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In order to recover in a lawsuit, you must sue within a certain amount of time. There are several practical reasons for the limitations, collectively known as statute of limitations. First, suing sooner rather than later allows for fresh evidence; for example, the witnesses’ memory may be better closer to the incident or checking the scene soon after the incident may be helpful in the case. Second, it allows the other party to relax after a certain period because they know that after a certain point, an injured party cannot sue. It would be nerve-racking to be held liable for every mistake you have made your entire life. Lastly, punishing crimes soon after they happen may have a deterring effect on future crime.

The statute of limitations depends on the type of suit. In personal injury cases, the statute of limitations is usually two years. That is, you have two years from the date of the accident to file your lawsuit. If you fail to file in those two years, then you cannot sue. The statute of limitations for contract claims is usually ten years, unless the contract states otherwise. Occasionally, statutes of limitations may overlap, which causes some confusion.

A recent Iowa Supreme Court case explains this overlap and confusion. In 2004, an individual suffered a neck injury from a vehicle collision. She had coverage under two insurance plans: $100,000 of coverage under State Farm, which was the insurance carrier for the driver who caused the accident, and an uninsured motorist policy under Allied for $50,000, which was her own insurance provider. The injured individual began negotiations with State Farm a few months after the accident, but when negotiations broke down, she sued before the two-year limitation.

Her uninsured motorist policy required that “any suit against us under this Coverage Form will be barred unless commenced within two years after the date of the accident.” Therefore, although contracts normally have a limitation of ten years, this particular contract limited that amount further, to two years. However, the injured individual did not file her claim with the uninsured motorist coverage until almost six years after the accident.

She explained that she waited to file the claim because she did not know the full extent of her damages. When she originally went to the hospital, they anticipated that she would have some pain in her neck, but that it would gradually subside as the tissue healed. However, the pain did not subside, and two years after the accident, the injured individual underwent major back surgery. Her doctor explained that while this surgery would likely solve most of her pain problems, she would likely have some pain for the rest of her life. The injured individual argued that because she did not realize she would need the extra payments from the second insurance until after the two-year limitation, the two-year limitation in the contract was unreasonable.

The Iowa Supreme Court disagreed. The Court explained that parties are free to change the limitations of the standard contract, as they did in this case (from the standard ten years to two years), and that courts should generally not interfere with the individual’s freedom to contract as they please. The Court explained that because the two years in the contract matched the two years for regular personal injury claims, it was not unreasonable.

The Court also distinguished this case from two other cases where they considered the time limitations in the contract unreasonable. In one case, the company who was responsible for the collision had insurance to start, but then became insolvent after the two-year period. Therefore, there was no need to use the uninsured motorist coverage until after the company did not have insurance coverage. In that situation, the two-year limitation could not apply because there was no legal ability to do so—that is, there was no legal ability to use the uninsured motorist coverage until the company was insolvent and therefore uninsured. However, in the instant case, the injured individual could have brought the case at any point because she had the legal capacity to do so.

The second case involved a contract that required that the lawsuit be finished in the two-year period. The Court decided that having the lawsuit finish before the two-year statute of limitations for personal injuries was not fair to the injured person. Therefore, the uninsured motorist contract was invalid as to the time restriction. In this case, the injured individual is only required to file the suit, not complete it, so it is not invalid.

In its final decision, the Court determined that the case was barred by the two-year limitation stated in the contract. Even something as simple as a time restriction can turn into a very complicated issue. Therefore, it is best to contact legal representation as soon as possible after a potential legal claim. Contact McCarthy, Callas, and Feeney and we will be happy to address any questions you may have regarding limitations on your legal claims.

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