Do You Know the Statute of Limitations in an Underinsured Motorist Case?

Los Angeles Uninsured Motorist attorney Barry P. Goldberg is regularly asked this question because his article "Effectively Preserving the Statute Of Limitations in Uninsured Motorist Cases" is one of the most viewed resources on the topic by both lawyers and the public. If you look at the article closely you will find that it does not answer the question how to "Effectively Preserve the Statute of Limitations in Underinsured Motorist cases." That's because there is no statute of limitations per se in Underinsured Motorist cases! It's a trick question!

The statute of limitations for filing Uninsured Motorist claims does not apply to Underinsured Motorist claims. This is because Underinsured Motorist benefits are not payable until bodily injury liability policies have been exhausted by payment of judgments or settlements and proof thereof provided to the insurer (Ins. Code § 11580.2(p)(3))

There are many timelines that can be envisioned which determine exactly when "bodily injury liability policies have been exhausted by payment of judgments or settlements and proof thereof provided to the insurer." In the typical case, there is a two year personal injury statute of limitations in which an injured party must initiate a lawsuit. If that party waits until almost two years before filing, a typical lawsuit in Los Angeles County takes about two more years to get to trial. Then, there could be post-trial motions and appeals which could go on and on before "bodily injury liability policies have been exhausted by payment."

In a not so typical case---say, involving a minor---the statute of limitations is tolled at least until the child's age of majority, and even then could go significantly longer. This could be up to 18 years! This is an important contrast to Uninsured Motorist cases. In those cases, even involving a minor, there is a two statute of limitations to "effectively" demand arbitration or file suit and notify the insurer. (See Article"Effectively Preserving the Statute Of Limitations in Uninsured Motorist Cases")

The reason for the difference is that the insurer has subrogation rights on Uninsured Motorist cases and the insurer has no subrogation rights on Underinsured Motorist cases.

All this being said, there are some limitation periods to be aware of when handling an Underinsured Motorist Claim. After "bodily injury liability policies have been exhausted by payment of judgments or settlements and proof thereof provided to the insurer" a claimant must act "reasonably" prompt. The most common defense in the Underinsured Motorist cases that have been around for a while is "Laches." An unreasonable delay in demanding arbitration may "waive" or "forfeit" the insured's right to arbitration and thus bar his or her Uninsured or Underinsured Motorist claim. (See, e.g., Allstate Ins. Co. v. Gonzalez (1995) 38 Cal.App4th 783.)

What is an "unreasonable delay" anyhow? Consider that an insured must effectively demand arbitration after providing the necessary proof of the settlement of the underlying bodily injury limits. Most lawyers forget this step. The statutes and case law do not account for this little problem. The statute of limitations on proceedings to compel arbitration does not expire until 4 years after either party refuses to arbitrate. (Spear v. California State Auto. Ass'n (1992) 2 Cal.4th 1035, 1044.)

Most often the problem is not that an insurer refuses to arbitrate, the problem is that arbitration has never been effectively demanded. The insurers are generally content to negotiate, ask for additional information and avoid the topic of arbitration. This could go on for months and even years. In the Gonzalez case referenced above, the insured's 3–year delay in demanding arbitration "waived" his right to arbitrate and thus barred his claim even though the statute of limitations had not run because the insurer had not refused to arbitrate. There is a lesson here.

Of course, just securing arbitration by agreement after a demand or even after timely compelling arbitration, is not the end of the limitations story. There is a five year rule which bars any case which is not arbitrated within five years after arbitration is instituted. (See, Ins. Code. § 11580.2(i)(1)(C); and Santangelo v. Allstate Ins. Co. (1998) 65 Cal.App.4th 804, 812.)

My advice to lawyers and to the public is to act very promptly in both Uninsured and Underinsured Motorist cases. The statutes were designed to provide prompt and relatively inexpensive resolution of these claims. By delaying even in the slightest, an injured insured defeats the very purpose of the statutes which were designed for his or her benefit. Perhaps more importantly, securing an early arbitration date by "effectively" demanding arbitration at the outset does more to favorably settle claims than any other action. Of course, the side benefit is that you will never have problems with any statutes of limitation or Laches defenses.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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