As the one-year anniversary of the COVID-19 pandemic approaches, policyholders with claims for business interruption losses must review their property insurance policies to determine if those policies contain a contractual limitations period for bringing suit. Unlike other types of insurance policies, most property policies contain such contractual limitations periods.

Depending on the wording of the policy, contractual limitations may (or may not) override state law on statutes of limitation. Determining this may require a review of the policy language, a review of the statutes of limitation in a particular state, and research to discern the controlling precedent.

How Time Is Computed

Jurisdictions may differ on how they calculate the accrual of the limitations period. In New Jersey, for example, the period does not accrue until the insurance company categorically denies coverage; other states calculate from the date of loss. To be on the safe side, companies should calculate the period from the earliest date possible, for example, the date on which the company first incurred damages, or the date of the event that triggered the business interruption, typically the first lockdown order by the state.

Limitations — May Be One Year

For commercial policies, the limitations period is often two years, but it can be as short as one year. Companies with one-year limitations periods can contact their insurance companies and ask for a tolling period in which to file suit, but there is no evidence that insurance companies are granting such extensions.

A one-year contractual limitations period may present challenges for policyholders seeking to protect their rights to business interruption caused by COVID-19. Many companies have chosen not to sue their insurance companies now, some preferring to wait until the law becomes more settled. However, the law is far from settled and may remain in flux for months or years. In fact, lower courts have issued numerous decisions on COVID-19 insurance coverage, but those cases differ dramatically in their outcomes, often within the same jurisdiction.

Cases exist that deny coverage for COVID-19 loss on grounds of both the virus exclusion and the lack of direct physical loss or damage, but policyholders have also scored impressive victories finding coverage in the face of those coverage defenses. This legal morass may not be cleared for a long time, as the courts in each of the 50 states evaluate the factual and legal issues presented by these cases against the backdrop of their existing precedent about insurance coverage.

\What Policyholders Should Do Now

Policyholders should review their insurance policies to determine whether the policy contains a suit limitation provision. While these provisions are not universally enforced by the courts, policyholders should still assume that a court will enforce them. Policyholders with unresolved claims should act now to protect their rights to bring suit, including potentially seeking an extension of the limitation period.