In liability insurance two clocks are ticking at the same time, and they do not run in step. One is the injured party's clock: how long they can turn to the business for compensation. The other is the company's clock with respect to the insurer: how long it can demand that the insurer answer for the loss in its place under the contract. In Hungarian practice the two deadlines can drift apart, and the consequence is unpleasant: the company's liability towards the injured party remains, while its cover with the insurer has already been lost. This article sets out the two limitation periods, their starting points, and what does and does not interrupt them.
- The injured party's claim for damages can be enforced against the company within the general five-year limitation period of the Hungarian Civil Code (Ptk.); the period starts when the loss occurs and may be suspended if there is an excusable obstacle.
- Several Hungarian policy conditions set a separate limitation period for claims against the insurer that is shorter than under the Ptk. – for example one year from the date of the insured event – but this differs by insurer.
- Under the Ptk., a demand or complaint sent to the insurer does not interrupt the limitation period; only acknowledgement, settlement, enforcement through the courts and lodging the claim in bankruptcy proceedings do.
The first clock: the injured party's time against the company
Under Section 6:22 of the Hungarian Civil Code (Ptk.), the general limitation period for claims is five years, and limitation begins when the claim falls due. Under the Ptk.'s rules on damages, compensation falls due as soon as the damage occurs, so the injured party's clock starts when the loss occurs – not when the injured party decides to go to court. There can be deviations from this in two directions. If the injured party was unable to enforce the claim for an excusable reason – for example, the defect remained hidden, or they could not have known who caused it – limitation is suspended under the Ptk.'s rule on suspension, and once the obstacle has ceased a shorter additional period is still available. According to an article by a member of the Financial Arbitration Board (PBT), published on the website of the MNB (Hungary's central bank and financial supervisor), the parties may also agree in writing on a shorter or longer limitation period, but an agreement excluding limitation is null and void. An important practical rule is that the court does not examine limitation of its own motion: if the injured party enforces a time-barred claim, the company itself must invoke limitation. And one more, little-known connection: some general liability insurance conditions exclude losses that are time-barred under the rules governing the legal relationship between the insured and the injured party. So anyone who voluntarily pays a time-barred claim without the insurer's knowledge will, under the conditions, not receive cover for it either.
The second clock: the company's time against the insurer
The claim arising from the insurance contract – that is, the right to have the insurer answer for the loss in place of the company under the contract – is subject to a separate limitation period. The Ptk. does not prescribe a separate, shorter period for this in liability insurance; several Hungarian policy conditions, however, make use of the option of a written agreement and set the limitation period for claims against the insurer shorter than the general period under the Ptk. According to one set of professional liability insurance conditions (listed under the sources), the limitation period for claims arising from the contract is “one year from the date of the insured event or from the date on which the claim accrues”. Another set, professional liability insurance conditions for lawyers, gives five years for the same and ties the starting point to the date on which a claim for damages was made against the insured. So the two rules differ not only in length but also in their starting point, and this is the key point: the limitation period for claims against the insurer differs by insurer and by product, so you need to look it up in your own policy. The validity and the starting point of short clauses counted from the date of the event may also be open to challenge in a legal dispute – especially if the insured could not yet have known about the loss at the time of the event – but it is not worth relying on this: the safe route is notification within the deadline.
Where the two clocks drift apart
Let us take an example. A contractor's defective work causes water ingress one year after the work was handed over; the owner first has the damage repaired at their own expense, sends a claim only in the third year and goes to court in the fourth. By the injured party's clock this is in order: the damages claim can be enforced within the five years. If, however, the company's conditions set a one-year limitation period for claims against the insurer, counted from the date of the insured event, and the company, although aware of the water ingress, did not report anything to the insurer, that one year will have long expired by the time the claim arrives. The consequence: the court may award damages against the company, while the insurer may refuse to pay, citing limitation. When this scenario arises depends on the starting point in the conditions – a clause that counts from the date “the claim accrues” is more favourable than one based purely on the date of the event – but the lesson is the same in both cases: it is in the company's interest to report early, even if the injured party has not yet taken any steps. With professional cover on a claims-made basis there is one more layer: there, notification must be made during the term of the contract or within the run-off cover period, otherwise there is no cover, irrespective of limitation.
What does not stop the clock
The most common misconception is that correspondence with the insurer “holds” the deadline. Under Section 6:25 of the Ptk., limitation is interrupted by acknowledgement of the debt, by amendment of the obligation by agreement and by settlement, by enforcement of the claim through the courts – provided that the court has given a final decision on the merits concluding the proceedings – and by lodging the claim in bankruptcy proceedings. A written demand, which still interrupted limitation under the old Civil Code, no longer does so for contracts concluded after 15 March 2014: the MNB article mentioned emphasises this specifically. In practice this means that a complaint written to the insurer, a reply to a request for missing documents, a letter of demand or discussions with the broker do not interrupt limitation – the deadline is preserved by enforcement through the courts (an order for payment or a lawsuit), or by the insurer's acknowledgement of the debt or a settlement concluded with it. If the insurer has rejected the claim, a complaint is useful and is the first step on the ladder of remedies, but it does not replace keeping track of the deadline; the steps are described in the article on remedies for a rejected claim. The same applies from the injured party's side: their demand does not interrupt the five-year period running against you either.
What to do in practice
First and most important: report the claim, and any circumstance that may give rise to a claim, without delay on the insurer's claims line, even if the injured party has not yet sent anything. The conditions set short deadlines for notification – five working days in one of the conditions quoted, at most thirty days in the other – and early notification, although it does not in itself interrupt limitation, leaves time for the claim to be closed, or brought before a court, within the limitation period for claims against the insurer; the order of the steps is set out in the article on the first 48 hours after a claim arrives. Second: record the dates – the day the damage was caused, the day the loss occurred, the day you became aware of it, the day of notification and the day of the insurer's reply – because in a limitation dispute these facts are decisive. Third: find the limitation clause in your policy and check what it counts from: the date of the insured event, the date the claim accrues, or the date the claim for damages is made. Fourth: do not admit liability and do not pay voluntarily without the insurer's knowledge – with a time-barred claim this may even exclude cover. As a broker, I see that limitation disputes typically grow out of late notification, not out of strict conditions; the primary route for notification is the insurer's claims line, and if a case gets stuck or is disputed, I help where I can. Limitation is a legal question: if the injured party is already suing, or the insurer rejects the claim citing limitation, bringing in a lawyer is warranted.
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Sources
- Hungarian Civil Code (Ptk., Act V of 2013) Section 6:22 (limitation period) and Section 6:25 (interruption of limitation)
- MNB / Financial Arbitration Board (PBT) – Csomorné dr. Lajkó Ildikó Erzsébet: “There is a way out if someone tries to make us pay a time-barred claim” (2023, in Hungarian)
- Alfa Vienna Insurance Group – Professional liability insurance conditions (SZAF-SZ-230801, in force from 1 August 2023), point XII.1 (limitation: one year) and point VIII.1 (claim notification: within 5 working days at most)
- Allianz Hungária Zrt. – Compulsory professional liability insurance for lawyers, general conditions (AHE-10474/3), point 12.1 (limitation: five years) and point 8.1 (claim notification)
- Allianz Hungária Zrt. – General terms and conditions for liability insurance (AHE-43501/6), point 7.1.13 (exclusion of time-barred losses)
