In South Africa, for example, under the Policyholder Protection Rules or the Short-term Ombud’s Rules the running of statutory prescription and time-bar limitation periods provided for in an insurance policy may be suspended while a dispute is resolved.
German law also provides for some circumstances in which the limitation period in an insurance coverage dispute may be suspended, and which provides lessons for South African insureds and insurers.
In 2019 a Dresden court found that the resumption of interrupted negotiations didn’t lead to a retroactive suspension of the relevant statute of limitations back to the beginning of negotiations and, in any event, the coverage claim had been time-barred when the insured eventually and belatedly started legal proceedings.
The claimant was an insured under an accident insurance policy who suffered a disabling injury in 2008. The insurer denied coverage in December 2011 leaving it to the insured to challenge its decision. A three year limitation period commenced running on 31 December 2008 but in accordance with the legislation the limitation period was suspended during negotiations until one party refuses to continue with the negotiations, for instance by the insurer denying cover.
In 2015 negotiations the insurer offered a part settlement. In 2017 the insured commenced legal proceedings.
After various periods of suspension of the limitations during negotiations, the coverage claim finally expired in March 2015. Despite the insurer agreeing a new examination and submitting an offer in December 2015 the negotiations didn’t revive the time-barred claim. The relevant legislation applied only to claims which were not already time-barred before the start of negotiations. The resumption of interrupted negotiations doesn’t lead to a retroactive suspension of the relevant statute of limitations back to the beginning of negotiations.
The principles are the same in South African law. If a claim is time-barred and the insurer makes an offer to pay part of the claim, without recognising any legal obligation thereto and the insured rejects it demanding the full amount of the claim, there is no implied waiver by the insurer to abandon any prescription or time-bar defence nor admission of liability.
It is useful when insurers make such offers as a gesture of goodwill and where a claim is prescribed or time-barred, that that offer is expressly made without prejudice, without admission of liability and without abandoning any defences under the policy.