Limitation Period Clause

Purpose

Claims under an insurance contract are also subject to limitation, so that insurers do not have to reckon with claims for an indefinite period and legal certainty arises as to when a loss event is finally closed. The clause states the applicable period and the point from which it begins to run, usually the occurrence of the event triggering the insurer’s liability or knowledge of it.

Effect and limits

Once the period expires, the insurer may refuse to pay permanently, irrespective of whether the claim exists on the merits. Contractual shortening of the statutory period is invalid or only narrowly permitted in most jurisdictions, since it would operate unilaterally to the policyholder’s detriment; notifying a claim to the insurer generally suspends the limitation period until a decision on the claim is made.

Negotiation and practice

Because the period is predominantly mandatory, negotiation in practice is usually limited to supplementary provisions on suspension, for example during ongoing settlement negotiations. It matters to policyholders that mere claims notification does not automatically interrupt limitation in every jurisdiction; an express notification of the claim may be required.

Jurisdictional comparison

Switzerland provides a five-year limitation period under Art. 46 VVG and expressly declares contractual shortening invalid; a shorter, statutorily fixed two-year period applies to collective daily sickness benefits insurance. Germany has dispensed with an insurance-contract-specific period since the 2008 VVG reform and applies the general standard three-year limitation period under Sections 195 and 199 BGB. Austria retains its own, shorter limitation period in Section 12 VersVG.