United Stated Court of Appeals for the Sixth Circuit; Case No. 88-1407; Published
Judges Krupansky, Boggs, and Engel; Unanimous
Official Federal Reporter Citation: 894 F2d 838; Link to Opinion 
STATUTORY INDEXING:
Tolling of Limitations Upon Submission of Claim [§3145]
Limitations Period for PPI Claims [§3145(2)]
TOPICAL INDEXING:
Not Applicable
CASE SUMMARY:
In this unanimous Opinion by Judge Engel, the United States Circuit Court of Appeals addressed a claim regarding "tolling" of the statute of limitations contained in § 3145(2) applicable to property damage claims.
In this case, an automobile drove into the side of a moving Norfolk & Western train in Michigan on May 2, 1985. Twenty-three railroad cars and several hundred yards of track were destroyed. The automobile was insured for property protection benefits by Auto Club under Michigan's no-fault law. Within five days of the accident, the district claims agent for the Railway contacted Auto Club's agent and informed Auto Club that Norfolk & Western was claiming property protection insurance benefits under the automobile policy. The railroad agent explained that the damaged railroad cars were being repaired at numerous locations throughout the Midwest and that consequently, it would take a substantial period of time to determine the total losses incurred. However, based upon the agent's rough estimates, Auto Club established a reserve for the claim in the amount of $300,000. There was no dispute that the claim was covered under the policy. The railway company's agent claims that he asked the Auto Club agent to put the file on hold until the damage estimates arrived. Auto Club's agent denies this. There was no further communication with the railway company from July 1985 until November 1986, when the railway submitted documentation of its costs. At that time, Auto Club rejected the claim as untimely under the provisions of §3145(2) which require that an action for recovery of property protection insurance benefits shall not be commenced later than one year after the accident.
The district court determined that the action was timely, finding that the statute of limitations had been tolled and holding that under Michigan law, "mere notice of a claim shall toll §3145(2) until the insurer formally denies the claim." The district court relied solely on Preferred Risk Mutual Insurance Company v State Farm, 123 Mich App 416 (1983) for its conclusion.
On appeal, Auto Club contended that the statute of limitations under Michigan's no-fault law cannot be judicially tolled, and even if it can be tolled, such tolling is not proper under the facts of this case. Auto Club further argued that in order to toll the statute of limitations, a submission of specific damages must be made, and mere notice of the claim is not sufficient.
On appeal, the Sixth Circuit determined that although the Michigan Supreme Court has not expressly addressed this issue, the tolling under §3145(2) should begin when notice of the claim is given to the insurer. The Sixth Circuit relied upon the Supreme Court decision in Walton v Carriers Insurance, 421 Mich 571 (1984) which considered the issue of tolling under §3145(1) which provides that in an action for personal injuries, the statute of limitations can be tolled by the submission of notice of injury and a specific claim for damages. Unlike Walton, however, the court did not believe that a specific claim for benefits was required under the facts of the instant case for property damages.
Based upon the facts of the present case, the United States Sixth Circuit held that under certain conditions, §3145(2)'s one-year limitation on actions for property damages may be judicially tolled. The appropriate event to trigger tolling has not been explicitly determined. However, Michigan law suggests that tolling should begin at the date when notice of the claim is filed with the insurer, at least if it is accompanied by communications which reasonably alert the insurer to the extent of its potential exposure.
In this case, there was no prejudice to Auto Club since it had an investigator at the scene immediately after the accident, and Auto Club had already determined that the loss was covered by the policy involved and had established a reserve of $300,000 for the claim based upon its communications with the railway.
The court cautioned, however, that the insured must seek reimbursement with reasonable diligence or lose the right to claim the benefit of a toiling of the statute of limitations.
