This article is a companion piece to this video

How are you supposed to know the deadline for filing your subrogation demand? In this episode of On Subrogation: Statute of Limitations, RG partner and subrogation-focused attorney Kim Rathbone explains the principles behind statutes of limitation and why they’re especially important to understand in the field of insurance subrogation.

Kim explains a statute of limitations as:

A law that prescribes a period of limitation for the bringing of certain kinds of legal action.

Statutes of limitation (SOLs) are considered an affirmative defense that must be brought in answer to litigation, or else it gets waived. 

But what purpose do statutes of limitation serve? The principle behind the necessity for SOLs in legal disputes is twofold:

1. In litigation, finality is all-important.

2. SOLs are just logistically practical. 

The veracity of witness testimony decays over time, there is nearly never a situation when a scene investigation can occur a length of time after the initial incident, and the cost of indefinite evidence storage adds up quickly. Statutes of limitation protect all parties from unnecessary delays and the legal process from convolution.

There are two possible starting points for a statute of limitation:

1. Date of the injury/incident

2. Date of the discovery of the injury/incident

Most often, these are the same date; consider a car accident. However, there are some circumstances where date of discovery takes precedence, such as medical malpractice and construction negligence. If a doctor performed a shoddy surgery, you may not know until years later; consider surgical robotics. Similarly, if a contractor cut corners or fails to properly update a building’s structure, you may not know until something terrible happens; consider Champlain Towers South in Florida.

States are in charge of setting their own statutes of limitations, and there are typically three different kinds:

  • Tort
  • Oral contract
  • Written contract

It’s a Bit More Complicated in the Field of Subrogation…

As with many legal processes, the field of subrogation makes statutes of limitation more nuanced, with exceptions and circumstances that change the SOL. Kim cites 4 common exceptions:

  • In some states, the statute of limitations in a medical subrogation claim can be different than a subrogation claim for property damage. This is the case in Tennessee.
  • Some states limit tort SOLs to 1 year, such as Louisiana.
  • Instead of the typical accrual dates for statutes of limitation (date of incident or date of discovery of incident), a state may start the clock at the date of the last subrogation claim payment. An example of this exception is PIP subrogation in Kentucky.
  • Arbitration Forum statute of limitation for subrogation claims is limited to 1 year.
  • Government entities often have shorter deadlines for notices and claim filings.

Every time the government is involved in an insurance dispute, things get more complicated and the lawsuit more difficult for subrogation counsel to navigate. For instance, when a government entity issues a denial, the post-denial statute of limitations may be even longer than in traditional circumstances. 

If you would like to know more about tort claims and how they apply to government entities, watch our On Subrogation episodes covering The Federal Tort Claims Act and Filing Claims Against State and Local Governments.

Calculating the Statutes of Limitation in a Subrogation Lawsuit 

So, how do we calculate the statute of limitations on a given subrogation case? Kim unpacks both calculating the SOL as well as circumstances where the statute of limitations is tolled, or put on pause.

Determining the statute of limitations:

  • The date of the incident doesn’t actually count. The SOL will be counted on each anniversary, and this includes holidays and weekends.
  • If the date of the incident is on a day the courts are closed, such as a holiday or over the weekend, the statute of limitations won’t start to accrue until the next day that the courts are open.
  • E-filing makes this part of the subrogation process a little more interesting. In many states, you can e-file an insurance lawsuit any day, even if the courts are closed. Despite that, at this point courts still calculate the start date as the first day the courts are open and process the claim, meaning there may be a discrepancy between the filing date and the start of the statute of limitations.

Circumstances that Suspend SOL Accrual on a Subrogation Case

As mentioned, there are several situations where a statute of limitation will be put on pause:

Bankruptcy Stay 

When a bankruptcy is filed in response to a subrogation claim, the SOL is tolled. If that bankruptcy should not go through for any reason, the statute of limitations starts to accrue again after 30 days of that dismissal.

Global Written Tolling Agreement

This takes two sophisticated and cooperative parties. Two circumstances where global written tolling agreements are made include:

  • Two opposing carriers who have reached a subrogation settlement and know that the payment is in process. However, the payment will not arrive until after the statute of limitations runs out. The carriers may create a written contract agreeing to toll the SOL so that the payment can be received and the subrogation lawsuit can end.
  • An incident causes a large loss and there are multiple parties that may be held liable. However, liability is unclear, disputed, or complicated; the parties need time to determine who is liable and who to pursue recovery from. All parties may form written agreement to toll the statute of limitations until liability is ironed out.

Plaintiff is Unable to Represent Themselves

There are two circumstances that are handled similarly: if someone is determined mentally incompetent and/or if they’re incarcerated. However, many states will appoint a Guardian ad Litem and circumvent a tolling of the statute of limitations.

In a similar vein, if a minor is involved in the subrogation process, especially if they are the plaintiff, the court may decide to toll the statute of limitations until the minor is older. This varies by state; some do not allow it.

Other Situations where a Statute of Limitations is Tolled

  • The plaintiff is active duty military.
  • Arbitration Forums Rule 1.2: If, over the course of a subrogation lawsuit it is determined that AF applies, there is a 60 day statute of limitations from the time the lawsuit is dismissed until the claim must be filed with Arbitration Forums.
  • Government health orders can automatically stay accrual. We saw this during COVID-19. Some states determined a set amount of time, such as in Ohio. Others, like Texas, did not determine an amount of time, waiting on governor orders to end a state of emergency.

Properly managing the statute of limitations during a subrogation lawsuit is vital; missing a deadline can mean losing your chance to recover losses, as well as whatever money was spent on pursuing recovery in the first place. Subrogation counsel managing the case should be adept at maneuvering through these convoluted limitations to protect their client’s right to subrogation and maximize their recovery.

Interested in learning more about insurance law and subrogation procedures? Visit Rathbone Group’s YouTube channel and podcast library for informational material on subrogation topics that are important to you.