Statute of limitations: Cause of action that accrues after decedent’s death is not limited under §557(a) to two years.

Benson v. MVP Health Plan , 2009 VT 57 (Skoglund, J.)

Brian Benson, as administrator of Alan Benson’s estate, appeals from a Windsor Superior Court order dismissing his suit against decedent’s insurer, MVP as barred by the two-year limitations period set forth in 12 V.S.A. § 557(a). We reverse and remand. We hold that the limitation period set forth in § 557(a) does not apply to causes of action that accrue to the estate after a decedent’s death.

That statute reads as follows:

"If a person, by or against whom an action may be brought, dies before the expiration of the time within which such action may be commenced as provided by this chapter or dies within thirty days after the expiration of such times, the period of limitation as to such action shall cease to operate at the date of his death. After the issuance of letters testamentary or of administration, such action, if the cause of action survives, may be commenced by or against the executor or administrator within two years, and not after."

A cause of action does not accrue until each element of the cause of action exists. A cause of action for breach of contract accrues when the breach occurs, and a cause of action against an insurance company for bad faith accrues when the company errs, unreasonably, in denying coverage.

Benson died on October 18, 2002. The administrator was appointed on December 2, 2002. The administrator filed suit on August 30, 2007, alleging that MVP breached the contract when it failed to pay a valid claim submitted by the administrator and repeatedly refused to respond to the administrator’s grievances and requests for information and relief. The complaint alleges bad faith on the grounds that MVP denied the claim without a reasonable basis. Assuming these allegations to be true, the estate’s causes of action accrued after the decedent’s death.

Based on the statutory language quoted above, MVP argues that § 557(a) applies to causes of action that accrue after death because a person who dies before a cause of action accrues necessarily dies before the expiration of that action’s limitations period. This clever reading is flawed, however, because the plain language of § 557(a) establishes a limitations period only for causes of action that could have been brought by or against the deceased during his lifetime; it does not apply to causes of action by or against an estate that accrue after the decedent’s death.

Accordingly, the trial court erred in concluding that the estate’s claim was barred by § 557(a).