Thought Leadership

In the matter of First State Cran Serv. V. L& W Ins., LLC, the Delaware Superior Court applied the three-year statute of limitations to bar claims for negligent procurement and breach of contract against an insurance broker. In this case, the plaintiff claimed that the broker negligently procured an insurance policy that included a policy exclusion which allegedly rendered the policy “worthless for the purpose for which it was intended.” The plaintiff argued that it was unfair to apply the three-year statute of limitations from the date of delivery of the policy, rather than from the date of coverage denial, and that its principal, as a lay person, could not have understood the policy exclusion, including because it was allegedly ambiguous.

Applying the rule from Kaufman v. C.L. McCabe & Sons, Inc., the court held that, despite the seeming unfairness of the act-based rather than harm-based rule, that the Supreme Court has clearly required that the statute of limitations on a negligent procurement claim begins to run from the date of delivery of the policy. Addressing plaintiff’s arguments, the court found that the policy exclusion was not shown to be ambiguous, however, even if it was ambiguous, such an ambiguity does not make the coverage denial inherently unknowable.  Under one of two interpretations, the exclusion would apply and, thus, was knowable. The court relied on Kaufman in making this holding and applied the same reasoning to the breach of contract claim and dismissed both.  First State Crane Serv. v. L&W Ins., LLC, 2026 Del. Super. LEXIS 262 (June 16, 2026).

This decision follows the rule set forth in Kaufman that the statute of limitations in a negligent procurement action against an insurance broker begins to run from the time of delivery of the policy. While the court recognized that other courts have taken a harm-based approach to the statute of limitations issue, this case highlights the act-based approach that the Delaware Supreme Court applies. Although the court was not unsympathetic to the plaintiff’s arguments that the statute of limitations would be unfair, this case also demonstrates that an insured is charged with notice of the policy and its exclusions upon delivery, even when a term of the policy is ambiguous and that a later denial of coverage is not relevant to an assessment of the statute of limitations. Despite plaintiff’s arguments that the exclusion was ambiguous, the court recognized that ambiguity would not relieve the plaintiff from being charged with such knowledge as of the date of delivery because “inherently unknowable” is a higher standard than mere ambiguity. In other words, if a term is subject to two interpretations, one that would include coverage and one that would exclude coverage, the risk of an exclusion of coverage was not “inherently unknowable.”  The court also distinguished this from cases where an affirmative misrepresentation or falsehood was present, such as a deed indicating an easement that never existed, because the falsity then was “inherently unknowable.” This case presents a strong defense for an insurance broker against negligent procurement (and breach of contract) claims where the claim is brought more than three years after the policy was delivered, even when ambiguity is alleged.  First State Crane Serv. v. L&W Ins., LLC, 2026 Del. Super. LEXIS 262 (June 16, 2026).