In California, the statute of limitations to file suit for breach of an insurance contract is four years. The state, however, allows that period to be contractually shortened by the parties. Consequently, most property insurance policies provide for a one-year period from the date of loss in which the insured must file a lawsuit against the insurer. In California, the one-year period is tolled between the time that the insured reports the loss to the insurer and the denial of the claim.1 This is often referred to as “equitable tolling.”
Sometimes, the insured may ask the insurer to reconsider the denial hoping the insurer will change its mind. It is important to note that, at least in California, the statute of limitations is not further tolled during the “reconsideration” period.2 If the insurer reconsiders the claim and ultimately stands by the initial denial, no time is added to the tolling period during this process. In other words, there is no second period of equitable tolling.
For the insured and those acting on behalf of the insured, it is critical not to be lulled to sleep, especially if there is any delay in a response from the insurer. Unless the insurer agrees to reopen the claim and actively conducts negotiations, there is no protection for the insured against the one-year period lapsing. If the insurer reopens the file within the one-year period, an argument can be made that the insurer waived its right or should be estopped from asserting a limitation defense. But there is no additional equitable tolling.
1 Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal.3d 674.
2 Singh v. Allstate Insurance Co. (1998) 63 Cal.App.4th 135.