Mortgage Insurance: The Starting Point of the Statute of Limitations

When it comes to loan insurance, a claim alone is not enough to trigger the statute of limitations. Case law is clear: the countdown begins only upon the insurer’s denial or the bank’s request for payment. A recent case serves as a reminder of this crucial rule for borrowers.

A dispute arising from a work stoppage
Taking out a mortgage usually involves purchasing mortgage insurance, which is designed to cover all or part of the monthly payments in the event of a major setback: death, disability, or inability to work.
 

It was in this context that an insured individual, who had taken out a loan in May 2019, had enrolled in a group insurance plan covering total temporary disability. In July 2019, he was placed on extended sick leave. Three years later, in February 2022, he requested that his coverage be activated so that the insurer would cover his loan payments.
 

But in April 2022, the insurer issued a categorical refusal: the insured’s claim was time-barred, in accordance with Article L.114-1 of the Insurance Code, which sets a two-year statute of limitations for bringing legal action, starting from “the event giving rise to the claim.” For the insurer, this event was none other than the initial claim: the sick leave in July 2019. The insured’s attorney immediately contested this argument.

Established case law: the claim alone is not sufficient
The key to the dispute lies in the interpretation of the starting point of the two-year statute of limitations. While the Insurance Code refers to a two-year period “from the event,” case law distinguishes based on the nature of the contract.
 

In the case of group loan insurance policies, the Court of Cassation has ruled on several occasions that the time limit does not begin on the date of the loss, but on the date the insurer denies coverage or the lending institution issues a formal notice to pay (Court of Cassation, 1st Civil Chamber, March 27, 2001, No. 98-20.595; Court of Cassation, 2nd Civil Chamber, February 6, 2014, No. 13-13870).
 

In other words, the event that “triggers” the insured’s action is not the accident or illness, but rather the insurer’s denial. In the case under review, this denial did not occur until April 2022. The two-year statute of limitations can therefore only begin to run from that date.

The practical implications for borrowers
This clarification is far from theoretical. For the millions of French citizens covered by a loan insurance policy, it determines whether or not they can obtain compensation. In this case, if the insurer’s argument had been accepted, the insured’s claim would have been dismissed as time-barred, since it was filed more than two years after the end of the sick leave.
 

However, the Insurance Ombudsman points out that the insured person is still entitled to request coverage, since the denial of coverage occurred in April 2022, which is the starting point of the time limit. “Many insured people are unaware of this legal nuance and give up when faced with a denial they believe to be final,” explains a lawyer specializing in insurance law.
 

This reminder also applies to banks: a payment request sent by the bank to the borrower can also trigger the statute of limitations, even without an explicit denial by the insurer.

Toward greater clarity for policyholders?
The rule seems simple, but it remains a source of confusion. For the policyholder, the line between an insurance claim, a report, a denial, and legal action is not always clear. Insurers, for their part, sometimes continue to wrongly invoke the statute of limitations in the hope of discouraging claims.
 

Contractual transparency is therefore essential. Several legal experts are calling for the information statements provided to policyholders to clearly specify the starting point of the statute of limitations, in order to avoid unnecessary litigation.
 

In a context where mortgage insurance has already undergone significant reforms—opening up to competition under the Hamon Act and the option to cancel at any time introduced by the Lemoine Act—this legal precedent marks another milestone in the defense of borrowers’ rights.

The bottom line: in loan insurance, time works against the insured… but it only begins to run at the moment of denial. This legal detail can make all the difference in the outcome of a dispute and deserves to be better understood by all borrowers.