere negotiation for settlement, unsuccessfully accomplished, is not that type of conduct designed to lull the claimant into a false sense of security so as to constitute a waiver of the limitation defense.”
With regard to an affirmative promise or act waiving the limitation, there must be just that – an affirmative promise to pay a claim, regardless of the limitation period. For example, in Employers Ins. of Wausau v. Nolen, 137 Ga. App. 205 (1976), the insurer made an affirmative assurance to the claimant that his claim would not be adversely affected by a delay. Based on this fact, the Georgia Court of Appeals held that the insurer’s conduct estopped them from presenting the statutory limitation as a defense.
On March 14, 2020, in light of the COVID-19 pandemic, the Georgia Supreme Court issued an Order Declaring Statewide Judicial Emergency, which terminates on April 13, 2020 at 11:59 pm.
The Order provides (in pertinent part):
Pursuant to OCGA 38-3-62, during the period of this Order, the undersigned hereby suspends, tolls, extends, and otherwise grants relief from any deadlines or other time schedules for filing requirements imposed by otherwise applicable statutes, rules, regulations, or court orders, whether in civil or criminal cases or administrative matters, including, but not limited to any: (1) statute of limitations.
Based on the language of the Court’s Order, insureds and their counsel may attempt to argue that any suit limitation period that expires during the term of the judicial emergency is stayed during the term of the Order. However, Georgia law is clear that a suit limitation clause found within an insurance policy is not the same as a statute of limitations. For example, in Gravely v. Southern Trust Ins. Co., 258 S.E.2d 753 (1979), the Georgia Court of Appeals concluded that a twelve-month limitation period was enforceable and not in conflict with Georgia’s six-year statute of limitations for contact claims. In sum, under Georgia law, “if a contract contains a limitations clause and a separate amendatory clause that does not explicitly refer to the statute of limitations, then the contract’s limitation period is generally enforceable.” Relf v. State Farm Mut. Auto. Ins. Co., No. 4:18-CV-240(CDL), 2019 WL 2552770 (U.S.D.C, M.D. GA, June 20, 2019). Examples of amendatory clauses that refer to the applicable statute of limitations include “but if the law of the state in which this policy is issued allows more than two years to bring legal action against us, that longer period of time will apply” and “unless a longer time is provided by applicable statute.” Accordingly, the Order declaring a judicial emergency and staying statute of limitations will not impact the suit limitations clause in an insurance policy unless the policy contains policy language referring to or incorporating the applicable statute of limitations.