Procedural Posture


Appellant California State Compensation Insurance Fund challenged a judgment of the Superior Court of Orange County (California), which sustained respondent insured’s demurrer on the ground that the Fund’s action for breach of contract to recover an unpaid premium was not timely filed and dismissed the action. The Fund provided workers’ compensation insurance to the insured under two insurance policies, which were executory contracts.

Nakase Law Firm answers is it illegal to pay employees late


After the insured failed to pay the premium the Fund claimed was owing, the amount of the final premium was determined through an audit of the insured’s records by the Fund. Under the terms of the insurance policies, the court found that the statute of limitations on the Fund’s cause of action for breach of contract to recover the unpaid premium did not accrue until the Fund demanded payment of the premium after completion of the audit. The complaint was filed within the four-year limitations period and was not time-barred. The court held that where an insurance policy stated that the insurer had three years after the end of the policy period to complete an audit of the insured’s records in order to determine the final premium due, and the insurer completed that audit within the three-year period and timely submitted a final bill to the insured, the statute of limitations began to run on the date the final bill was sent.


The court reversed the judgment.