Property Insurance and Michigan’s Short Limitations Period

In Michigan, the limitations period for a suit based on a policy of property insurance is determined by the contract, and may be as little as one year pursuant to MCL § 500.2833(1)(q).  As compared to the general breach of contract limitations period (six-years) this is quite short, making it a potential problem for insureds or practitioners who are unfamiliar with these rules.

Further, the statute itself refers to “fire insurance polic[ies]”, but Michigan courts have held that the shortened limitations period applies to property coverages other than fire.  Aldalali v Underwriters at Lloyd’s, London, 174 Mich App 395 (1989).  The limitations period is tolled, however, from the time the insured gives notice of the claim until the time the insurer formally denies the claim or liability.

This may come into play in certain circumstances, including where the true nature of the damage or claim may not be known or may not have been discovered immediately following the loss-causing event, or where the insured (or his or her attorney) is involved in protracted negotiations with the insurer after a denial is made.  In any event, insureds, and particularly their attorneys, should be aware of the time limits and the effects they may impose on any given case.

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