If your insurance claim is based on a loss – fire, water, hail, rain, or anything else – and the loss occurred close to a year ago, you are imminently in need of preserving your rights to sue for breach of contract or forever losing them! You might say, “I currently have no disputes with my insurance company. Do I need to protect my rights?” Yes! “Even if my claim is still being adjusted, and I do not anticipate ever suing my insurance company?” Yes! “Even if I discovered the damage later than the date it occurred and submitted the claim only recently!” Yes! Yes! Yes! Otherwise, you forever lose your right to bring a lawsuit against your insurance company for breach of contract.
If you miss the deadline, you lose the right to sue for breach of contract forever—even if the insurance company has not yet breached the contract by the deadline!1 Will an insurance company that has been treating you well suddenly change after the deadline? Maybe! Is your adjuster still working on their estimate? Even if they are making you promises, their manager might reduce it! Are they waiting on an engineering report? That might cause a claim denial. Are they waiting for you to submit your repair estimate? Have you gotten a repair estimate? The bottom line is that you should preserve your rights at all costs.
You may also ask, “Am I going to jeopardize my relationship with my adjuster by talking about a right to sue?” Or you may ask, “Will they retaliate?” We will pose a question in response: Would you rather have your insurance company know that you forever gave up your right to sue for breach of contract while they continue to adjust your claim? Of course not! The truth is disputes arise on many claims. And luckily, you do not need to sue to preserve these rights, just a simple agreement with your insurance company. Your insurance company should do this routinely, so it is not a big deal.
Is it nonsensical, maybe even ludicrous, that you would lose your right to sue for breach of contract before the breach even occurs? Absolutely! Should the law change? Absolutely! But it is what it is, and this blog post is not changing the law, no matter how many alarm bells it sounds. You lose your rights even if you filed your claim after the date of loss? Yes! Even if the insurance company is still evaluating your claim? Yes! Once the deadline passes, your right to sue for breach of contract is gone, even if the breach has not yet occurred! This is very much an act of preserving rights in case you need them, even if you do not anticipate needing them.
How to Find Your Deadline
If your one-year anniversary from the date of loss is approaching, your first step is to look to your insurance policy for a provision stating how long you have until you must sue the insurance company and when that stated length of time starts. In Washington, your insurance company can insert a provision into your policy stating that you have as little as one year to file a lawsuit from the date the loss occurs, and that is binding.2 Almost all policies have this, although some say two years. Look for this provision in the “Conditions” section of your policy, but if it is not there, look everywhere because it is usually there somewhere. It is commonly titled “Suit Against Us” or “Legal Action,” but it might be titled something else. It will say how long you have to file suit before your rights expire, and when that time starts running. The insurance policy can legally limit this to one year and start that time from the date the loss occurs – the fire, the water loss, etc. – no matter the circumstances.
How To Extend the Deadline
So how do you protect your right to sue for breach of contract if the deadline is approaching but you are not ready to or may never need to sue? It is actually quite easy, although using an attorney is recommended. You enter into a “tolling agreement” with your insurance company. A tolling agreement is a written document signed by all parties that states you and the insurance company agree that the deadline to file a lawsuit is extended. The document should identify the property address, the date of loss, the policy number, the claim number, and expressly state that any and all rights whatsoever, including the right to sue for breach of contract, are extended from the current legal deadline. You can agree to extend this indefinitely, though most insurers will only extend for a limited time period. If you cannot get such an agreement, you need to file a lawsuit to preserve your rights. Otherwise, they are lost forever. Having an attorney draft and review your tolling agreement is highly advised.
Consequences of Failing to Extend the Deadline
Failing to file suit within the timeframe set out in your policy or to get a tolling agreement can cost you greatly. You do not necessarily lose all rights whatsoever to sue for your denied or underpaid policy benefits, but you make things harder on yourself if you need to sue under another theory. In Washington, you can recover your denied policy benefits by suing for breach of contract, violation of the Insurance Fair Conduct Act (“IFCA”), or common law bad faith. And although the deadline to file suit is controlled by your insurance policy language, these deadlines are three years from the date the insurer breaches its duties.3 Suing under the Consumer Protection Act (“CPA”) gives you four years from the date of the insurance company’s breach.4 But do not sit on this advice if the one-year anniversary is approaching and your policy says you have one year from the date of loss. You will lose your claim for breach of contract. This is critical because suing for and winning a case of breach of contract is much simpler.5 You have less to prove. You have fewer burdens of persuasion. There are fewer legal defenses the insurance company can bring. If your case is not one of bad faith or other misconduct but a genuine disagreement on coverage or valuation, breach of contract may be your only way to recover benefits.
2 W. Beach Condo. v. Commonwealth Ins. Co. of Am., 11 Wash. App. 2d 791, 798 (2020); Ashburn v. Safeco Ins. Co. of Am., 42 Wash. App. 692, 695 (1986).
3 Moratti ex rel. Tarutis v. Farmers Ins. Co. of Washington, 162 Wash. App. 495, 501 (2011).
5 Hanson v. State Farm Mut. Auto. Ins. Co., 261 F. Supp. 3d 1110, 1116 (W.D. Wash. 2017).
