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Explaining the Application of the Private Limitation of Action Provision

The phrase, \\u201cinception of the loss\\u201d in the standard fire insurance  policy has been interpreted to mean \\u201cthe occurrence of the casualty or  event insured against.\\u201d [ See e.g., Zuckerman v. Transamerica Ins. Co., 133 Ariz. 139, 650 P. 2d 441 (1982) (Arizona law); Closser v. Penn Mut. Fire Ins. Co., 457 A. 2d 1081 (Del Supr 1983) (Delaware law); Sager Glove Corp. v. Aetna Ins. Co., 317 F. 2d 439 (7th Cir) (Illinois law), cert den 375 U.S. 921 (1963); Gremillion v. Travelers Indemnity Co., 256 La. 974, 240 So. 2d 727 (1970) (Louisiana law); and General State Authority v. Planet Ins. Co., 464 Pa. 162, 346 A. 2d 265 (1975) (Pennsylvania law).]

The Sixth Circuit held that a one-year limitations period after the  inception of loss or damage in an insurance contract did not conflict  with Kentucky law and was reasonable. [Smith v. Allstate Ins. Co., 403 F.3d 401, 402-04 (6th Cir. 2005); Miller v. Seneca Specialty Ins. Co. (W.D. Ky., 2019)]

The inception of loss means \\u201cthe time when the loss was first incurred or began to accrue.\\u201d [Tucker v. State Farm Mut. Auto Ins., 2002 UT 54, \\xb6\\xb6 13-14, 53 P.3d 947].

In 1885, the California Court of Appeal found the one year private  limitation to be enforceable unless the plaintiff established that  negotiations with the defendant insurer established a waiver or caused  the insurer to be estopped from asserting the provision as a defense. [Garido v. American Cent. Ins. Co. of St. Louis,  2 Cal Unrep. 560, 8 P. 512 (1885).] Finding no evidence of waiver or  evidence to support estoppel, the defense verdict was affirmed.

In Sarmiento v. Grange Mutual Casualty Company, 106 Ohio  St.3d 403, 2005-Ohio-5410 (2005), the court found that a two-year  contractual limitation period for filing uninsured- and  underinsured-motorist claims is reasonable and enforceable, regardless  of whether the foreign state in which the accident occurred provides a  longer statute of limitations for the underlying tort claim.

ZALMA OPINION

Every person insured and every lawyer representing a policyholder  must undertstand the fact that insurance policies contain private  limitation of action provisions and, if there is a dispute, the suit  must be filed before the expiration of the private limitation not the  state\\u2019s statute of limitations.