Time Please!

Originally published in March 2002

The Law Commission's initial proposals to reform the present law of limitation, that is to say how long a claimant has to bring legal proceedings against a defendant, were widely considered by the reinsurance industry to be likely to cost millions of pounds in unmet reinsurance recoveries. However, following representations by the industry, these concerns have been significantly reduced in modified proposals published by the Law Commission last year.

The existing law

The current limitation provisions, mainly contained in the Limitation Act 1980, prescribe different limitation periods, ranging from three years to twelve years, for different causes of action (personal injury, contract, land related actions and so on). A number of exceptions and special rules also apply, for example, where "fraud, concealment or mistake" has occurred and when a defendant acknowledges a debt or makes a part payment in respect of it. The time at which the applicable limitation period begins to run also varies according to the nature of the cause of action and the precise facts involved. The result of these matters is that the existing law is unclear and uncertain in its application to existing and, particularly, emerging causes of action.

The Law Commission's proposals for reform

The objective of the Law Commission's proposals was to resolve these problems by creating a single, uniform limitation regime applicable to most causes of action.

The Law Commission's basic proposition is a "core regime", the main elements of which are:

A primary limitation period of three years running from when a claimant knew or ought to have known that he has a cause of action, that is to say that he knew, or ought reasonably to know:

- the facts giving rise to the cause of action;

- the identity of the defendant; and - that the loss suffered was significant

A "long-stop" limitation period of ten years running from the date of the accrual of the cause of action or, in some cases, from the date of the act or omission which gave rise to the cause of action.

Special rules will continue to apply in certain circumstances.

The impact of the Law Commission's proposals on the reinsurance market

The limitation period currently applicable to claims relating to reinsurance contracts is six years from the accrual of the claimant's cause of action. Whilst accrual will depend on the terms of the reinsurance contract, generally a reinsured's cause of...