Statutory Limitations Versus Contractual Limitations and the Virginia Nonsuit Statute
August 4, 2020
Virginia practitioners and litigation claims adjusters are familiar with Virginia’s nonsuit statute. In layman’s terms, Virginia Code Section 8.01-380 allows a plaintiff to voluntarily dismiss an action if no counterclaim is filed in the case, and to re-file it at a later date essentially without penalty. The nonsuit statute is basically a mulligan and a very powerful tool available to a plaintiff. Nearly every defense attorney has found himself relishing in the strength of his developing case or celebrating an amazing first day of trial only to have plaintiff exercising his statutory right of a nonsuit.
Virginia Code Section 8.01-229(E)(3) makes the nonsuit an even more powerful weapon since it provides a tolling of the statute of limitations. If the statute of limitations has already expired at the time that the nonsuit is taken, the plaintiff is permitted to re-file within six months of the date that the nonsuit order was entered by the judge.
The combination of Sections 8.01-380 and 8.01-229(E)(3) make the following scenario commonplace: A plaintiff’s attorney files his client’s lawsuit the day before the statute of limitations expires. The case develops over the following weeks and months, being worked up through the discovery phase or even through the first part of trial. Something happens that negatively impacts the plaintiff’s case (i.e. missed deadline, delay in obtaining documents, etc.) so a nonsuit is taken. The plaintiff has bought himself the right to restart all of the deadlines in the case and an extra six months of time to gather additional documentation that is needed to aid him in his case. Within the six month statutory grace period, the case gets re-filed, re-served and begins again as if it never existed the first time. The aforementioned scenario occurs so often that it rarely gets a second glance from defense attorneys.
Recently, however, the Supreme Court of Virginia authored an opinion on this topic that reminds all defense attorneys to look closely at filing dates when the dispute is contractual in nature. In Allstate Property & Casualty Ins. Co. v. Ploutis, the Supreme Court noted that a contractual limitations period and a statutory limitations period are not equivalent and the tolling mechanism of Section 8.01-229(E)(3) does not apply to contractual limitations periods.
In the case at hand, the homeowner was insured under a policy by Allstate and made a claim when contents in her home were damaged after pipes burst. The incident occurred on March 19, 2010 and the homeowner filed a Complaint for breach of contract on March 16, 2012. Upon the request of the homeowner, an order of nonsuit was entered on February 22, 2013.
The homeowner subsequently filed suit on August 21, 2013, well over two years after the damage was sustained. The policy required that all actions be brought within two years “after the inception of loss or damage.” Allstate filed a demurrer asserting that the homeowner failed to comply with conditions precedent under the policy. The lower court overruled the demurrer and held that the limitations period was tolled pursuant to Virginia Code Section 8.01-229(E)(3), which tolls the “statute of limitations” with respect to nonsuited actions. Allstate argued that the period of limitations provided for in its policy is not a statute of limitations subject to tolling under Virginia Code Section 8.01-229(E)(3).
The Supreme Court of Virginia held that the homeowner and Allstate voluntarily chose to enter into a contract that contained a two-year period of limitations for bringing an action under the policy. The insurance contract itself did not include a tolling provision incorporated in Virginia Code Section 8.01-229(E)(3). By incorporating a period of limitations into the terms and conditions of their contract, “the parties chose to exclude the operation of the statute of limitations and in doing so, also excluded its exceptions.” Since the homeowner did not comply with the two-year period of limitations for filing her claim the Court found in favor of Allstate.