Klein v. Farmers Insurance Co.
453 P.3d 266
Idaho2019Background
- In 2010 Erica Klein was injured in a car accident; she had a $500,000 UIM policy with Farmers.
- Klein settled with the tortfeasor’s insurer (Allstate) for the $25,000 policy limit in April 2011.
- Klein submitted a UIM demand to Farmers in November 2012; Farmers paid $75,000 as an undisputed portion and expressly kept the claim open for future medical needs.
- Little progress occurred for several years; new counsel reopened communications in 2016–2017 and served a supplemental demand in February 2017.
- Farmers asserted the five-year contract statute of limitations (Idaho Code § 5-216) had run and moved for summary judgment; the district court denied summary judgment and reconsideration, applying the "breach of contract" accrual rule.
- The Idaho Supreme Court affirmed, adopting the majority "breach of contract" rule: a UIM cause of action accrues when the insurer allegedly breaches the insurance contract (e.g., refuses payment or arbitration).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When does the 5-year statute of limitations for a UIM claim accrue under Idaho law? | Klein: accrual occurs on insurer's breach (refusal to pay or to arbitrate) — so limitations run from breach, not accident or settlement. | Farmers: accrual should be date of accident or date insured settled/obtained judgment against the tortfeasor (clear, objective date); those would bar Klein's claim. | Court adopts the "breach of contract" rule — statute begins to run when insurer allegedly breaches contract; Klein's claim was not time-barred. |
Key Cases Cited
- Hill v. American Family Mut. Ins. Co., 150 Idaho 619 (Idaho 2011) (held exhaustion clauses in UIM policies void in Idaho; did not set accrual date)
- Erie Ins. Exch. v. Bristol, 174 A.3d 578 (Pa. 2017) (adopted breach-of-contract accrual for UM/UIM claims)
- Swafford v. Huntsman Springs, Inc., 163 Idaho 209 (Idaho 2017) (general rule: cause of action accrues when it exists)
- McDonnell v. State Farm Mut. Auto. Ins. Co., 299 P.3d 715 (Alaska 2013) (applied breach-of-contract accrual in UIM context)
- Berkshire Mut. Ins. Co. v. Burbank, 664 N.E.2d 1188 (Mass. 1996) (explained justiciability concerns with starting limitations before breach)
- Grayson v. State Farm Mut. Auto. Ins., 971 P.2d 798 (Nev. 1998) (articulated fairness concerns with using accident date as accrual)
- Hamm v. Allied Mut. Ins. Co., 612 N.W.2d 775 (Iowa 2000) (discussed and rejected the settlement/judgment and date-of-incident rules)