Tolling Provision of Virginia’s Nonsuit Statute Does Not Apply to a Contractual Period of Limitations Contained in Fire-Insurance Policy

Andrew R. Alder, Esquire
Stephen A. Horvath, Esquire
September 23rd, 2015
By: Andrew R. Alder, Esquire and Stephen A. Horvath, Esquire

One of the most important tools available to a plaintiff in Virginia is the right to take a nonsuit to dismiss a case without prejudice to refiling the lawsuit, even if the statute of limitations has run. The right to a nonsuit is almost absolute, so if a case is not going well, the plaintiff just takes a nonsuit and starts over again. Under the tolling provision of Virginia’s nonsuit statute, a plaintiff has the right to refile a cause of action within six months after taking a voluntary nonsuit, even if the statute of limitations for the cause of action has expired. See Va. Code 8.01-229(E)(3). The Virginia Supreme Court has now limited the right to a nonsuit, and held that for claims under a Fire Insurance Policy, the tolling provisions of the Virginia Code do not extend the time to refile a nonsuited claim. Allstate Property & Casualty Ins. Co. v. Ploutis

The new ruling extends a 1998 decision holding that under the plain meaning of the tolling statute, the tolling provision applies only to a statute of limitations, not to a contractual period of limitations. Massie v. Blue Cross & Blue Shield of Virginia, 256 Va. 161 (1998). Despite the holding in Massie, plaintiffs have regularly argued that periods of limitations found in fire insurance policies are statutory rather than contractual, and thus subject to the tolling provision. Fire insurance policies are regulated by statute, and Va. Code 38.2-2105(A) requires certain provisions in these policies, including a minimum limitations period of two years. Thus, the argument goes, a two-year limitations period in a fire insurance policy is statutory and not contractual, and therefore subject to the tolling provision. Some courts, including federal district courts, agreed. See, e.g., Zaeno International, Inc. v. State Farm Fire & Casualty, 152 F.Supp.2d 882 (E.D. Va. 2001) (holding, incorrectly as it turns out, that Massie stands “for the principle that the applicability of the nonsuit tolling provision to an insurance policy’s limitations period depends on whether the policy’s limitations period derives from the statute or the parties’ contract”).

The Supreme Court of Virginia rejected this line of argument. In Allstate Property & Casualty Ins. Co. v. Ploutis, the plaintiff filed suit against Allstate for breach of contract under a fire-insurance policy issued by Allstate. The plaintiff brought the suit within two years after the date of loss, as was required under the policy, but subsequently nonsuited the case. She then refiled within six months, but outside the two-year period of limitations contained in the policy. Allstate demurred, contending that the plaintiff failed to timely file suit. The trial court disagreed and allowed the case to go forward. The Supreme Court of Virginia reversed and entered judgment in favor of Allstate.

Relying on its Massie decision, the Court held that “Code 38.2-2105(A), by its own language, is not a statute of limitations but prescribes standard policy form provisions for fire insurance policies. . . . Allstate’s use of ‘substantively’ the same language as the standard policy form did not convert the contractual limitations period into a statute of limitations.” The Court further explained that to hold otherwise “ignores the voluntary nature of insurance contracts and the essential difference between a contractual period of limitations and a statute of limitations. In contrast to statutes of limitations such as those found in Chapter 4 of Title 8.01 of the Code, contractual periods of limitations are incorporated into the terms and conditions of contracts into which parties have voluntarily entered.” In conclusion, the Court held that “neither Code 38.2-2105 nor the contractual period of limitations provided in Allstate’s policy is a ‘statute of limitations’ within the meaning of Code 8.01-229(E)(3). [The plaintiff] and Allstate voluntarily chose to enter into a contract that contained a two-year period of limitations for bringing an action under the policy.”

Seventeen years after Massie, the Court has spoke again. This time the Court simply erased any doubt that it meant what it said in Massie – that the tolling provision of Virginia’s nonsuit statute does not apply to contractual periods of limitations contained in policies of insurance.

This case was litigated and successfully appealed by Stephen A. Horvath, Esquire, a director of the firm.

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This blog and the information provided has been prepared by Bancroft, McGavin, Horvath & Judkins, P.C. (“BMHJ”) for information purposes only and is not intended nor to be construed as legal advice. This blog may contain the opinions of the members and associates of this firm on various legal issues and is not legal advice. Read More