Considering the amount of coverage litigation, it has always seemed curious that there isn’t more case law addressing when the statute of limitations begins to run for bringing a declaratory judgment action. This is especially so when you consider that the body of law addressing statute of limitations in general is gargantuan.

In any event, this was the issue before the Pennsylvania Superior Court in Selective Way Insurance Co. v. Hospitality Group Services, No. 1430 WDA 2013 (Pa. Super. Ct. July 7, 2015). The case has a lot of detail that I’ll skip over to get right to the main points.

At the outset, looking at Pennsylvania’s statute of limitations law in general, the court stated that a cause of action for a declaratory judgment action accrues “when an actual controversy exists between the parties.” This was sufficient for the court to reject a per se rule that the statute of limitations for a declaratory judgment begins to run at the time of the denial of coverage. It could be the date, but not necessarily.

Again, skipping a lot of analysis and getting to the black letter rule (which is what statute of limitations cases are about – at least initially), the court held as follows: “[T]he statute of limitations for a declaratory judgment action brought by an insurance company regarding its duty to defend and indemnify begins to run when a cause of action for a declaratory judgment accrues. See 42 Pa.C.S.A. §§ 5502(a), 7538(a). This requires a determination of when the insurance company had a sufficient factual basis to present the averments in its complaint for declaratory judgment that the insurance policy at issue does not provide coverage for the claims made in the third party’s action.”

If the statute of limitations begins to run when as insurance company had a sufficient factual basis to believe that no coverage is owed, then, as a practical matter, in many cases this will be the date when the insurance company is in receipt of the complaint. This is because, under Pennsylvania law (and many other states), the duty to defend is based on the four corners of the complaint. Thus, when the insurer has the complaint in hand it has what it needs to form a belief that no coverage is owed. This point was certainly acknowledged by the Hospitality Group Services court.