Typically, the statute of limitation means there is a window of time for a plaintiff to lodge a claim after an incident occurs. The recent decision of Ali v Insurance Australia Limited examined this issue, looking at the date at which a statute of limitation began in relation to a policyholder’s previously denied claim on a home and contents insurance policy. This article unpacks the decision and what it means for policyholders bringing proceedings against insurers.
On 9 October 2013, the plaintiff’s home was broken into. Goods were stolen and damage was done to the property. The next day, the plaintiff made a claim on his home and contents insurance policy. The insurer denied cover on 20 May 2014. Unhappy with the outcome, on 16 October 2019, the plaintiff filed a suit seeking damages for the insurer’s failure to comply with its policy obligations.
The limitation period
The insurer argued that the suit was brought outside the 6-year period prescribed by the Limitation Act 1969 (NSW). The plaintiff argued that the suit was brought within the time limit because the defendant’s liability (the insurer) arose when it denied cover in 2014. The Court had to determine whether the defendant was liable under the policy on the date of the break-in or the date it denied cover. If the former, it would mean the suit was time-barred (i.e., the claimant failed to bring the action before the Court within a specified time).
The Court found in favour of the defendant and determined that the plaintiff’s course of action arose on the date of the break-in, not the date cover was denied. Therefore, the suit was time-barred. The Court cited the decision in Globe Church Incorporated v Allianz Australia Insurance Ltd (2019), which states that “absent a provision in an indemnity insurance policy that makes lodgement of a claim a condition precedent to liability, the promise to indemnify is enlivened when the property damage is suffered’. In other words, unless an indemnity insurance policy specifically requires that a claim be made before the insurer can be held liable, the promise to provide compensation is activated as soon as the property damage occurs. Applying this to the present case, the Court found nothing in the policy wording that overruled this starting position, despite the plaintiff’s arguments to the contrary.
Ali v Insurance Australia aligns with the common law position that the relevant statute of limitation period is triggered upon the occurrence of the loss covered by the policy. Policyholders must be aware of the relevant limitation periods when bringing proceedings against insurers following a denied claim, particularly since property damage losses are not afforded the same leniencies as personal injury matters.