Granted, California isn’t known for having all the answers. While some may believe it does, one look at the financial situation on the west coast shows otherwise. California may, however, provide some answers to tricky problems in Florida when it comes to insurance laws and regulations.
For years, Florida has been plagued by questions regarding the statute of limitations as it pertains to insurance contracts. As I mentioned previously in Associations Should Mark October 24, 2010 On The Calendar, Florida Statute § 95.11(2)(b) is not clear as to whether an action for breach of an insurance contract runs from the date of loss or from the date of the actual breach. Many associations were unsure how to best proceed when their claims had not been completed before October 24, 2010, due to the possibility of being barred from filing an action in the future.
Insurance companies and their attorneys were well aware of this confusion. Despite their obligations to policyholders, many insurers made no real effort to conclude their current Wilma claims before the five year mark. Remarkably, some insurers and prominent defense attorneys actually represented that they believed the statute of limitations ran from the date of a breach, despite arguing the exact opposite after previous hurricanes.
This scenario could not exist in California for a number of reasons. California’s statute of limitations for breach of an insurance contract is not as muddled, and California has other provisions in place which would protect a policyholder in such a situation. California Insurance Regulation § 2695.7 provides:
Standards for Prompt, Fair and Equitable Settlements.
(f) Except where a claim has been settled by payment, every insurer shall provide written notice of any statute of limitation or other time period requirement upon which the insurer may rely to deny a claim. Such notice shall be given to the claimant not less than sixty (60) days prior to the expiration date; except, if notice of claim is first received by the insurer within that sixty days, then notice of the expiration date must be given to the claimant immediately. With respect to a first party claimant in a matter involving an uninsured motorist, this notice shall be given at least thirty (30) days prior to the expiration date; except, if notice of claim is first received by the insurer within that thirty days, then notice of the expiration date must be given to the claimant immediately. This subsection shall not apply to a claimant represented by counsel on the claim matter.
This section provides a great deal of protection to a policyholder. While the statute specifically mentions the statute of limitations, it also applies to any time period requirement that an insurer may rely on to deny a claim. This could apply to Proof of Loss requirements, time limitations to complete construction to recover monies for Increased Cost of Construction Coverage, or even time limitations to receive recoverable depreciation.
The purpose of this regulation is obvious. It is intended to keep an insurer from quietly sitting back and playing “gotcha” when an unknowing policyholder lets a time period expire.
As you can see from the last line of the regulation, the above provision does not apply to policyholders represented by an attorney. Have no fear, however, because California didn’t stop there. California regulation §2695.4 provides:
Representation of Policy Provisions and Benefits.
(a) Every insurer shall disclose to a first party claimant or beneficiary, all benefits, coverage, time limits or other provisions of any insurance policy issued by that insurer that may apply to the claim presented by the claimant. When additional benefits might reasonably be payable under an insured’s policy upon receipt of additional proofs of claim, the insurer shall immediately communicate this fact to the insured and cooperate with and assist the insured in determining the extent of the insurer’s additional liability.
Unlike §2695.7, this provision does apply when a policyholder is represented by counsel. Thus, every policyholder is basically treated equally under each statute.
Failure to comply with these requirements will result in the insurer waiving (at least temporarily) its right to enforce the time limitations. If these statutes were adopted Florida, it would prevent insurance companies from sitting quietly by, delaying adjustment and planning a statute of limitations defense. Even with Florida’s unclear statute, policyholders would not be unfairly left to guess what to do in instances like Hurricane Wilma. Insurers would have to inform their insureds of their interpretation of the statute of limitations and would not be allowed to argue such a defense in the event it failed to do so.