Alabama Supreme Court Upholds Kentucky Insurance Claim Limitation in UIM Case: What Policyholders Need to Know

When policyholders buy insurance, they often assume their home state’s laws will govern any disputes. But in a recent decision, the Alabama Supreme Court affirmed that policy terms can incorporate the laws of another state—even if that means a shorter deadline to file your claim.

In Jackson v. State Farm Mutual Automobile Insurance Company, the Court held that a Kentucky insurance policy with a contractual two-year limitations period could bar a UIM (uninsured/underinsured motorist) claim filed in Alabama, even though Alabama law normally allows six years.

Let’s break down what happened and what this means for policyholders.

Case Summary: Jackson v. State Farm

Background:

Eric Jackson, a commercial truck driver, was injured in a motor vehicle accident in Alabama in December 2020. Although he initially sued the at-fault driver, he later filed a claim against his own personal auto insurer, State Farm, for underinsured motorist benefits. But State Farm denied the claim—arguing it was filed too late under the two-year limit written into Jackson’s policy. Here’s the twist: Jackson’s policy was issued in Kentucky and specifically stated that Kentucky law would govern, including the time to file a claim.

Jackson argued that Alabama’s six-year statute of limitations should apply since the crash happened in Alabama and the lawsuit was filed in Alabama court. He pointed to Alabama law that says contracts can’t shorten the legal time to file a claim (Ala. Code § 6-2-15). But State Farm insisted that the policy language clearly incorporated Kentucky’s two-year limit, making the claim untimely.

The trial court agreed with State Farm, and the Alabama Supreme Court affirmed.

Here are the key points from the Supreme Court’s decision:

1. Insurance Companies Can Choose Which State's Law Applies to Insurance Claim

The Court reiterated that Alabama honors contractual choice-of-law clauses. As long as applying another state’s law doesn’t violate fundamental Alabama public policy, the courts will enforce it.

In this case, the policy said Kentucky law would apply “without regard to choice of law rules,” and further required that legal action be brought “within the period of time required by Kentucky law.” The Court found this language clear, specific, and enforceable.

2. Statutes of Limitations Can Be Substantive

Jackson argued that Alabama should apply its own procedural rules, like the statute of limitations. But the Court ruled that when a policy explicitly incorporates another state's limitation period, that limitation becomes part of the substantive contract terms, not just a procedural issue.

3. Alabama Public Policy Was Not Violated

Although Alabama law (§ 6-2-15) voids contractual attempts to shorten statutory limitation periods, the Court found no strong public policy reason to override the Kentucky provision in this case. The policy was a Kentucky contract, issued to a Kentucky address, and Kentucky allows parties to limit the filing period.

Why This Matters

This case sets a powerful anti-policyholder precedent: Policyholders must be aware of what state’s law their insurance policy incorporates. Even if an accident occurs in Alabama, a policy issued in another state may bind you to that state's statute of limitation.

🔑 Key Takeaways for Policyholders

1. Read the Fine Print-0 Review your policy’s choice-of-law provision. If your policy says it’s governed by another state’s law, that law may limit your rights—even if you live or file suit in Alabama.

2. Be Aware of Shortened Deadlines- Don’t assume Alabama’s six-year statute of limitations applies. Some states, like Kentucky, only allow two years to file certain insurance claims—including UIM claims.

3. Act Quickly After an Accident or Claim- If you're injured in a crash, especially in a multi-state or commercial vehicle situation, immediately notify your insurer and consult an attorney. Waiting could cost you your right to recover.

4. Multi-State Policyholders May Be At Risk- If you live, work, or insure vehicles across state lines (e.g., Kentucky policy, Alabama accident), you may be subject to complex legal rules. Know which state's law controls.

5. Public Policy May Not Save You- While Alabama has laws to protect consumers from shortened filing windows, those protections may not apply if the contract was issued under another state’s law.

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Need Help Navigating an Insurance Dispute?

At Johnstone Trial Law, LLC, we help policyholders across Alabama, Texas and Washington enforce their rights and recover fair compensation from insurance companies. If you’re facing a denied claim or need help understanding your insurance policy, contact us today.

📞 Call: (205) 894-8900🌐 Visit: www.policyholderslawyers.com

Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. Every case is different. You should consult an attorney regarding your specific legal situation.