DUTY TO PROVIDE NOTICE OF LIMITATION PERIODS IN DELAWARE: NOT JUST FOR CASUALTY CLAIMS ANYMORE

BY: JOHN D. BALAGUER AND TIMOTHY S. MARTIN

On May 15, 2008, 18 Del. C. § 4129 became law. The new statute requires propert insurers to provide “prompt and timely” written notice to policyholders of the applicable limitation period for filing an action for damages under any insurance contract. This section applies to statutes of limitation as well as any contractual period of limitations established in the insurance policy.

Delaware law has required casualty insurers for some time to provide prompt and timely notice of the applicable statute or contractual period of limitations. 18 Del. C. § 3914. The requirements of section 4129 will likely be interpreted consistently with section 3914.

Under section 3914, a claimant has the initial burden to place the casualty insurance carrier on notice of a potential claim. Delaware courts interpreting section 3914 have held, however, that constructive notice may trigger the carrier’s obligations under the statute.

Once a casualty insurer receives notice of a potential claim, it is required to notify the claimant of the applicable statute or contractual period of limitations. If a casualty insurer fails to comply with section 3914, Delaware case law has held that the insurer will not be able to argue later that the claim is time-barred. So, where the claimant complies with the requirements of section 3914 and the casualty insurance carrier does not, the statute or contractual period of limitations is tolled.

Due to the similarities between sections 4129 and 3914, a property insurer’s failure to provide prompt and timely notice will likely also preclude it from asserting that a plaintiff’s claim is barred by the applicable statute or contractual period of limitation.

In addition to requiring prompt and timely notice from property insurers, Delaware law now prohibits a property insurance contract from shortening the contractual period of limitations to any period less than one year from the date of the denial of the claim by the insurer.

The new notice provision and restriction on contractual periods of limitation apply to property insurance policies issued or renewed on or after January 1, 2008. Any policy inconsistent with the new rules will not be nullified. Rather, the policy will be construed in a manner consistent with the new statutes.

The lawyers in the Wilmington office of White and Williams LLP stand ready to answer any questions you may have about these new provisions for property insurance claims or any other insurance regulatory questions under Delaware law.

John D. Balaguer is a Partner in the Litigation Department of White and Williams LLP and the Managing Partner of the firm's Wilmington office. For more information, contact John (302-467-4501, balaguerj@whiteandwilliams.com) or Timothy S. Martin, an Associate in the Litigation Department (302-467-4509, martint@whiteandwilliams.com).