The Suit Limitation Defense in California: Ten Years After Prudential LMI

Reprinted with permission by the Journal of Insurance Coverage. 

Most property insurance policies include a suit limitation provision that requires the insured to commence suit against the insurer within a certain period of time, usually one or two years, after the date of loss. 1 Ten years ago, the California Supreme Court was faced with the question of when the suit limitation period in a homeowners' policy begins to run in a continuous and progressive property loss case. In Prudential-LMI Insurance Co. v. Superior Court,2 the court held that the suit limitation period begins to run at that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable insured would be aware that its notification duty under the policy was triggered. 3 The court then held that the suit limitation period is tolled from the time the insured gives notice of the loss to the insurer until the insurer formally denies liability.4