The policy stated that it would provide $35,000 of death proceeds to the named beneficiary after receiving due proof that the Insured died while this contract was in force.
In relevant part, the policy also contained a grace period provision, which provided: A premium is due on any Process Day on which the contract value, less loans in effect, is not enough to cover the charges then due. The required premium will equal the charges then due. We will mail you, and any assignee of record, notice of the amount due. The contract will stay in force for 60 days after the due date of the required premium, or, if later, until 31 days after notice of the amount due has been mailed, but not past the Maturity Date. If you do not pay the required premium by the end of this grace period, the contract will end with no value. We will send you a notice before the contract ends. If death occurs during a grace period, any required premium then due will be subtracted from the death proceeds.
The insurance company refused to pay the $35,000 in death proceeds to plaintiff, maintaining that the policy had lapsed in 1999 for nonpayment of premiums.
Plaintiff demanded that the insurance company provide a copy of the written notice of cancellation that it was required to send under the policy’s grace period provision or, if such documentary evidence could not be produced, that it pays the death proceeds. When they did not pay, plaintiff filed this lawsuit alleging breach of contract.
The insurance company argued that plaintiff’s claim arose out of the company’s alleged failure to provide plaintiff with the contractually required notice before the policy lapsed. Consequently, it concluded that the breach at issue occurred in 1999, when the policy was allegedly wrongly terminated. Thus, the applicable six-year limitations period began running in 1999 and expired in 2005, making plaintiff’s claim untimely when it was filed in 2017.
However, the insurance company had a policy of retaining records for lapsed policies for only seven years, so it was unable to produce copies of the actual notices it allegedly mailed to plaintiff.
Plaintiff argued that the proceeds under the policy could not become payable until the death. Therefore, her claim could not have accrued until January 30, 2017, when the proceeds became payable; only then could she, as the policy’s beneficiary, have had a right to recover under the policy.
The applicable limitations period for a breach-of-contract action is six years after the claim first accrued.
Relevant to the instant matter, a claim accrues at the time the wrong upon which the claim is based was done regardless of the time when damage results. MCL 600.5827. Thus, this Court has generally held that a cause of action for breach of contract accrues when the breach occurs.
Importantly, however, a breach of contract claim generally cannot accrue until the claim can be brought. In other words, a claim cannot accrue until such time as a plaintiff can legally bring a claim, because otherwise a claim could be barred before any injury resulted.
Plaintiff had no legal interest in or rights under the policy until the death. Because she could not have brought an action under the policy before 2017, her claim cannot have accrued before 2017.
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