Statute of limitations begins once an insurer has a factual basis for denying coverage
A recent ruling by Pennsylvania’s Westmoreland County Court of Common Pleas puts insurers on notice that if they intend not to defend a claim against an insured, the statute of limitations begins when they become aware that they may not have a duty to defend the insured.
In the case that led to the ruling, Selective Way Insurance Co. v. Hospitality Group Svcs, Inc., Selective Way did not file for a declaratory action against the insured until six years after the incident, which the court ruled was too late. By the time of the ruling, the case had already been settled and was unaffected by the ruling, which will provide precedent for other insurers doing business in Pennsylvania going forward.
“The statute of limitations for the filing of a declaratory judgement action brought by an insurance company regarding its duty to defend and indemnify begins to run when a cause of action for declaratory judgement arises,” wrote Judge Christine L Donohue. “This requires a determination by the trial court of when the insurance company had a sufficient factual basis to support its contentions that it had no duty to defend and/or indemnify the insured,” she continued.
