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A claim provision requiring insureds to seek underinsured benefits from their auto insurer within three years of an accident is unenforceable in New Hampshire because it restricts the insureds’ right to obtain the same benefits they would have received if underinsurance were not an issue.

The New Hampshire Supreme Court, noting that such a provision could require insureds to seek underinsurance benefits before they even know if the other party is underinsured, ruled on October 25 that such a requirement in a Geico General ÈȵãºÚÁÏ Co. contract violates the public policy behind the motor vehicle statute governing uninsured motorist coverage (RSA 264:15).

“The overall goal of the [uninsured motorist] statute is to promote a public policy of placing insured persons in the same position that they would have been if the offending uninsured motorist had possessed comparable liability insurance by broadening protection for those injured in accidents involving uninsured motorists,” the court stated.

Thus while state law gives insureds three years after an accident to sue the other driver for damages, the Geico policy’s three-year underinsurance claim deadline denies them the same benefits because it is tied to the date of the accident and not to when they discover that the other driver is underinsured.

Because the contractual limitations provision “unreasonably restricts the plaintiffs’ ability to obtain the same benefits they would have been entitled to had the alleged tortfeasor had comparable liability insurance coverage,” the court concluded that it violates the public policy underlying the statute.

The plaintiffs, Shane and Maura Pelissier, sought compensation for damages arising out of a July 29, 2017 automobile accident. They filed suit against the driver they said was responsible for the accident prior to the expiration of the three-year statute of limitations for personal injury claims. During the course of that litigation they learned that the driver’s liability insurance policy limit was less than their accident-related medical expenses. By then it was November 2021– more than four years after the accident.

The Pelissiers formally notified Geico of their intent to file an underinsured motorist claim on November 5, 2021. On November 30, 2021, Geico denied the underinsured motorist claim relying on the provision that required them to file for underinsured motorist benefits within three years of the date of the accident — that is, within three years of July 29, 2017.

On February 19, 2022 — less than three months after Geico denied their claim but four and a half years after the accident — the Pelissiers sued Geico for underinsured motorist benefits.

Geico argued that it was entitled to summary judgment as a matter of law because the plaintiffs failed to bring suit within three years of the date of the accident.

A trial court rejected Geico’s argument, finding that the contractual limitations provision is unenforceable given that it could require insureds to file suit before a justiciable cause of action existed. Additionally, the trial court found that using the date of the accident as the triggering event is contrary to the public policy underlying the underinsured motorist law.

Geico asked for the high court’s review but did not get the answer it wanted as the high court agreed with the lower court.

Geico argued that the three-year contractual limitations provision triggered by the date of the accident is a reasonable restriction that does not violate the public policy. Geico further argued that the provision did not violate public policy because it provided the plaintiffs with the same rights they would have had if the tortfeasor had comparable liability coverage.

The Pelissiers countered that because the contractual limitations period could run before the insured’s legal claim against the insurer has accrued, the provision impermissibly restricts their underinsured motorist coverage and is unenforceable.

The high court disagreed with Geico, noting that a plaintiff injured in an accident has three years from the date of the “act or omission complained of” or three years from when “the plaintiff discovers, or in the exercise of reasonable diligence should have discovered, the injury and its causal relationship to the act or omission complained of” to sue the motorist.

By contrast, the high court continued, under the contractual limitations provision in this case, the three- year period to file suit against the insurer begins to run before the occurrence of the “injury” that would be redressed by the underinsured motorist suit. That is because, under the common law, claims for underinsured motorist benefits sound in contract, and a cause of action for breach of contract does not arise until the breach occurs, the court explained.

In the underinsured motorist context, the breach occurs — and therefore the cause of action accrues — when the insurer wrongfully denies underinsured motorist coverage. This means that under the contractual limitations provision, a plaintiff injured by an underinsured motorist will, in effect, have less than three years to file suit against the insurer because the three-year period begins to run before the relevant “injury” occurs. Contrary to Geico’s contention, the contractual limitations provision does not, and cannot, change when the cause of action for a suit for underinsured motorist benefits accrues, the court found.

The court further explained how an insurer’s denial of an insured’s underinsured motorist claim will always occur at some point after the date of the accident. Indeed, insureds must first ascertain the extent of their damages, discover that the other motorist involved in the accident had insufficient coverage, file a claim for underinsured motorist benefits with their insurer, and have that claim denied before a cause of action for underinsured motorist benefits accrues.

Given the time required for an insured to ascertain whether they have a claim for underinsured motorist coverage, a contractual limitations provision such as the one at issue here could effectively force insureds to file suit before a cause of action for breach of their insurance contract has accrued; or bar any relief because they may not be aware that they have a claim for underinsured motorist benefits prior to the expiration of the three-year period.

“In either circumstance, the insureds’ ability to recover for their injuries is restricted as compared to a person injured in an accident caused by a motorist with liability coverage equal to the liability coverage purchased by the insureds,” the court concluded.