I write to bring to your attention a recent opinion from Judge Rufe of the United States District Court here in Philadelphia which may have implications for your handling of uninsured and underinsured motorist claims. In Motorist Mutual Insurance Co. v. Durney, the insured was involved in an accident on September 10, 1997. The adverse vehicle was underinsured. By August 2, 1999, Motorist Mutual had granted to Durney consent to settle with the adverse vehicle and had opened an underinsured motorist claim file.
The matter apparently languished until July 8, 2004, with Durney through her attorney submitting additional medical information to Motorist Mutual but not making any specific settlement demand. Durney claimed that she made no demand because she was still undergoing treatment and, therefore, did not know the extent of her claim.
On July 8, 2004, Motorist Mutual instituted a declaratory judgment action seeking a declaration that the statute of limitations had run with respect to Durney’s claim. The company argued that Durney’s claim had vested - at the latest - when consent to settle with the tortfeasor was granted. More than four years had elapsed since that date. As a result, Motorist Mutual contended that Pennsylvania’s four year statute of limitations with respect to contract claims barred further prosecution of the claim.
Durney responded by arguing that under Pennsylvania law the statute of limitations did not begin to run until there had been a breach of the contract. She argued that there could be no breach until she had made a formal demand which Motorist Mutual refused to pay. She reasoned that because no demand had ever been made on her behalf, there could be no breach and, therefore, no running of the statute of limitations.
Judge Rufe accepted Durney’s position and granted her summary judgment with respect to the statute of limitations issue. In doing so, she specifically rejected Motorist Mutual’s contention that the insured could extend a statute of limitations indefinitely simply by failing to make a demand:
Even if true, [that no demand had been made], Durney had provided Motorist Mutual with the records of her treatment so Motorist Mutual was able to value her claim. If Motorist Mutual wanted to resolve the claim, it could have made Durney an offer at any time; and if Durney refused the offer, either party could have petitioned for arbitration of the claim.
According to Judge Rufe, the statute of limitations would have begun to run at that point but no earlier. Judge Rufe’s opinion does not address what the result might have been had Motorist Mutual made an offer and Durney simply not responded to it.
Two other points should be made concerning this opinion. First, nothing in the opinion would preclude an insurance company from writing into its policy a provision providing that coverage is excluded if a petition for arbitration is not filed within a certain time either following the accident or following vesting of the underinsured motorist claim.
Second, there is room for dispute under current Pennsylvania law with respect to when an underinsured motorist claim actually vests. Although Motorist Mutual contended that the claim vested at the time it granted consent to settle with the tortfeasor, one could certainly argue in view of cases such as Harper v. Providence Washington, (holding that an underinsured motorist claim can be made before the insured has settled with the tortfeasor) that the claim for underinsured motorist benefits vests at the time of the accident.
Keep in mind that because Judge Rufe’s opinion is that of a federal district court judge, it does not constitute the final word with respect to Pennsylvania law. Her opinion does not bind any other judge - federal or state - in Pennsylvania though other judges could be persuaded by its reasoning.
If you would like to read a copy of the opinion, please click here . You can also request a copy from my secretary, Denise Patsch, at 215-665-3349. Should you have any questions concerning the opinion, please feel free to contact me.
Very truly yours,
Louis E. Bricklin
For further information, please contact Louis E. Bricklin, Esquire.
Telephone: 215-665-3400
E-mail: bricklin@bbs-law.com
P.S. You might also note that at the conclusion of her opinion Judge Rufe ruled that Durney had set forth sufficient evidence of bad faith on the part of Motorist Mutual to permit that issue to be submitted to a jury. Durney contended that Motorist Mutual’s continued requests for additional information were simply a ruse to lull her into permitting the statute of limitations to lapse.
