In an issue of first impression, the Ninth Circuit Court of Appeals affirmed summary judgment for Allstate and held that the two-year statute of limitations for bad faith claims arising out of an uninsured/underinsured motorist claim begins to run when the claimant should have known about the insurer’s alleged bad faith acts, rather than when the claim is resolved. In Marinelarena v. Allstate Northbrook Indem. Co., 2023 WL 3033498 (9th Cir. 2023), the plaintiff alleged that she suffered injuries in a 2016 car accident with a hit and run driver. Two years later, in January 2018, Marinelarena made a policy limit demand for uninsured motorist benefits. Allstate declined the demand and insisted on taking steps to further investigate the claim. Eventually, because the parties could not agree on the value of the claim, they proceeded to uninsured motorist or UM arbitration, after which the arbitrator issued an award in Marinelarena’s favor. Allstate immediately paid the award.

Less than two years after the arbitration award, Marinelarena sued Allstate for bad faith, alleging that Allstate unreasonably delayed and forced her to go through arbitration to obtain the policy limit settlement she was owed. Allstate moved for summary judgment, arguing that if her bad faith allegations of delay and lowballing were true, its unreasonable conduct occurred when it first refused to settle for the policy limit, which was more than two years before Marinelarena filed her bad faith suit. The district court agreed and granted summary judgment for Allstate. 

The Ninth Circuit affirmed reasoning that the two-year bad faith statute of limitations runs from the date that the plaintiff has reason to suspect an injury or some wrongful cause. Thus, the court clarified that the statute of limitations for a bad faith lawsuit arising out of a UM/UIM claim begins to run at the time when the first alleged bad faith act occurred, not from the date the claim ends or payment is made.