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“Continued” Denial Of Coverage Does Not Extend Statute Of Limitations

Article by Kaavya Ramesh, Esq.

The Western District of Pennsylvania recently granted an insurer’s motion to dismiss a bad faith claim after finding that the bad faith claim was barred by the two-year statute of limitations, which began to run from the date of the initial denial of coverage. The Court found that there was no allegation that the insurer had been presented with new facts or new evidence in the underlying claim such that they should have reconsidered its denial, and thus triggered a new limitations period. See Dana Mining v. Kelly, et al., 2022 WL 704932 (W.D. Pa. Mar. 9, 2022).

In Dana Mining, the insured was sued in an underlying action for negligence and deliberate and intentional conduct pursuant to Pennsylvania’s Wrongful Death Statute, 42 Pa. C.S § 8301, and Survival Act, 42 Pa.C.S. § 8302. The insured alleged that it was insured under a general liability insurance policy issued by the insurer and sought defense and indemnity coverage for the underlying lawsuit. On May 3, 2017, the insurer denied coverage to the insured. On April 6, 2021, the insured sued the insurer alleging three causes of action: declaratory judgment; breach of contract; and bad faith under 42 Pa.C.S. § 8371. The insurer moved to dismiss the bad faith claim.

The Court granted the insurer’s motion after finding that the bad faith claim was barred by the two-year statute of limitations for a Section 8371 claim. The Court held that the two-year statute of limitations began to run on May 3, 2017, the date of the initial denial of coverage, meaning that the insured had until May 3, 2019, to file a claim for bad faith against the insurer. However, since the insured did not file the bad faith claim until nearly four years later on April 6, 2021, the bad faith claim was time-barred.

The Court was not persuaded by the insured’s argument that the insurer’s “continued” denial of coverage created a separately actionable instance of bad faith that triggered the beginning of a new limitations period. The Court held that a “continued” or repeated denial of coverage is merely a continuation of the injury caused by the initial denial and does not trigger a new limitations period. Because there was no allegation that the insurer had been presented with new facts or new evidence in the underlying claim such that the insurer should have reconsidered its denial, the Court found that a new limitations period was not triggered.

The insured further argued that they had stated a common law bad faith claim for which there was a four-year statute of limitations. The Court in rejecting the insured’s argument found that the insured’s bad faith claim expressly cited Section 8371. Moreover, the Court found that even if the insured had plead a common law bad faith claim, it would be duplicative of, and subsumed within, the insured’s breach of contract claim.