Beware the Phantom Statute of Limitations in Some UM and UIM Insurance Contracts

Bob Breetz, Claims Counsel

In Elkins v. Kentucky Farm Bureau etc., Ky.App., 844 S.W.2d 423 (1992) we learned that a contractual limitation period of one year to bring a UM claim was unreasonably short. Three years later the Supreme Court decided Gordon v. Kentucky Farm Bureau etc., Ky. 914 S.W.2d 331 (1995). It was an UIM case which, as Elkins, had a contractual one-year limitation. Since the one-year limitation was invalid because it was unreasonably short and no other time limitation was in the policy, the court applied the fifteen- year provision for limitations on a written contract.

Lawyers Mutual has seen several instances of attorneys getting caught short because they believed that the fifteen- year rule applied universally to UM and UIM suits. Perhaps they didn’t notice that the Supreme Court said in Gordon that insurance companies may shorten the fifteen- year period as long as the period was not unreasonable. Insurance companies took the hint and many policies now contain a two-year contractual limitation period. Lawyers Mutual is aware that this two-year contractual limitation period has been upheld as not unreasonable in several trial courts. There are no published appellate decisions on this issue as far as we are aware, but we strongly encourage, indeed exhort, our insureds to abide by the contractual provision. Make the Phantom Statute of Limitations part of your risk management litigation checklist.