In Nationwide Mutual Insurance Co. v. Shilling, 2020 WL 1910499 (Md. 4/20/20), the Maryland Court of Appeals affirmed the intermediate appellate court finding that the statute of limitations began to run on UIM claims when the insurance company denied an insured’s demand for UIM benefits, thereby breaching the insurance contract.
In Shilling, the plaintiff/insured was involved in an automobile accident with an underinsured motorist. The underinsured motorist paid $20,000 to settle the claim. The settlement was approved two years after the accident occurred and represented the per person limit of bodily injury under one policy. The plaintiff then sought additional UIM benefits from her own insurance company, Nationwide Mutual. Formal demand for UIM benefits was made in 2015, two years after the automobile accident. Initially, Nationwide requested additional medical records and did not deny the claim. Later, the plaintiff/insured sued Nationwide, seeking the balance of her unpaid damages not covered by the $20,000 settlement. Nationwide sought to dismiss the lawsuit against it, arguing that the claim was time-barred by a three-year statute of limitations for contract actions. Nationwide argued that the statute of limitations period began to run when the tortfeasor’s insurance policy was exhausted, which happened when the insured accepted the settlement offer. In response, plaintiff insured asserted that the statute of limitations had not run because Nationwide had not formally denied her claim for UIM benefits.
The Maryland Court of Appeals held that the applicable statute of limitations began to run on the UIM claim once the insurance company denied the insured’s demand for UIM benefits. The reasoning behind the ruling was that UIM claims are based in contract. The statute of limitations began to run when the insurance company breached its contract to provide UIM benefits. The Court noted that the insurance company could not breach the insurance contract if the plaintiff insured did not demand payment of benefits. What occurred was that the plaintiff insured had only demand benefits when the formal demand letter was sent in 2015.
The majority of jurisdictions that have considered the question of when a UM/UIM cause of action accrues have concluded that the limitations period began to run when the claim upon the insurers breach of the insurance contract rather than the date of the accident. See, Steven Plitt and Jordan R. Plitt, Practical Tools for Handling Insurance Cases, §11:34 (2020 Supp. citing cases).