National Association of Mutual Insurance Companies

Print | ShareThis

Indiana: Supreme Court Addresses Statute of Limitations for Claim of Agent Negligence

The Indiana Supreme Court handed down an opinion on Jan. 29 holding that the statute of limitations for negligence claims against an insurance agent for failure to obtain a desired form of coverage begins to run when the failure was first discoverable through ordinary diligence.

In Idan Filip and Valaria Filip vs Carrie Block and 1st Choice Insurance Agency, the Filips purchased a six-unit apartment building in Knox, Ind., in late 1998. In January 1999, the Filips met with Carrie Block, an insurance agent for 1st Choice Insurance Agency, the agency that had served the prior owner of the building. The Filips told Block they wanted the same coverage that the prior owner had purchased. The Filips moved into one of the units in the building and rented the other five units. Although Block knew the owners were living in the building, the policy issued to them did not cover nonbusiness personal property, and there was no separate tenant’s policy issued.

During the years from 1999 to 2003, the Filips made several changes in the policy, increasing the property damage limits from $250,000 to $350,000, adding the prior owner as an additional insured and changing the spelling of their names.

In April 2003, a fire destroyed the building. Because of the lack of certain coverages, a substantial part of the loss was uninsured. The Filips sued Block and 1st Choice, alleging negligence in the selection of insurance. They claimed that their actual value coverage for the building was about $50,000 less than its replacement cost; the business personal property policy limit was $17,000 less than replacement cost; there was no coverage for their own nonbusiness personal property in the unit they occupied, valued at $128,000; and there was no business interruption coverage, leaving an uninsured loss of at least $30,000.

The trial court granted the motion for summary judgment filed by Block and 1st Choice, holding that the two-year statute of limitations for negligence started on the date of initial coverage in 1999. The Filips appealed, and the court reversed the trial court on two grounds, one of which dealt with designation of evidence by plaintiffs. Specifically, the Court of Appeals held that the statutory period for negligence against an insurance agent starts to run when the claim is denied.

The Supreme Court granted transfer and affirmed the trial court’s grant of summary judgment for the defendants. In so doing, the court cited the general rule that a cause of action for a tort claim accrues and the statute of limitations begins to run when the plaintiff knew or, in the exercise of ordinary diligence, could have discovered that an injury had been sustained as a result of the tortuous act of another. The court also applied the rule in the insurance contract context, noting that insurance applicants are not relieved from the duty of exercising ordinary care and prudence that is required in every other business transaction.

While the court here held that the statute of limitations began to run when the policy in question was issued, the court also noted that the date of coverage was not necessarily controlling in every case. The court stated that the question in this case was at what point the plaintiffs, in the exercise of ordinary diligence, could have discovered that they were underinsured. The answer here was the date of issuance of the policy; all of the alleged problems were ascertainable simply by reading the policy.

Direct questions to NAMIC's Regulatory Affairs Counsel Marsha Harrison.

Posted: Tuesday, February 05, 2008 12:00:00 AM. Modified: Wednesday, February 06, 2008 10:06:02 AM.

Salary Survey: Custom Reports Available

(317) 875-5250 - Indianapolis | (202) 628-1558 - Washington, D.C.