The U.S. District Court for the Western District of Pennsylvania issued a short but important decision this week concerning the applicable statute of limitations under Pennsylvania law for an insurance carrier’s allegedly improper refusal to accept the defense of its insured. Wiseman Oil Co., Inc. v. TIG Insurance Co., Civ. Action No. 011-1011 (W.D. Pa.), is an environmental insurance case brought against an insurer for breach of contract and bad faith for failure to defend a CERCLA action. After answering the complaint, the defendant insurer filed a motion for judgment on the pleadings, arguing that the action – filed in 2011 after the insured entered into a Consent Decree to resolve the underlying litigation – was time-barred because the insured’s claims accrued in 2004, when the insurer initially refused to provide the insured with a defense.
In a July 17th Memorandum Order, the Court disagreed, adopting in full the Magistrate Judge’s May 29th findings and recommendations, and characterizing the insurer’s objections unpersuasive and off-point. On the claim for breach of contract for failure to defend, which carries with it a 4-year limitations period, the Court affirmed the Magistrate Judge’s finding that the claim does not begin to run against an insurer until the underlying action against the insured is terminated and the defense costs are fixed – in this case, in 2011 when the Consent Decree was entered.
And on the statutory bad faith claim, which carries with it a 2-year limitations period, the Court adopted the Magistrate Judge’s conclusion that the statute begins to run only upon “a clear or unequivocal denial of coverage by the insurer.” In this regard, the Magistrate Judge found that the insurer’s correspondence following receipt of the insured’s tender, which advised that the insurer was unable to locate the policies and thus was unable to provide any coverage determination, read more like a reservation-of-rights letter than a clear denial of coverage. In fact, the Magistrate Judge found that the insurer did not clearly deny coverage and refuse to defend until 2010, when it notified the insured that it would “take no further action” if it did not receive copies of the policies within 30 days.