Attorney Brian Rosenthal was insured under a State Farm Insurance Co. personal automobile policy when he was injured in an accident. Rosenthal’s car was rear-ended by another driver in the Summer of 1999. Nearly four years later, Rosenthal settled his claim against the other driver for $85,000 (under a policy with a $100,000 limit).

A month after the settlement, Rosenthal’s lawyer contacted State Farm for approval of the settlement and he notified the insurer that Rosenthal planned to file an Underinsured Motorist (UIM) claim under his own policy. Shortly after the rear-end collision, Rosenthal sought the advice of a vocational specialist and an economist. These experts advised him that, due to the accident, Rosenthal suffered a decreased earning capacity as well as a projected economic loss in excess of $1,000,0000.

In response to Rosenthal’s request for a UIM arbitration in 2004, State Farm filed a declaratory motion asking that the claim be barred because the state’s 4-year statute of limitations had passed. Rosenthal filed a cross-motion, disputing the insurer’s position and a District court ruled in favor of Rosenthal. State Farm appealed.

The higher court reviewed the matter of when the four-year statute of limitations should begin running. State Farm argued that the relevant date was the original accident date. Rosenthal’s position was the date that he settled the original claim at an inadequate amount was proper. A third position, supported by the District Court, was that the four-year clock should start on the date that State Farm denied the UIM claim.

The court spent time considering a number of state cases it judged to be relevant. It found it helpful to consider timelines that had been established in losses involving Uninsured Motorists. The cases they examined consistently treated the statute as beginning when an accident occurs and, when seeking compensation for injury, the insured becomes aware that the other party is uninsured. However, the court was not convinced that the treatment of UM cases was comparable to matters involving UIM. It reasoned that, while it is easy to establish whether coverage exists; it can be difficult to determine whether adequate coverage exists.

The court reasoned that, applying the standard regarding UM losses to UIM losses could result in the filing of unnecessary lawsuits in order to be certain that they were filed in a timely manner; or could result in the loss of the right to file because of the statute running too quickly. Several cases reviewed by the court demonstrated that, for various reasons, long stretches of time may pass before an insured definitively establishes that another party’s available coverage is insufficient.

In the end, the higher court agreed with the position advocated by Rosenthal; that the statute of limitations begins to run at the time that an insured settles a claim and that claim establishes the existence of an inadequate amount of coverage. This differed from the District Court’s reasoning that the relevant date was at the time that the insurer rejects a claim for UIM coverage. The court ruled in favor of Rosenthal, though on different grounds.

State Farm Mutual Automobile Insurance Co., Appellant, v. Brian D. Rosenthal. USCTAP, 3rd Cir. No. 06-2158. Filed April 20, 2007. http://laws[dot]findlaw.com/3rd/062158[dot]html (downloaded June 4, 2007)