8th Circuit Coverage Opinion – Suit Limitation Clause Not Enforceable Under Arkansas Law

On July 11, 2017, the United States Court of Appeals for the Eighth Circuit issued an opinion voiding a suit limitation clause in an insurance policy under Arkansas Law.  See  Opinion Here.  In this case the insurance policy at issue had a one-year suit limitation clause requiring the insured to bring suit on the policy within one year of the date of the loss.  However, the insured brought suit on the policy over two years from the date of the loss.  However, under Arkansas law  an insured has five years to sue an insurer for breach of a property insurance policy and “[a]ny stipulation or provision in the policy or contract requiring the action to be brought within any shorter time or be barred is void.” Ark. Code § 23-79-202; and § 16-56-111(a).  Thus, under Arkansas law, an insurer is specifically prohibited by statute to shorten the time period in which an insured can bring a suit under the policy.

The decision is most likely limited to the application of Arkansas law on the issue.  In fact, the court specifically notes that if Oklahoma law was applied then the suit limitation clause would have been enforceable.  Also, under Minnesota law and Iowa law, suit limitation clauses in insurance policies are generally enforceable.  See L & H Transp., Inc. v. Drew Agency, Inc., 403 N.W.2d 223, 224 (Minn. 1987) (When an insurance policy contains a suit limitations clause which requires suit to be brought within a certain period, failure to bring suit within that period bars suit unless the limitation clause conflicts with a specific statute or is unreasonably short); and Ingrim v. State Farm Fire & Cas. Co., 249 F.3d 743 (8th Cir. 2001) (Under Iowa law, one-year suit limitations clause in policy, which incorporated provision of statutory standard fire insurance policy, was enforceable and barred all actions on the policy brought more than one year after date of loss or damage. I.C.A. § 515.138.).  See also § 235:36 Generally, 16 Couch on Ins. § 235:36, (“Depending on the governing statutory requirements, suit limitation provisions in property insurance policies have been held valid where the provisions required the insured to file suit within one year, or two years.”)

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