Insurer’s “Gift” to Extend Statute of Was Unenforceable Because it Was Issued After the Statute had Run

Once it Expired a Statute of Limitations Cannot be Extended

Aug 23, 2021

FACTUAL HISTORY

On January 15, 2020, Molnar filed suit against Tack House in Fayette Circuit Court, alleging she had sustained injuries in a fall on its premises on September 4, 2018, and that her injuries were attributable to its negligence. Tack House denied liability and shortly thereafter moved to dismiss Molnar’s suit on limitations grounds. Specifically, Tack House noted the one-year limitations period applied to Molnar’s injury claim; and that the date Molnar initiated her suit was well beyond one year after the injury.

Elsewhere in its motion, however, Tack House also indicated it had contacted Molnar about what it believed was the untimeliness of her claim; that Molnar had disagreed based upon a December 17, 2019 letter she had received from Tack House’s insurer, Grange Insurance Company; and, that it anticipated Molnar would seek to avoid the effect of the statute of limitations based upon Grange’s letter. The letter, which Tack House attached as an exhibit to its motion to dismiss, provided in relevant part: “After careful consideration of the facts of this loss, it is our position that our insured [Tack House] is not legally responsible. In the absence of legal liability, we would not be justified in making any payment; accordingly, we must deny this claim. The statute of limitations ran on 09/04/2019. The time period to file a lawsuit will be extended 30 days from the date you receive this letter.” (emphasis by the court)

A Kentucky statute allows for written agreements entered into in good faith and at arms length to extend limitations periods for the filing of civil actions are valid and enforceable according to their terms.

Grange’s stated intent – both in its letter, and according to what its designated representative attested to in a July 6, 2020 hearing before the circuit court in this matter – was to give Molnar the “gift” of an additional “30 days from the date [she] receive[d] this letter” to file suit against its insured, Tack House.

After it had already sent Molnar its December 17, 2019 letter, however, Grange realized that it put its own insured in potential peril of liability for a stale claim. There is no indication from the record that Grange ever consulted with Tack House before it decided to make this “gift”; that Tack House ever consented to it; or that – at least until after Molnar filed suit in this matter – Grange explained to anyone why it had sent the December 17, 2019 letter.

The trial court found that the statute was inapplicable because:

no proof of record indicated Molnar had been induced to file suit outside of the applicable limitations period; and
in the circuit court’s view the statute did not authorize parties to contractually “extend” a statutory deadline that had already elapsed.

The Court of Appeal found that it was significant that there was no evidence that Plaintiff detrimentally relied on any action of Defendant Tack House Pub, LLC or on any action of Grange or its employees. The December 17, 2019 letter was sent more than three months after the one-year period following Plaintiff’s fall had passed. Thus, when the letter was sent to Plaintiff by Grange, there was nothing to extend because Plaintiff’s time to file a suit had run.

ANALYSIS

The appellate court found that the statute to be clear and unambiguous. There was nothing in the plain language that would allow a Court to conclude that Plaintiff’s statute of limitations could be extended after it had expired. In reading the plain language of the statute a tolling agreement to extend any statute of limitations can only be entered when there is actually something remaining that can be extended. In this instance, the statute of limitations had expired. Thus, there was nothing to extend.

Tack House’s position, which the circuit court adopted, is that no such “agreement” existed. Molnar’s argument is one of statutory interpretation. She contends that because the statute does not specifically state that the “agreement” it envisions is a “contract” that requires “consideration,” no consideration was required.

When interpreting a statute, words are to be afforded their plain meaning unless doing so would lead to an absurd result or wholly unreasonable conclusion. The appellate court must presume the General Assembly was aware of the status of the law, including the common law when it enacted the statute.

A promise to extend a limitations period, to be enforceable within the context of the statute, requires either detrimental reliance or some other consideration. Therefore, there was no error in the circuit court’s assessment that Grange’s December 17, 2019 letter to Molnar – which undisputedly lacked consideration, and upon which Molnar (who had already missed the deadline for filing suit) could not have detrimentally relied – failed to qualify as an enforceable agreement. Therefore, the circuit court’s order was affirmed.

ZALMA OPINION

The plaintiff argued that a “gift” from an insurer given three months after the statute of limitations had expired extended the limitation period. The argument, reasonably, failed because at the time the insurer made its “gift” there was no limitation period left to extend nor did its insured, the person against whom a claim had been made, did not even know about the “gift” nor did it agree to the extension of a limitation period that had already run. Insurers have great power to control a liability claim but it does not have the power to change the law or enter into a contract that takes away a right of its insured without consideration.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at

http://www.zalma.com

and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

Insurer’s “Gift” to Extend Statute of Was Unenforceable Because it Was Issued After the Statute had Run

Once it Expired a Statute of Limitations Cannot be Extended

FACTUAL HISTORY

ZALMA OPINION

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