Although there are no precise statistics, it is estimated that some 15-20 percent of all drivers in California are uninsured. That is in excess of 2 million financially irresponsible drivers on the road and disproportionately involved in motor vehicle accidents.
Chances are that any Valley lawyers that handle automobile accident cases will eventually encounter an uninsured motorist claim. Because insurers are attempting to pay less and less on third-party auto claims, that culture has spilled over to the first-party uninsured motorist claims.
It is not uncommon for an attorney, who was used to better first-party settlements, to refuse to settle for an insurer’s low offer. As a result, the case sits longer than is customary to see who will budge first. However, the longer the case sits, the insurers actually stiffen up to see if the attorney will either drift beyond the statute of limitations or succumb to a low offer rather than preserving the Statute. Even the most experienced personal injury attorneys have been known to struggle with the two-year uninsured motorist statute of limitations.
Fulfilling the Requirements of the Insurance Code.
The California Insurance Code requires bodily injury liability policies in the state to include insurance for sums recoverable from the owner or operator of an uninsured motor vehicle.
If a dispute concerning an uninsured motorist claim arises, the Code provides that, “No cause of action shall accrue to the insured under any policy or endorsement provision issued pursuant to this section unless one of the following actions have been taken within two years from the date of the accident:
- The suit for bodily injury has been filed against the uninsured motorist, in a court of competent jurisdiction.
- An agreement as to the amount due under the policy has been concluded.
- The insured has formally instituted arbitration proceedings by notifying the insurer in writing sent by certified mail, return receipt requested.
That is, one of the three actions specified in the Code must be taken as a condition precedent to the accrual of a cause of action against the insurer. 
Even in the face of apparently clear language, when the limitation date approaches, it becomes increasingly confusing how to guarantee that the statute date has been fully complied with.
File a Lawsuit.
Of course, it should not be difficult to file suit against the uninsured motorist within two years and provide an insurer with such notification within a reasonable time thereafter. However, such an option is more expensive with rising filing fees and the fact that such a payment makes it even more difficult to settle a claim when the amount offered is too low.
Filing a lawsuit is also somewhat perilous in these days of mandatory efiling. The Los Angeles Superior Court boasts that initial filings are completed within 24 to 48 hours―but these are work hours―not contiguous hours. In addition, it is quite possible that one may not actually know if their initial filing was accepted or rejected. Sometimes court filings are rejected for reasons that cannot be anticipated. The Superior Court has admitted that notifying counsel of a rejection could take as much as 3 weeks.
Depending on how close the limitations date is to the filing, it may not be possible to learn of the rejection, fix it, and get it refiled on time. Filing a lawsuit to merely preserve the statute of limitations is not desirable.
Settle the Case?
There is scant authority available to interpret what “conclusion” of an agreement for the agreed amount due means and questions abound. Specifically, is there a signed and binding settlement agreement? Have both parties signed off on a binding contract before the statute date? Why would anyone “sign off” on an uninsured motorist claim? A release is not required in an uninsured motorist claim and the insurer’s never sign Release agreements for an ordinary uninsured motorist claim.
Perhaps more importantly, an insured’s attorney cannot take the chance that an “agreement” is “concluded” before the limitations date, unless money is already received and deposited. Besides, the insurer has no interest in making it clear and easy as the limitation date approaches. In fact, the closer to the limitation date, the less likely that a settlement can be “concluded.”
The prudent course is to effectively preserve the statute of limitations so that there is no pressure to conclude a settlement by the limitation date.
Formally Institute Arbitration.
Most practitioners opt to make an “unequivocal demand” for arbitration within the two years as the formal institution of arbitration proceedings. Surprisingly, though, there are no clear guidelines in the statute as to what constitutes “instituting” arbitration. Mentioning arbitration or threatening arbitration in correspondence has been found to be insufficient.
Since most insurers will readily discuss settlement without a formal institution of arbitration proceedings, many practitioners may be lulled into a false sense of security that the code section need not be formally complied with. Moreover, many unsuspecting lawyers may think that a quick last minute email or facsimile to the claims adjuster stating that the communication is a “request to arbitrate” will suffice to protect that statute of limitations. They are wrong. It will not.
Not only is it unclear whether you can institute arbitration proceedings directly with an adjuster, but the demand for arbitration must be more “formalized.” In that case, the attorney in Allstate Ins. Co. v. Gonzalez wrote the insurance company that Gonzalez was making a claim for uninsured motorist benefits and stated, “We would like to proceed with an uninsured motorist arbitration in this matter.”
Among other reasons, the Court held that such an informal statement was insufficient as a formal institution of arbitration proceedings because “any demand or petition for arbitration shall contain a declaration, under penalty of perjury, stating whether:
- The insured has a workers’ compensation claim.
- The claim has proceeded to findings and award and, if not, what reasons amounting to good cause are grounds for the arbitration to proceed immediately.
In view of what the statute requires, the attorney’s letter was found to not be a proper demand.
It is absolutely imperative that every demand for arbitration be accompanied by a proper declaration under penalty of perjury even though the adjuster obviously knows workers compensation is not implicated and has been actively discussing settlement. Otherwise, the demand is not in compliance with what the statute requires.
Many lawyers freeze when trying to make a demand for arbitration because they either do not want to go immediately into arbitration or the case is simply not ready for arbitration. The unequivocal demand must be made in any event. Thus, an effective demand can still be made with a postponement of scheduling the arbitration to see if the case can be settled.
In Santangelo v. Allstate Ins. Co., the insured’s attorney sent a letter to the insurer demanding arbitration pursuant to section 11580.2 to protect the insured’s uninsured motorist claim while the parties awaited an independent medical examination. The letter indicated the attorney’s intent to postpone scheduling the arbitration hearing, pursuant to the parties’ agreement, until after the examination. As a result, the court held the letter constituted formal institution of arbitration pursuant to the Insurance Code. 
What About an Underinsured Motorist Statute of Limitations Period?
The statute of limitations for filing uninsured motorist claims does not apply to underinsured motorist claims. This is because underinsured motorist benefits are not payable until bodily injury liability policies have been exhausted by payment of judgments or settlements and proof thereof provided to the insurer.
The reason for the difference is that the insurer has subrogation rights on uninsured motorist cases and the insurer has no subrogation rights on underinsured motorist cases.
In the typical case, there is a two-year personal injury statute of limitations in which an injured party must initiate a lawsuit. If that party waits until almost two years before filing, a lawsuit in Los Angeles County might take up to year or two to conclude. Then, there could be post-trial motions and appeals which could go on infinitum before “bodily injury liability policies have been exhausted by payment.” In a not so typical case involving a minor, the statute of limitations is tolled at least until the child’s age of majority.
There are several limitation periods to be aware of when handling an underinsured motorist claim. The most common defense in the underinsured motorist cases that have been around for a while is Laches. An unreasonable delay in demanding arbitration may “waive” or “forfeit” the insured’s right to arbitration and thus bar his or her uninsured or underinsured motorist claim.
Also, the statute of limitations on proceedings to compel arbitration does not expire until four years after either party refuses to arbitrate. Thus, attention must be paid to an underinsured motorist case even without a two-year limitations period.
Making a Demand for Arbitration.
The unequivocal demand is ready to go out. Now, the question is where to send it, in writing, certified return receipt requested. The easiest way is to obtain clear permission, in writing from the handling adjuster, to send the formal demand to the appropriate party and assure that the statute will be deemed satisfied.
After receipt of the permission, it is wise to confirm that permission, in writing, and state that the insured is reasonably relying on the adjuster’s representation by not serving any other insurance representative or the agent for process. Planning ahead is critical here as, sometimes, it is difficult or impossible to obtain permission at the last minute.
Accordingly, as to providing proper notice, the policy itself will have a contact for all formal notifications, usually the home office. This can be problematic because there is no actual person, or sometimes actual street address, to send the written notice to receive a signature.
Section 11580.2 of the California Insurance Code also allows the written notice to be sent to the agent for process designated by the insurer filed with the department. This person is relatively easy to find. Go to the department of insurance web site and look up the agent for service of process for the appropriate company.
Make certain that the exact name of the insuring company is provided as many insurers have multiple companies that sound very similar and, sometimes, different company names have different agents for process designated by the insurer with the department.
In addition, there is still some question as to whether complying exactly with the code is sufficient to preserve the statute of limitations.
For example, it is possible to send a fully compliant written demand for arbitration to the correct party before the limitations date. It is also possible for the insurer to receive and sign for that fully compliant written demand for arbitration after the limitations date. Under that circumstance, it is justified to question whether that letter is “notifying the insurer within two years of the date of the accident.” Clearly, the notification is after two years as will be evidenced by the signature on the return receipt.
To solve this anomaly, it is recommended that the insurer be further “notified” notwithstanding receipt of the actual written demand. This can be done by sending a copy of the demand for arbitration by facsimile before the limitations period expires. In addition, it is recommended to additionally notify the insurer by sending a facsimile of the post mark on the certified mail receipt showing that the demand was sent before the limitation period expired.
Given the holding in Allstate Ins. Co. v. Gonzalez, and given the Insurance Code’s precise language, practitioners must be especially careful to properly and “formally” institute arbitration proceedings “within two years of the date of the accident.” 
Barry Goldberg is a trial attorney practicing in the area of personal injury litigation with an emphasis on insurance coverage. He is based in Woodland Hills and can be reached at firstname.lastname@example.org.
 Cal. Insurance Code § 11580.2.
 Cal. Insurance Code § 11580.2 (i)(1).
 Cal. Insurance Code § 11580.2 (i).
 Spear v. California State Auto. Assn. (1992) 2 Cal.4th 1035, 1039.
 Cal. Insurance Code § 11580.2(i)(1)(C).
 Allstate Ins. Co. v. Gonzalez (1995) 38 Cal.App.4th 783.
 Ibid. at 791.
 Ibid. at 792.
 Santangelo v. Allstate Ins. Co. (1998) 65 Cal.App.4th 804.
 Cal. Insurance Code § 11580.2 (i).
 See Santangelo, at pp. 807, 811-12.
 Cal. Insurance Code § 11580.2(p)(3).
 Allstate Ins. Co. v. Gonzalez (1995) 38 Cal.App4th 783.
 Spear v. California State Auto. Assn. (1992) 2 Cal.4th 1035, 1044.
 Allstate Ins. Co. v. Gonzalez (1995) 38 Cal.App.4th 783.
 Cal. Insurance Code § 11580.2.