STANDARD SET FOR DETERMINING WHEN STATUTE OF LIMITATIONS BEGINS TO RUN ON INSURANCE COVERAGE DECLARATORY JUDGMENT ACTIONS

STANDARD SET FOR DETERMINING WHEN STATUTE OF LIMITATIONS BEGINS TO RUN ON INSURANCE COVERAGE DECLARATORY JUDGMENT ACTIONS

July 8, 2015

In Selective Way Insurance Company v. Hospitality Group Services, Inc., an en banc Superior Court panel set out the law as to when the 4 year statute of limitations on insurance declaratory judgment actions begins to run.  The basic principle is that “the statute of limitations for a declaratory judgment action brought by an insurance company regarding its duty to defend and indemnify begins to run when a cause of action for a declaratory judgment accrues.”  The Court then specified when accrual takes place: “This requires a determination of when the insurance company had a sufficient factual basis to present the averments in its complaint for declaratory judgment that the insurance policy at issue does not provide coverage for the claims made in the third party’s action. It is possible for the insurance company to possess sufficient information at the time it receives a complaint [against the insured] to cause the statute of limitations to begin to run; or that may not occur until the case develops and the claim is winnowed down to a recovery the insurance company believes is not covered by the policy of insurance. This requires the trial court to determine when the insurance company had a sufficient factual basis to support its contentions (as set forth in its complaint for declaratory judgment) that it has no duty to defend or indemnify the insured.”