Insurance Law Lesson 44: Limitations Periods

Insurance policies are contracts. All other things being equal, they should be subject to the statute of limitations for contracts (6 years in Michigan). But, all other things are not equal.

Your typical property insurance policy (whether a personal or business policy) includes its own statute of limitations, and it is significantly shorter than 6 years.

A standard policy will require suit to be filed against the insurer within 1 or 2 years of the date of the loss. Under Michigan law, such provisions are enforceable, with a caveat. Any time that the insurance company was considering the claim does not count towards the limitations period.

For example: A loss occurs on 1/1/18. The insured doesn’t report the loss until 2/1/18. On 6/1/18 the insurer denies the claim. The policy says that a suit must be filed within 1 year of the loss. How long does the insured have to file suit?

The loss happened on 1/1/18 and the insured gets a year. But, under Michigan law, the 4 months that the insurer considered the claim, between 2/1/18 and 6/1/18, don’t count towards the calculation of that year. So, under Michigan law, the insured will have until 4/30/19 to file suit.

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