Say you buy professional-liability insurance. If the insurance company lets you think the insurance covers something that it does not, how soon do you have to sue your insurance company? I’m taking a little break from the federal courts today to look at the Ohio Supreme Court’s recent decision on professional-liability insurance and accrual. The Court held that a claim of negligent procurement of professional-liability insurance accrues when you buy the policy, not when the insurance company denies a claim you thought it covered.

LGR Realty, Inc. bought a professional-liability policy from London Insurance Agency. But the policy categorically ruled out coverage for any claims brought by a third company, Plaza Property. I bet you can guess what happened next: Plaza sued LGR and London Insurance denied LGR’s claim for defense and indemnification. Then, after Plaza won its lawsuit, LGR sued London Insurance for negligent insurance procurement.

The trial court dismissed the claim as untimely under Ohio’s Rule 12(B)(6) (which is very like the federal rule). The court of appeals reversed the trial court—then the Ohio Supreme Court reversed the court of appeals, holding the claim was indeed too late. The Court held the claim accrued when the policy was issued, not when the request for indemnification was denied.

The opinion gives a short, useful review of two important exceptions to the everyday rules of accrual: the discovery rule and the delayed-damage rule. The delayed-damage rule states that when a claim is based on an act that isn’t harmful—yet—the claim does not accrue until there’s actual damage. Here the Court held that the rule does not apply to professional-liability insurance claims. That’s because “[i]t is only in the narrow circumstances in which application of the general rule would lead to the unconscionable result that the injured party’s right to recovery can be barred by the statute of limitations before he is even aware of its existence.” As soon as it bought the allegedly negligent-procured policy LGR had started paying premiums on the policy—so that’s when the harm occurred, and that’s when the claim accrued.

The Ohio Supreme Court opinion is sparing with the facts, but it’s enough to serve as a gentle reminder: Read your documents. The Ohio Supreme Court’s opinion is here.

And if you’ve gotten this far but are starting to miss the federal courts, the Sixth Circuit addressed the discovery rule just last year. The Sixth Circuit held a claim for pension benefits accrues when the request is denied. You can read that opinion here.