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Tucker v. State Farm Mutual Automobile Insurance Company6/11/2002
n section 78-12-25(3) applies. The Tuckers' characterization of these claims as based on something other than a contract of first-party insurance is incorrect.
Section 31A-21-313(1) states, "An action on a written policy or contract of first party insurance must be commenced within three years after the inception of the loss." As we explained in Beck v. Farmers Ins. Exchange,
We use the term "first-party" to refer to an insurance agreement where the insurer agrees to pay claims submitted to it by the insured for losses suffered by the insured. . . . In contrast, a "third-party" situation is one where the insurer contracts to defend the insured against claims made by third parties against the insured and to pay any resulting liability, up to the specified dollar limit. 701 P.2d 795, 799 n.2 (Utah 1995).
Under the PIP provisions of the Tuckers' insurance policy, State Farm has no obligation to defend the Tuckers against claims made by third parties. Rather, State Farm's only obligation under the PIP provisions is to pay claims submitted by the Tuckers for losses suffered by the Tuckers within specified parameters. See, e.g., Utah Code Ann. § 31A-22-307 (2001) (describing the parameters of an insurer's obligations concerning personal injury protection coverages and benefits). Thus, in accordance with our definition of "first-party" in Beck, the Tuckers and State Farm have a first-party relationship. Beck, 701 P.2d at 799 n.2.
All duties and obligations arising from this first-party contract of insurance are contractual in nature. We reaffirm our position in Beck that "in a first-party relationship between an insurer and its insured, the duties and obligations of the parties are contractual rather than fiduciary. Without more, a breach of those implied or express duties can give rise only to a cause of action in contract, not one in tort." Id. at 800. Because the Tuckers and State Farm are in a first-party relationship, and all of the duties and obligations arising from that relationship are contractual in nature, we affirm the trial court's holding that section 31A-21-313, which governs "action on written . . . contract of first party insurance," is the only statute of limitations applicable to this case and the Tuckers' claims against State Farm "must [have been] commenced within three years after the inception of the loss." § 31A-21-313(1) (2001).
III. APPLICATION OF SECTION 31A-21-313 TO THE TUCKERS' CLAIMS
The application of this three-year statute of limitations to the Tuckers' claims hinges on the definition of "inception of the loss." As section 31A-21-313(1) explains, "An action on a written policy or contract of first party insurance must be commenced within three years after the inception of the loss." The "inception of the loss" refers to the time when the loss was first incurred or began to accrue. See, e.g., Canadian Indem. Co. v. K & T, Inc., 745 F. Supp. 661, 664 (D. Utah 1990) (construing "inception of the loss" language in section 31A-21-313-(1), holding that it refers to the time when the loss was first incurred). Additionally, section 31A-21-313(4) prohibits filing an action until, among other things, the insurer denies full payment. Utah Code Ann. § 31A-21-313(4)(c) (2001). As the trial court correctly stated, "In a case involving the alleged failure to pay PIP benefits, the [inception of the loss occurs] no later than the date on which the insurer refuses to pay the disputed PIP benefits," and such a refusal to pay constitutes "denial of full payment" under section 31A-21-313(4)(c).
Here, State Farm reimbursed the Tuckers in November 1996 for the expenses it deemed to be necessary and informed th
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