Estoppel Requires Affirmative Action by the Insurer

Statute Of Limitations Applies

Everyone who has a cause of action against another for bodily injury or property damage must sue to protect the right or lose the right to obtain damages. When an insurer is involved the insurer will attempt to resolve the claim prior to the expiration of the statute of limitations. If it cannot settle it has no obligation to force a claimant to sue its insured because the insurer’s first duty is to protect its insured.

In Janice L. Davis v. Shelter Insurance Companies, State Farm Insurance Companies, No. 02A05-1105-CT-256 (Ind.App. 11/21/2011) Janice Davis appealed the trial court’s decision to grant summary judgment in favor of Jennifer Culver and State Farm Insurance Company because her suit was filed after the running of the statute of limitations. Davis contended that there existed a genuine issue of material fact as to whether State Farm’s communications with her following a car accident and while she was receiving treatment were sufficient to trigger the theory of equitable estoppel and prevent State Farm from using a statute of limitations defense against Davis’s claim.


On January 3, 2008, Davis and Culver were involved in a car accident in which Davis sustained injuries. Shelter Insurance was Davis’s insurance company, and State Farm was Culver’s insurance company. Davis received treatment that was paid for by Shelter. Shortly after the accident, a representative from State Farm contacted Davis to discuss the injuries she sustained. The representative informed Davis that she was not to call State Farm until her treatment was completed and she was ready to settle her claim.

On June 6, 2008, Shelter gave State Farm Davis’s medical payment subrogation package. State Farm issued a draft to Shelter on June 16, 2008, to cover the medical payments and closed the case file. In November 2008, Shelter notified State Farm that Davis had resumed treatment for her injuries. Shelter also responded to an inquiry by Davis, erroneously informing her that the statute of limitations for her claim was three years instead of two.

Lisa Wellman, a State Farm representative, took over Davis’s claim on November 10, 2008. On January 8, 2009, Davis spoke to Wellman over the phone. Davis said that she would provide medical documentation when she was ready to settle her claim. Wellman informed Davis that she was responsible for proving her claim, and Davis acknowledged that she was a case manager so she was familiar with the law. No discussion about the statute of limitations occurred.

In January or February 2009, Shelter contacted State Farm and informed them that Davis was still treating her injuries and that it would send a final subrogation notice when treatment was complete. Shelter also requested that State Farm stop contacting Davis because she felt like she was being harassed by their periodic phone calls. No further action was taken for over a year, and the statute of limitations on Davis’s claim ran on January 3, 2010.

On March 11, 2010, Davis asked State Farm to settle her claim of $4,338.80 for medical expenses, but she was informed that the statute of limitations had run. Davis retained counsel for the first time and filed a complaint on June 24, 2010, against Shelter and State Farm. State Farm filed a motion to dismiss.


The trial court conducted a hearing on both motions, granting summary judgment for both State Farm and Culver.

Davis contends that the trial court erred by granting summary judgment in favor of State Farm and Culver and denying her motion for judgment on the pleadings. Davis argues that there is a genuine issue of material fact as to whether equitable estoppel barred the statute of limitations defense by State Farm and Culver.

At issue in the motion for summary judgment is whether the statute of limitations bars Davis’s claim. Whether a statute of limitations defense is applicable is generally a question of law, but in the case of estoppel, it can be a question of fact. Estoppel, although variously defined, is a concept by which one’s own acts or conduct prevents the claiming of a right to the detriment of another party who was entitled to and did rely on the conduct. In order to assert equitable estoppel against an insurer, the conduct of the insurer must be of a sufficient affirmative character to prevent inquiry or to elude investigation or to mislead and hinder.


The doctrine of equitable estoppel is an extraordinary remedy that is not appropriate when the insurer’s conduct does not exceed the bounds of mere investigation and negotiation. The doctrine will apply to prevent a party from asserting a statute of limitations defense when “such party by fraud or other misconduct has prevented a party from commencing his action or induced him to delay the bringing of his action beyond the time allowed by law.  The Indiana Supreme Court revised the application of equitable estoppel when it affirmed the trial court’s granting of summary judgment in favor of the insurer because, after a car accident, the claimants’ attorney spoke with the insurer and agreed that it would be unwise to file suit until all of the necessary information was obtained and all efforts at settlement had been exhausted.

The Supreme Court found the insurer’s conduct was insufficient to rise to the level necessary to trigger equitable estoppel, noting that to create an equitable estoppel, the conduct of the insurer must be of a sufficient affirmative character to prevent inquiry or to to mislead and hinder.  The decision essentially eliminated fraud as a necessary element when asserting equitable estoppel, allowing the doctrine to be utilized in a wider variety of cases. The test in Indiana is the unconscionability of the resulting advantage.

Turning to the out-of-state cases, an analysis of the relevant national case law indicates that there are certain behaviors on the part of the insured that act as triggers of equitable estoppel. Discouraging the claimant from retaining counsel has been held to trigger equitable estoppel. The court found that equitable estoppel was an available argument for the claimant, noting that the insurer explicitly discouraged the claimant from obtaining counsel. While the claimant was in the hospital, the insurer told her father, “[y]ou don’t need no [sic] lawyer in that case at all because the company is a reliable company and they will pay all the damages and suffering.” Id. at 29. Finding that it would be “unconscionable” to allow the statute of limitations to run because of the behavior by the insurer, the court allowed the equitable estoppel argument. Id. at 30.

While the specific conduct was not one of the commonly-recognized examples of behavior that other courts found sufficient to trigger equitable estoppel, the South Carolina court found it egregious enough to allow the claimant to argue equitable estoppel. After reviewing cases from other states the Court of Appeal noted that courts around the country look to the behavior of the insurer when determining the availability of equitable estoppel. Certain actions have consistently been held to be sufficient to trigger the availability of the equitable estoppel argument. After completing its review the Court of Appeal discovered a two-part test to determine the availability of equitable estoppel.


1.    The court must determine whether the insurer has engaged in any of the following: (1) a promise to settle; (2) discouraging the claimant from filing suit; (3) discouraging the claimant from obtaining counsel; or (4) otherwise egregious conduct. If one of those behaviors is present, then the court will engage in the second part of the test/

2.    Reviewing the totality of the circumstances surrounding the insurer’s actions.

Equitable estoppel will be available to the claimant when the circumstances surrounding the insurer’s conduct have induced the claimant to delay timely action, if the delay that otherwise would give operation to the statute had been induced by the insurer’s conduct and the claimant’s reliance on the insurer’s statements or actions was reasonable. Courts will not protect a person who failed to exercise common sense and judgment.

The Court of Appeal concluded that State Farm’s conduct was not sufficient to trigger equitable estoppel. State Farm made no promise to settle, did not discourage Davis from filing suit, did not discourage Davis from obtaining counsel, and did not engage in otherwise egregious conduct. Furthermore, State Farm made an effort to stay in continuous contact with Davis while she was receiving treatment for her injuries; it was Davis who asked for the communications to stop because she felt like she was being harassed. State Farm’s only action at issue in this case was to tell Davis to contact them when she was done with her medical treatment. This conduct can hardly be considered egregious and should not have overridden Davis’s common sense that she needed to actively pursue her claim with State Farm. As a result, this claim fails the first prong of the test, making equitable estoppel unavailable.

Even if the first prong of the test had been satisfied, Davis still would not have an equitable estoppel argument based on the second prong of the test. Considering the totality of the circumstances, including the fact that Davis was not represented by counsel during her conversations with State Farm and the fact that State Farm would not suffer prejudice from the application of equitable estoppel, this is not a situation in which the doctrine of equitable estoppel is appropriate. State Farm’s conduct did not induce Davis to delay timely action. The statement from State Farm that is at the center of this case was one indicating that Davis should not contact them until she was done with treatment.  An exercise of common sense and judgment would have prompted Davis to pursue her claim for her medical bills despite the one statement made by State Farm. As a result, this case also fails the second prong of the equitable estoppel test. The trial court was therefore correct in granting summary judgment to State Farm and Culver.


Insurers are bound to treat third party claimants and protect the interests of the person insured. Injured people who have a viable cause of action for bodily injury or property damage should never sit on their rights. In this case, the claimant, did nothing to protect her rights and, in fact, told State Farm to stop calling and leave her alone. They followed her instructions.

In California, for example, California Code of Regulations § 2695.10 (g) provides, in part: “Except where a claim has been settled by payment, every insurer shall provide written notice of any statute of limitations or other time period requirement upon which the insurer may rely to deny a claim. Such notice shall be given to the claimant no less than sixty (60) days prior to the expiration date.” If Indiana had a similar regulation State Farm violated it because they did not give the written notice and the notice they gave was wrong. The decision of the Court of Appeal might have changed.

Although State Farm avoided liability in this case it is incumbent on every insurer to recognize that almost every state has an Unfair Claims Settlement Practice statute, although all do not have as stringent a set of Regulations as California.

To avoid litigation like this case third-party-liability insurers should establish a nation wide practice to give notice, in writing, to every third-party claimant about the existence of the state statute of limitations at least sixty days before it elapses.

© 2011 – Barry Zalma

Barry Zalma, Esq., CFE, is a California attorney, insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud. Mr. Zalma serves as a consultant and expert, almost equally, for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant. He recently published the e-books, “Zalma on Insurance,” “Heads I Win, Tails You Lose — 2011,” “Zalma on Rescission in California,” “Zalma on Diminution in Value Damages,” “Arson for Profit,” “Insurance Fraud,” and others that are available at

Mr. Zalma has published three new E-Books: “Zalma on Insurance,” “Murder and Insurance Fraud Don’t Mix” a short novel and “Zalma on California Claims Regulations – 2011 is now available for $5 and $25 respectively.

Mr. Zalma can be contacted at, and you can access his free “Zalma on Insurance Fraud” newsletter at

About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
This entry was posted in Zalma on Insurance. Bookmark the permalink.

3 Responses to Estoppel Requires Affirmative Action by the Insurer

  1. Pingback: Estoppel Requires Affirmative Action by the Insurer | Insurance Auto 911

  2. Pingback: How Safe Allstate vs Farmers vs State Farm Insurance?

  3. Pingback: Estoppel Requires Affirmative Action by the Insurer

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.