Contract Remains King: Contractual Time Limits Defeat UIM Coverage

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07.10.2025

In Jackson v. State Farm Mut. Auto. Ins. Co., --- So. 3d ----, No. SC-2024-0588, 2025 WL 1718038 (Ala. June 20, 2025), the Supreme Court of Alabama held that choice-of-law provisions can, under certain circumstances, incorporate the contractually-selected state’s statute of limitations applicable to claims arising under the insurance contract, and that such provisions are enforceable under Alabama law so long as they are specific, clear, unambiguous, and do not violate Alabama’s public policy.

The Motor Vehicle Accident and Insurance Policies at Issue

In December 2020, Eric Jackson, a tractor-trailer driver and resident of Kentucky, was injured in a motor vehicle collision with another tractor-trailer in Morgan County, Alabama.[1]. At all relevant times, Jackson was insured under two personal auto insurance policies issued by State Farm Mutual Automobile Insurance Company (“State Farm”), which included uninsured/underinsured motorist (“UIM”) coverage.[2] Jackson’s State Farm policies were issued in Kentucky and delivered to the Kentucky residential address he provided State Farm.[3]

Notably, the State Farm policies contained an express choice-of-law provision, which provided that “[w]ithout regard to choice of law rules, the law of the state of . . . Kentucky will control . . . in the event of any disagreement as to the interpretation and application of any provision in this policy.”[4] On the same page as the choice-of-law provision, under a section titled “Legal Action Against Us,” the policies provided, in relevant part:

Legal action may not be brought against [State Farm] until there has been full compliance with all the provisions of this policy. In addition, legal action may only be brought against [State Farm] regarding:

. . .

d. [UIM coverage] if such action is commenced within the period of time required by Kentucky law for filing a lawsuit to recover bodily injury damages incurred as a result of a motor vehicle accident.[5]

Jackson Files Suit Against the Alleged Tortfeasor (and Eventually, State Farm)

In April 2022, Jackson filed suit against the motorist who allegedly caused the collision (among others), in Circuit Court of Morgan County, Alabama—the place where the accident occurred—seeking damages for bodily injuries sustained as a result of the collision.[6] Jackson’s complaint, however, did not name State Farm as a defendant or otherwise assert claims against State Farm.[7]

In October 2023 (more than two years after the collision), Jackson sought leave to amend his original complaint to add State Farm as a defendant and assert claims against State Farm for UIM benefits under the policies.[8] In support of his motion, Jackson contended he was “recently offered the limits of available insurance from all of the tortfeasors in the original complaint[;]” that, following this offer, Jackson submitted a claim for UIM benefits to State Farm under his personal auto insurance policies; that State Farm denied his claim based upon the two-year limitations period in his policies and the application of Kentucky law; and that State Farm thus wrongfully denied Jackson’s UIM claim in violation of “longstanding Alabama law.”[9] The trial court granted Jackson’s motion for leave, and Jackson filed his amended complaint on October 27, 2023.[10]

In response to the amended complaint, State Farm filed an answer and attached verified copies of the policies to its response.[11] At the same time, State Farm separately filed a Rule 12(c) motion for judgment on the pleadings, arguing it was entitled to judgment on the pleadings because Jackson failed to comply with a condition precedent to his recovery of UIM benefits under the policies—i.e., that Jackson failed to assert his UIM claim against State Farm within two years after the accident, as required by Kentucky law and the policies.[12] Jackson opposed State Farm’s motion, arguing the “procedural” law of the forum (i.e., Alabama) governs the statute of limitations applicable to his UIM claim.  In this regard, Jackson contended that Alabama’s six-year statute of limitations applied to his UIM claim, thus rendering his claim timely under the law of the forum.[13] Jackson also argued that any policy provision seeking to shorten Alabama’s six-year limitations period is void as against Alabama public policy pursuant to Ala. Code § 6-2-15.”[14]

The trial court granted State Farm’s motion for judgment on the pleadings, holding Kentucky law applied and Jackson’s claim for UIM benefits was time-barred.[15] The trial court entered final judgment in favor of State Farm, and Jackson appealed.[16]

The Supreme Court of Alabama Weighs In

The Supreme Court of Alabama reviewed the trial court’s judgment de novo and affirmed, concluding the policies’ choice-of-law and coverage provisions—including the two-year limitations period within which to bring a UIM claim against State Farm—were enforceable and Jackson’s UIM claim was time-barred.[17]  In reaching this conclusion, the Court made two initial observations worth noting: (1) Alabama has a long history of recognizing “the right of parties to an agreement to choose a particular state’s laws to govern an agreement”;[18] and (2) under Alabama law, choice-of-law provisions can, under certain circumstances, incorporate another state’s statute of limitations.[19]

Next, the Court found that the choice-of-law provision and coverage terms of the State Farm policies “expressly state, in clear and unambiguous language . . . that Kentucky’s two-year statutory period for filing accident-related tort claims applied to UIM claims arising under the policies.”[20] The Court found that the policy language at issue “is a direct reference” to the Kentucky Motor Vehicle Reparations Act (“KMVRA”);[21] that under Kentucky law, it is valid for the KMVRA’s two-year statute of limitations for tort claims to be applied to any UIM claim;[22] and that it is “undisputed that State Farm and Jackson, an acknowledged Kentucky resident, agreed not only that Kentucky law would control, but also that this Kentucky law would control.”[23] The Court concluded:

This case involves Kentucky parties who negotiated, in Kentucky, contracts -- i.e., the policies -- to which the parties agreed that Kentucky law -- including a specific statute of limitations applicable in that state would apply. The contracts were not an attempt to modify Alabama's statutes of limitations but, instead, to explicitly incorporate procedural elements consistent with the forum of the contracts.[24]

Finally, the Court distinguished its holding from a recent opinion by the Alabama Court of Civil Appeals in Archie v. SoFi Lighting Corporation. In Archie, the Court of Appeals declined to apply California’s statute of limitations to a claim relating to a loan agreement that was entered into in California and contained a choice-of-law provision stating the “provisions of [the] loan, including this agreement, will be governed [by] California law, without regard to conflict of law rules.”[25] The Court of Appeals found that the choice-of-law provision at issue merely governed the “provisions” of the loan—i.e. the “various clauses in the contract”—and did not state that “any dispute arising out of the contract would be governed by California procedural law[,] or expressly provide that the California statute of limitations would apply to any civil action arising out of the loan agreement.”[26] In Jackson, the Court found that unlike the loan agreement at issue in Archie, the State Farm policies at issue were “more specific” and “expressly stated, in clear and unambiguous language,” that Kentucky’s two-year statutory period for filing accident-related tort claims applied to UIM claims arising under the policies.[27]

What Does this Mean for Insurers?

Jackson serves as a reminder to insurers of the value of drafting clear, unambiguous, and specific choice-of-law provisions and conditions precedent to coverage in the insurance contract. It is not uncommon—particularly in the auto insurance context—for a policy to be issued and delivered in one state, but implicated in litigation in another state. Litigation surrounding such policies can quickly turn into expensive, time-consuming “mini-trials”—with often unpredictable choice-of-law analysis and outcomes—regarding which state’s law should govern which aspects of the litigation and claims at issue. Therefore, when drafting choice-of-law clauses, insurers should consider whether it may be advantageous to incorporate—through clear, unambiguous, and specific policy language—not only the substantive law of the selected state, but also “procedural” laws, such as the statute of limitations applicable to particular claims.

---

_{[1] Jackson v. State Farm Mut. Auto. Ins. Co., --- So. 3d ----, No. SC-2024-0588, 2025 WL 1718038, at *1 (Ala. June 20, 2025).}

_{[2] Id.}

_{[3] Id.}

_{[4] See Answer to First Amended Compl. and Notice of Determination of Foreign Law, Doc. 207, Exhibit A at p. 45, Jackson, et al. v. Rager, et al., No. CV-2022-900105.00 (Ala. Cir. Ct. 2022) (emphasis added).}

_{[5] Id. See also Jackson, 2025 WL 1718038, at *2  (citing the policies) (emphasis added in quoted text).}

_{[6] Jackson, 2025 WL 1718038, at *1.}

_{[7] See id. at *1.}

_{[8] Id.}

_{[9] See id.}

_{[10] See id.}

_{[11] Id. State Farm’s answer conceded the alleged facts of the accident and Jackson’s entitlement to UIM coverage under the policies, but “only if and to the extent [he] . . . satisfied all the terms and conditions of the Kentucky policies providing [him] UIM coverage, including the submission of a valid and timely claim for UIM benefits as prescribed by Kentucky law.” Id.  As discussed below, State Farm further asserted that Jackson was not entitled to UIM benefits because he had not satisfied a condition precedent under the policies.}

_{[12] Id. at * 2.}

_{[13] Under Alabama law, a claim for UIM benefits is subject to the six-year statute of limitations governing claims for breach of contract under Ala. Code § 6-2-34. See, e.g., Ex parte State Farm Mut. Auto. Ins. Co., 401 So. 3d 1092, 1098 (Ala. 2024) (noting that under Alabama law, “[u]ninsured/underinsured-motorist claims against an insurer are based in contract and are subject to a six—year statute of limitations.”).}

_{[14] See Jackson, 2025 WL 1718038, at *2. Jackson relied upon Ala. Code § 6-2-15 in support of his argument that the time limitation in the policies violated Alabama public policy. Ala Code § 6-2-15 provides: “Except as may be otherwise provided by the Uniform Commercial Code, any agreement or stipulation, verbal or written, whereby the time for the commencement of any action is limited to a time less than that prescribed by law for the commencement of such action is void.”}

_{[15] See id.}

_{[16] Id.}

_{[17] See id. at *5–7.}

_{[18] Id. at * 5 (quoting Polaris Sale, Inc. v. Heirtage Imports, Inc., 879 So. 2d 1129, 1133 (Ala. 2003)).}

_{[19] See id. at *5 (citing Archie v. SoFi Lighting Corp., 399 So.3d 1067, 1071–72 (Ala. Civ. App. 2024)).}

_{[20] Id. at * 5}

_{[21] See id. at *2 (citing Ky. Rev. Stat. Ann. § 304.39-230(6)).}

_{[22] See id. at *6 (citing State Farm Mut. Auto. Ins. Co. v. Riggs, 484 S.W.3d 724, 730–731 (Ky. 2016)).}

_{[23] Id. at *6 (emphasis in original).}

_{[24] Id. *7. The Court noted that “Alabama law might void as prohibited an Alabama contract reducing a plaintiff’s procedural remedies, such as a statute of limitations[,]” but that this case did not involve an Alabama contract. Id. (citing Fugazzoto v. Brookwood One, 325 So. 2d 161, 163 (Ala. 1976)) (italics emphasis added).}

_{[25] Archie, 399 So. 3d 1067, 1070 (Ala. Civ. App. 2024).}

_{[26] See id. at 1073.}

_{[27] See Jackson, 2025 WL 1718038 at *5, *7.}