In case you didn’t know, your insurance policy is actually a contract between you and your insurer. If there is a breach of contract, Texas law grants citizens four (4) years after the breach to file a lawsuit. So if you want to sue someone for breach of contract, you have 4 years after the breach to do so. If you fail to file suit within those 4 years, you are out of luck. But that’s not all. Texas courts have stated that parties can agree to a shorter limitations period, as long as that period is not less than two (2) years. With respect to insurance claims, which party benefits the most from a shorter limitations period? That’s right, insurance companies.

In Bazile v. Aetna Casualty Surety Co., 784 S.W.2d 73 (Tex.App.—Houston [14th Dist.] 1989, writ dism’d), the policyholder sued four insurance companies for denying her claim for a fire loss that occurred on April 17, 1981. Once she realized that she was not getting anywhere with her insurers, the policyholder hired a public adjusting firm and an attorney to assist her in filing her claim. The public adjuster filed proofs of loss with the various insurers on August 8, 1981. Three days later, an agent acting on behalf of all four companies rejected the proofs of loss as not timely filed under the policies. The policyholder then waited more than three years to file suit.

Of the three relevant insurance contracts, the Court found that they all provided the following language:

The amount of loss for which this Company may be liable shall be payable sixty days after proof of loss, as herein provided, is received by this Company and ascertainment of the loss is made either by agreement between the insured and this Company expressed in writing or by the filing with this Company of an award as herein provided. No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within two years and one day next after cause of action accrues. [emphasis added]

The appellate Court held that contractual provisions which limit the time in which to file suit are valid and enforceable, rejecting the policyholder’s contention that the limitation period did not begin to run because the proofs of loss were not received and accepted by the insurers. The Court further held that the cause of action accrued sixty days after the proofs of loss were rejected, so the limitation period began to run at that time, and the policyholder’s 1984 lawsuit was barred.